Research Handbook on the Economics of European Union Law

Research Handbook on the Economics of European Union Law

Research Handbooks in Law and Economics series

Edited by Thomas Eger and Hans-Bernd Schäfer

The Handbook focuses particularly on how the development of EU law negotiates the tension between market integration, national sovereignty and political democracy. The book begins with chapters examining constitutional issues, while further chapters address the establishment of a single market. The volume also addresses sovereign debt problems by providing a detailed analysis of the architecture of the EU’s monetary institutions, its monetary policy and their implications.

Chapter 12: An Economic Analysis of Legal Harmonization: The Case of Law Enforcement within the European Union

Nuno Garoupa

Subjects: law - academic, european law, law and economics


Nuno Garoupa* 1 1 INTRODUCTION Legal harmonization in the European Union is presented by many of its supporters and enthusiasts as economically justified. Paradoxically, legal economists are quite skeptical about the overall economic advantages of harmonization and unification. There is now a vast economics literature looking at the multiple determinants of legal convergence. The more detailed and more realistic are the models, the more skeptical the literature is about legal harmonization. Law enforcement has not been immune to the legal harmonization discussion. The economics literature has not attracted so much attention. Nevertheless, in the same vein, legal economists are not convinced by the superiority of coordination over decentralized enforcement. For example, the externalities in the market for criminal law are self-evident. However, the centralized solution is not immune to agency costs. The extent to which the benefits of internalizing externalities outweigh these agency costs is much less obvious. Harmonization of law enforcement is pursued in the European Union within the former  Third Pillar, now absorbed into the consolidated European Union structure under the Treaty of Lisbon. Established under the Maastricht Treaty (1993), the former Third Pillar essentially covered asylum and immigration policies (transferred to the First Pillar under the Treaty of Amsterdam, 1999), rules concerning external borders and customs, coordination of legal policies in relation to illicit drugs, international fraud, terrorism, organized crime and judicial cooperation. Certain European agencies were created in this context, for example, Eurojust (2002) and Europol (1999). Special mechanisms were developed such as the European Arrest...

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