This document discusses whether the European Union exhibits characteristics of a federal system and the extent to which the Lisbon Treaty moved the EU in a more federal direction. It analyzes several features of federal systems and compares them to the EU, such as a single currency (euro), common defense, written constitution, and supremacy of EU law. While the EU shares some federal characteristics like a single market and currency for some members, it lacks a full federal system with centralized taxation, military, and constitution. The document concludes the EU has moved in a more federal direction with reforms like the Lisbon Treaty but member states still retain significant sovereignty and control over most policy areas.

1. The Question
“[The] question is whether the EU displays enough of the characteristics of a state that is
federally organised to be considered one, [and] if not now, then just how much more is
necessary and to what extent, if any, was the Lisbon Treaty a step in this direction?”
European Union Coursework
Winston Churchill in his famous post - war speech at University of Zurich said: “We
must build a kind of United States of Europe”.1 In other words, his vision was to build
a federal state of Europe, similar to United States of America, which would unify the
nations and create a good economical and peaceful climate for Europe to develop.
After ratifying the Lisbon Treaty in 2007 European Union might be going towards this
system, as “This treaty marks a new stage in the process of creating an ever closer
union among the peoples of Europe, in which decisions are taken as openly as
possible and as closely as possible to the citizen”.2 Therefore, this essay will analyse
at which stage of integration the European Union actually is.
First of all, the question is what the federation actually is? Former president of the
European Commission, Barosso, described federalism as ‘a concept with two faces:
searching for unity whilst recognising genuine autonomy’.3 In other words, Federation
is a union between two or more states under centralised government. The states
delegate most of its powers to the central government, which acts directly not only
on member states but also on individuals.4 The features of federal state are as
follows: single state currency, common defence force, written constitution5,
1 Winston Churchill’s Speech at University of Zurich, 19/10/1946
2 Art.1 TEU
3 Jose Barroso; Speech to Brussels; ‘The state of the EU in 2013: heading towards federalism or
fragmentation’ 22/04/2013
4 Encyclopaedia Britannica
5 The document might not be necessarily called constitution, as long as its nature is constitutive, in
other words, document is a final source of legal validity and it stands above the contracting parties

2. describing the powers of different layers of government, also, the court, which
arbitrates disputes between them, at least two sets of law, government, bureaucracy
and taxation. Additionally, Federal Central Authority has full control of international
representation.6
On the other hand, Confederation is a system, based on international agreement,
where states’ co-existence is only based on common interests, therefore, they retain
their separate legal existence but give some of their powers to a central authority for
mutual interest reasons.7 By explaining that, the states keep their sovereignty and
the majority of powers still remains with them.
It could be said that EU has its two layers of government - central being in Brussels
and regional being in member states. However, the question is where the powers lies
within EU and what sort of powers it is? The executive of European Union - The
Commission has three different functions.8 Firstly, Commission promote general
interest of the Union. It acts as a motor of European integration, as it has the power
to formally propose legislative bill. It also has to execute the budget and manage
programmes, as well as, exercise coordinating, executive and management
functions.9 In addition, Commission ensures the application of treaties. It may apply
the secondary legislation, for instance, it may address appropriate directives or
decision to Member States.10 It may bring the matter to the European Court of
Justice, if there was an identification of infringement of European Law.11 Commission
shall ensure the Union’s external representation and it has the power to act as
as a higher authority - European Union Law, Robert Schutze, Cambridge University Press, 2015,
p.54
6 Understanding the European Union, John McCormick, 6th edition, 2014, p.16
7 Understanding the European Union, John McCormick, 6th edition, 2014, p.16
8 Art. 17 TEU
9 Art. 17 (1) TEU
10 Art. 106 (3) TFEU
11 Art. 258 TFEU: “If the Commission considers that a Member State has failed to fulfil an
obligation under the Treaties, it shall deliver a reasoned opinion on the matter after giving the state
concerned the opportunity to submit its observations. If the State concerned does no comply with
the opinion within the period laid down by the commission, the latter may bring the matter before
the Court of Justice of the European Union.”

3. external representative of the Union in the negotiation of international agreement in
terms of Trade.12 By stating all the facts above, it is clear that it is very federal body,
which guides the laws of European union and represents the Union at international
level, similar power to the office of the President of United States of America, under
Article 2 of US Constitution, which has the power to make treaties and guides the
execution of federal laws within the state.
Furthermore, the European Parliament is legislative bodies of the EU, together with
the Council exercising legislative and budgetary function. Historically, its function was
supervisory, which meant that it was only a co-legislator.13 However, after Lisbon
Treaty its powers have been widened. For instance, it possesses the power of
political control and consultation, described in the treaties and it elects the President
of the Commission.14 Informally, EP may propose new legislation.15 However, as it
was stated above, unlike many national parliaments, it cannot propose new bills
formally, as this power is held by Commission.16 EP holds the power to question the
European executive - the Commission, which shall reply orally or in writing.17 There
is the ‘Check and balances’ mechanism exercised by the EP, as it has to give the
consent before the council can adopt a European legislation.18 In addition to that, EP
may “address questions or make recommendation to the Council or to The High
Representative and debate progress in impending the common foreign and security
policy”.19 Commission is obligated to ‘present a report to the European Parliament
after each of the meetings of The European Council’.20 Under art 10 (2) of TEU
citizens of European Union are directly represented by the EP, which ensures the
democratic values within the Union. Thus, it can be said that European Parliament
12 Art. 17 (1) TEU
13 Art. 20 ECSC
14 Art. 14 (1) TEU
15 Art. 225 TFEU
16 European Union Law, Robert Schutze, Cambridge University Press, 2015, p. 164 - 165
17 Art. 230 TFEU
18 Art.19 TEU
19 Art. 36 (2) TEU
20 Art. 15 (6) (d) TEU

4. represents the national peoples, in other words, it represents - European people.21
European citizens may engage with the Union’s matters, which affects him, her or it
directly, as they have the general right to ‘petition’ the European Parliament.22
Comparing EP with USA legislature, its Constitution article 1, section 2 states that
House of Representatives are directly elected and article 1, section 5 states that
Senate must act by super - majority (similar to qualified majority). European
Parliament’s powers have grown significantly after ratification of Lisbon Treaty, which
means that the national legislatures’ powers are declining.
Federal State must have a single currency and the federal central authority must
manage the monetary matters. In terms of single currency, nineteen out of 28
countries have euro (on 1st of January 2015, Lithuania joined eurozone).23 This
means that they have transferred monetary policy from their own national central
banks to the European Central Bank in Frankfurt.24 On the other hand, 9 countries
stays with their own national currency, which indicates that this area is not fully
federal. However, “the Union shall establish an economic and monetary union whose
currency is the euro”, which shows that its ultimate goal is to have one currency in
the Union.25
In terms of taxation, in Federal State, it is usually controlled by federal authorities.
Nonetheless, American states can raise their own taxes, but they cannot levy taxes
on imports and exports.26 Regarding the EU law, it seems that it only regulates the
non — discriminatory taxation.27 For example, Article 110 of TFEU states that “no
Member State shall impose, directly or indirectly, on the products of other Member
States and internal taxation of any kind in excess of that imposes directly or indirectly
on similar domestic products”. Furthermore, there is no costume duties, on imports
21 J. Habermas, ‘ Remarks on Dieter Grimm’s “Does Europe Need a Constitution”: (1995) 1 ELJ
303 at 306
22 Art. 227 TFEU
23 Understanding the European Union, John McCormick, 6th edition, 2014, p.17
24 Art. 282 TFEU
25 Art 3 (4) TEU
26 Understanding the European Union, John McCormick, 6th edition, 2014, p.17
27 Art. 65 TFEU

5. and exports between member states.28 This is very similar to US Constitution Article
1 Section 10, Clause 2, where it is state that the custom duties between the state are
removed. However, it indicates that there is no generalised European tax system. As
a matter of fact, vast majority of taxes (income, corporate, property, sales, estate,
capital gains) are raised by national governments of Member States.29
As it was said above, federal laws shall act directly not only on Member States but
on individuals too.30 It is reflected in the Treaties: “A regulation shall have general
application. It shall be binding in its entirety and directly applicable in all Member
States.”31 The issue is that when the state is dualist, it considers international law
separate from domestic law.32 Therefore, international law needs to be incorporated
into national law, which would mean that it would be indirectly effective.33 Therefore,
individuals could never have the direct contact with European Union’s law. However,
in the case of Van Gend en Loos34 the court expressed that European law no only
imposes obligations on individuals but individuals can derive rights from European
Union, in other words, they can rely on provisions of the Treaties and use them
against national governments. Furthermore, in the case of Marshall35
it was held that
claimant can use the Directive against her employers, as UK failed to implement the
directive. It can be seen that ECJ is trying to move the Union towards the Federal
system, as it is filling the gaps.
28 Art. 28 TFEU
29 Understanding the European Union, John McCormick, 6th edition, 2014, p.21
30 Art. IV, Clause 2 of the United States Constitution: ‘All Treaties made, or which shall be made,
under the Authority of the United State, shall be the supreme Law of the Land; and the Judges in
every State shall be bound thereby, any Thing in the Constitution or Law of any State to the
Contrary notwithstanding.’
31 Art. 266 TFEU
32 European Union Law, Robert Schutze, Cambridge University Press, 2015,
33 In countries like United Kingdom, international treaties must be validated by parliamentary
command. Also, following the United Kingdom’s Constitutional Law, Act of Parliament can be
repealed by future Act of Parliament.
34 Case 26/62, Van Gend en Loos v. Netherlands Inland Revenue Administration [1963] ECR
35
Marshallv Southampton Health Authority (No 1) [1986] ECJ

6. The Federal law must also be the Supreme law of land, as it could be seen in US
Constitution.36 There are no expressed statements in the European Treaties that EU
law is supreme.37 Nevertheless, the case of Costa v. ENEL38
is the turning point of
this principle in the European law. It was held that taking into account Unions special
and original nature, it could not be overridden by domestic legal provisions and
Member State courts must apply it over domestic law. The fact that the Union’s law
supremacy could not be extracted from classic international agreement Court stated
that Union Legal Order is autonomous from ordinary international law.39 It could be
state that ECJ filled the gap again, making Union more federal. However, this view
might not be shared among all the Union’s states. For instance, The (British) 2011
European Act states: “ Directly applicable or directly effective EU law (that is, the
rights, powers, liabilities, obligations, restrictions, remedies and procedures referred
to in section 2 (1) of the European Communities Act 1972) falls to be recognised and
available in law in the United Kingdom only by virtue of that Act or where it is required
to be recognised and available in law by virtue of any other Act.40 From the first
impression, the Act states that national law accepts the supremacy of EU law. On
one hand, it is not absolute, as it is granted and limited by national constitutional
law.41 On the other hand, the case of ex parte Factortame42
showed, that domestic
English courts follows the supremacy of EU law. In this case EU law was conflicting
with English law. House of Lords asked for preliminary ruling from ECJ.43 ECJ
confirmed this and HoL held that EU law was supreme and shall be applied.
36 Article 6 Section 1 - the Constitution of US should be supreme law of the land - the judges
should be bound the constitutional law and they have to ensure that federal law prevail over
regional law.
37 Art. 1 - 6 of Constitutional Treaty: ‘The Constitution and law adopted by the institutions of the
Union in exercising competences conferred on it shall have primacy over the law of the member
State.’ However, the provision was not incorporated into Lisbon Treaty.
38
Case 6/64, Costa v. ENEL [1964] ECR 585
39 European Union Law, Robert Schutze, Cambridge University Press, 2015, p. 121
40 2011 European Union Act, s. 18
41 European Union Law, Robert Schutze, Cambridge University Press, 2015, p. 128
42
Case C-213/89.
43 Art. 267 TFEU (ex Art. 234 TEC)

7. Furthermore, the British Parliament does not need to justify its act, as it has a
competence to do all things.44 This sort of ‘omnipotence’ is essential in sovereign
state.45 However, ‘The Union shall act only within the limits of competences conferred
up it by the Member States in the Treaties to attain the objectives’.46 EU has very
wide powers in terms of establishment and functioning of internal market.47 Article
352 TFEU states most general competences within the Treaties, which could be used
to adopt executive as well legislatives acts.48 This article may allow to develop a
policy area that has no specific title within the Treaties. In addition, there is a separate
competence category, acknowledging Union’s Common foreign and security policy.49
There are exclusive competences: custom union, the establishment of the
competition rules necessary for the functioning of the internal market, monetary
policy for the Member state, whose currency is the euro, the conversation of marine
biological resources and the common commercial policy.50 Union and the Member
states have shared competences.51 However, The Union and the Member State may
legislate’.52 On the other hand, analysing the articles 4 (3) and (4) TFEU it can be
seen that ‘the exercise of that competence shall not result in Member States being
prevented from exercising theirs’. From all the facts above, it can be stated that even
EU has competence and some sort of sovereignty of power in certain aspects, it does
not have the full control of it, as the Member States still have majority of control.
Though, it has exclusive competence in commercial and internal market’s policy.
44 A.V. Dicey, Introduction to the Study of the Law of the Constitution (Liberty Fund, 1982)
Chapters I and II
45 European Union Law, Robert Schutze, Cambridge University Press, 2015, p. 224
46 Art. 5(2)
47 Article 114 TFEU
48 Similar to US Constitution Art. I, s.8, cl.18, The American Union shall have the power ‘to make
all Laws which shall be necessary and proper for carrying into Execution and foregoing Powers,
and all other Powers vested by this Constitution in the Government of the United State, or in any
Department or Officer thereof’.
49 Art 2 (4) TFEU: “The Union shall have competence, in accordance with the provisions of the
Treaty on European Union, to define and implement a common foreign and security policy,
including the progressive framing of a common defence policy.
50 Art. 3 (1) TFEU
51 Art. 4 TFEU EU competences will be share ‘where the Treaties confer on it a competence which
does not relate to the areas referred to in Article 3 and 6’.
52 Art. 2 (2) TFEU

8. Federal state’s central authority must represent the State. In terms of international
agreements with third parties, EU has full control of it. First of all it has legal
personality, which means that Union is representing al the Member States.53 As was
discussed above, European Commission has the authority for that. Article 216 (2)
states: ’agreements concluded by the Union are binding upon the institution of the
Union and on its Member States’. Therefore, this aspect is very federal within the EU.
To support the idea of Confederation, the Member States of EU are not permanently
locked in.54 Also, the 2004 Constitution Treaty was rejected, as the peoples of France
and the Netherland voted against it in the referendums.55 Therefore, how could the
EU be a federation if the Member States are not permanently locked in and it rejected
the idea of having written Constitution? Furthermore, there is no generalised
European tax or defence system. There are separate law systems in different
states.56 Despite the fact, that there is a European Citizenship under article 9 TEU,
the citizens of the member state still have greater sense of allegiance to their own
nationality.57 It might be that EU is just not suitable for federal system - Allan
Dashwood took the view that EU continent is not culturally and politically suitable for
federation.
The EU is a project, which is still developing. From all the evidence of legal aspects
covered above, it is hard to say it is fully federal. The Treaties are neither a
Constitution nor an International law, as it is standing in-between as Constitutional
Treaties. It is federally balanced, as having some components of national and
international aspects. Therefore, as Robert Schutze described it, European Union is
a Federal ‘Middle ground’.58
53 Art 47 TEU
54 Art 50 TEU
55 European Union Law, Robert Schutze, Cambridge University Press, 2015, p. 34
56 Understanding the European Union, John McCormick, 6th edition, 2014, p.21
57Understanding the European Union, John McCormick, 6th edition, 2014, p. 21
58 European Union Law, Robert Schutze, Cambridge University Press, 2015, p. 62

9. Bibliography
Legislation:
• Treaty on European Union
• Treaty on the Functioning of European Union
• The United States Constitution 1788
• 2011 European Act
Cases:
• Costa v ENEL [1964] ECJ
• Marshall v Southampton Health Authority (No 1) [1986] ECJ
• Van Gend en Loos v Netherlands [1963] ECJ
Books and Journals:
• European Union Law, Robert Schutze, Cambridge University Press, 2015
• Understanding the European Union, John McCormick, 6th edition, 2014
• J. Habermas, ‘ Remarks on Dieter Grimm’s “Does Europe Need a Constitution”:
(1995) 1 ELJ 303 at 306