This Living Review deals with the division of competences between the EU and its member states in a multilevel political system. The article summarises research on the relations between the EU and the national and sub-national levels of the member states. It provides an overview on normative and theoretical concepts and empirical research. From the outset, European integration was about the transfer of powers from the national to the European level, which evolved as explicit bargaining among governments or as an incremental drift. This process was reframed with the competence issue entering the agenda of constitutional policy. It now concerns the shape of the European multilevel polity as a whole, in particular the way in which powers are allocated, delimited and linked between the different levels.
The article is structured as follows: First of all, normative theories of a European federation are discussed. Section 2 deals with different concepts of federalism and presents approaches of the economic theory of federalism in the context of the European polity. The normative considerations conclude with a discussion of the subsidiarity principle and the constitutional allocation of competences in the European Treaties. Section 3 covers the empirical issue of how to explain the actual allocation of competences (scope and type) between levels. Integration theories are presented here only in so far as they explain the transfer of competence from the national to the European level or the limits of this centralistic dynamics.