Principal-Agent Theory and the EU: Evaluating a Changing Relationship

Abstract

Principal-agent (PA) theory has been employed to characterize the relationship between states and the international organizations (IOs) that they are members of. While the European Union (EU) has been considered a model for this sort of relationship, the tendency of PA theory to provide a static account of principals and agents has led to the dominant collective principal model declining in goodness of fit as the EU has changed over time. By tracking changes in the EU from its inception as the European Coal and Steel Community (ECSC) to the passage of the Lisbon Treaty, it is possible to identify structural changes that have strained the institutional relationship between members and the EU. In the current context of the EU, neither the collective principal model nor the multiple principal model can perfectly capture the relationship. Instead, a hybrid approach is needed that recognizes different avenues of re-contracting that are available to specific members. Additionally, the structural progression of the EU has opened up the theoretical possibility of a role reversal between principal and agent. The EU exerts a great deal of control over member-states through proceedings that the Commission initiates to compel members to comply with EU laws, as well as controlling the scope and pace of integration by regulating the procedures of enhanced cooperation and treaty opt-ins. This indicates that states are being given direction by the EU, rather than the reverse. Though the EU is very much unique among IOs, these developments are parsimonious enough that it is possible for them to occur in other institutional arrangements as well. Much of the impetus for these shifts can be found in the European focus on the normative benefits of integration which, instituted in another context, could lead to similar shifts occurring.