In private law, the regulation is, next to the directive, the most important form of action of the European Union. As regards other legal instruments of the EU (legal instruments of the EU (others)), the decision is of particular significance in relation to competition law. A regulation ensures the uniform and equal application of its provisions in all Member States (ECJ Case 819/79 – Germany v Commission  ECR 21 para 10) and is therefore especially suitable when the legislature aims for unification rather than mere approximation of laws. However, the power to adopt regulations is considerably limited on grounds of competence, owing to the principles of subsidiarity and proportionality. Prominent examples of private law legislation adopted as regulations are Reg 1/2003 (formerly Reg 17/ 1962; basis: Art 103 TFEU/83 EC), the block exemption regulations (Art 101(3) TFEU/81(3) EC) (prohibition of restrictive agreements and exemptions) and the various regulations on private international and international procedural law which have recently been or will in the near future be adopted. In company law, the EU created the supranational legal forms (European Company (Societas Europaea), European Cooperative (Societas Cooperativa Europaea), European Economic Interest Grouping (EEIG); see also the proposal for a European Private Company (Societas Privata Europaea)) via regulations. An important part of labour law is governed by the regulation governing freedom of movement for EU citizens, Reg 492/2011 (former Reg 1612/68; free movement of workers). Notable in the area of contract law are Reg 2560/2001 on Cross-Border Payments in Euros and Reg 261/2004 establishing Common Rules on Compensation and Assistance to Passengers in the Event of Denied Boarding and of Cancellation or Long Delay of Flights (Passenger Rights Directive).
The regulation has ‘general application ... [and] shall be binding in its entirety and directly applicable in all Member States.’ (Art 288(2) TFEU/249(2) EC). Hence it is also called ‘European law’ (explaining the nomenclature used in the failed Treaty Establishing a Constitution for Europe). The ‘general application’ characterizes the regulation as an abstract and general provision, regulating an unlimited number of cases, which distinguishes it from a decision (ECJ Case 101/76 – Scholten  ECR 797 paras 8-11, 20-22). A regulation does not, however, ‘cease to be a regulation because it is possible to determine more or less exactly the number or even the identity of the persons to whom it applies at any given time as long as it is established that such application takes effect by virtue of an objective legal or factual situation defined by the measure in question in relation to its purpose’ (ECJ Case 242/8181 – Roquette Frères  ECR 3213 para 7). In contrast to directives, which are only binding upon the Member States as to the result to be achieved, and to recommendations and opinions, which are not binding at all, the regulation is binding in its entirety. Regulations can be addressed to Member States and private individuals (eg Regulation governing freedom of movement for EU citizens (Reg 492/2011, former Reg 1612/68), Statute of the European Company (Reg 157/2001)) as well as bodies of the EU (eg Staff Regulation of Officials (Reg 259/68)). It is controversial whether a regulation addressed to only certain Member States is per se inadmissible, given its nature as defined in Art 288(2) TFEU/249(2) EC (‘directly applicable in all Member States’) or whether such determination of its scope merely needs to be justified by objective reasons (principle of equality). It is, however, widely accepted that it is unobjectionable if the scope of a regulation is defined in abstract and general terms but, as a matter of fact, its practical importance is limited to certain regions.
2. General applicability and transposition
The regulation is directly applicable in—and not merely for—the Member States. That means that its ‘entry into force and its application in favour of or against those subject to it is independent of any measure of reception into national law’ (ECJ Case 34/74 – Variola  ECR 981 para 10). The Member States—ie all channels of state power including courts and administrative bodies—have to apply it without further ado. Therefore, the regulation is equal to national legislation and is formally a part of the legal system of the Member State, while remaining a legal instrument of the EU. The regulation therefore ranks at the same level of hierarchy as national legislation. It does, however, take precedence over national law. It does not render contradicting national law invalid (principle of validity); rather, in case of conflict, the relevant national law is inapplicable. This primacy of regulations also applies to national law enacted after the regulation. Precedence over national constitutional law—as assumed by the European Court of Justice (ECJ)—has been accepted by the German Federal Constitutional Court only with reservations.
Measures of implementation or transposition taken by the Member States or mandatory rules on interpretation are not merely unnecessary. They are even illegitimate as far as they can potentially interfere with the effective implementation of the regulation, including its interpretation by the ECJ (‘prohibition of transposition’). Thus, the ECJ has considered illegitimate those measures that disguise the Union law nature of the regulation or frustrate or even merely ‘jeopardize’ its direct applicability, such as, for example, repetitive legislation or mandatory rules for interpretation. A selective repetition of the rules of a regulation is permissible only within close limits, eg where this is necessary due to the complexity of the regulation or the interaction of its provisions with national law. Non-binding, clarifying rules of interpretation, eg rules made by a government agency, can also be legitimate if they address uncertainties.
The duty to revoke, change and not adopt conflicting national provisions acts as the counterpart of the prohibition of transposing regulations into national law. Even though these provisions would yield to the regulation due to the latter’s precedence of application, they may cause uncertainty concerning the legal situation and therefore hinder the effective implementation of the regulation (in particular preventing the addressee from invoking provisions contained in the regulation).
A requirement of transposition only exists by way of exception where it is stated in the regulation itself (and thus by means of secondary law), eg the Statute of the European Company, or where it is factually necessary; (in the latter case, the requirement of transposition follows from Art 288(2) TFEU/249(2) EC in connection with Art 4(3) TEU/10 EC). Such regulations are also known as incomplete or ‘limping’ regulations.
3. Direct applicability
General applicability is to be distinguished from direct applicability. However, ‘by reason of their nature and their function in the system of the sources of [Union] law, regulations have direct effect and are as such, capable of creating individual rights which national courts must protect’ (ECJ Case 43/71 – Politi  ECR 1039 para 9; ECJ Case 34/74 – Variola  ECR 981 para 8). In accordance with its legal nature and addressees, the direct applicability of a regulation is not limited to relationships of vertical nature (ie between citizens and Member States) but, in contrast to the directive, can also take effect in the horizontal relationship between private individuals. This means that the regulation can constitute rights and obligations for private individuals against other private individuals which have to be enforceable in front of the national civil courts of the Member States (ECJ Case C-253/00 – Muñoz and Superior Fruiticola  ECR I-7289 paras 30 ff). Take, for example, the Passenger Rights Regulation (Reg 261/2004): it creates a right of the passengers to compensation, reimbursement or re-routing and care enforceable against the air carrier (see ECJ Joined Cases 402 and 432/07 – Sturgeon,  ECR I-10923).
The general conditions for direct applicability, namely that the provisions are unconditional regarding their content and do not need a transposing act, are usually met by regulations. The most noteworthy exceptions in this regard are incomplete regulations (see 2. above), regulations concerning the internal law of the EU and so-called basic regulations (which only govern essential aspects of certain matters).
4. Judicial review
Only bodies of the EU can institute a direct legal challenge against regulations thought to infringe primary law (Art 263(2) TFEU/230(2) EC). Individuals can only ask for an implicit review of the regulation’s conformity with primary law (ie as part of a legal action concerning the application of the regulation). They can, however, institute an action for annulment according to Art 263(4) TFEU/230(4) EC if the regulation is of direct or individual concern to them; this is the case where a legal act appears in the form of a regulation but is a decision in substance—a so-called pseudo-regulation—or where a regulation, in specific circumstances, has the practical effect of a decision—a so-called hybrid legal act. For example, the ECJ held that a producer of sparkling wine could institute proceedings against a regulation of general applicability because it was of individual concern to him since it prevented him from using his graphic trademark (ECJ Case C-309/89 – Cordoniu  ECR I-1853 para 14-23).
Hans-Jürgen Rabe, Das Verordnungsrecht der Europäischen Wirtschaftsgemeinschaft (1963); Wolfdietrich Möller, ‘Die Verordnung der Europäischen Gemeinschaften’  Jahrbuch des öffentlichen Rechts der Gegenwart 1; Derrick Wyatt, ‘The nature of regulations and directives’  E L Rev 215; Xabier Arzoz, ‘Rechtsfolgen der Rechtswidrigkeit von Verordnungen der Europäischen Gemeinschaften’  Jahrbuch des öffentlichen Rechts der Gegenwart 299; Armin von Bogdandy, Jürgen Bast, Fabian Arnd, ‘Handlungsformen im Unionsrecht’ (2002) 62 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht 78; Johannes Köndgen, ‘Rechtsquellen des Europäischen Privatrechts’ in Karl Riesenhuber (ed), Europäische Methodenlehre (2nd edn, 2010) 189.