The subsidiarity principle is originally a Catholic social principle stating that society should not interfere in areas that families can decide on their own.
In advanced democracies, where citizens are the sovereign also in executive and legislative affairs, subsidiarity means that each citizen's sovereignty is passed on to the next level of representatives, and so forth, but only up to the level nearest to the people that is competent to decide and work with them.
The Treaty of Maastricht has a special protocol on subsidiarity urging the EU not to legislate when an aim may be better achieved at a more local (decentralised) level. The principle applies in the areas where the EU has not been given exclusive power (competence). At present, it is the EU Commission in Brussels and the treaties that determine who shall create laws. The monopoly on proposing laws includes the power to decide the legal base for whether a competence shall be administered as binding legislation or as voluntary co-ordination. The choice of the EU Commission on this matter can only be amended by a unanimous Council decision. This means that centralisation normally prevails.
The EU Constitution proposes subsidiarity as one of the “Fundamental principles” in Art. I-9 and an up-dated protocol on subsidiarity and proportionality is attached.
In the Convention, there was a strong move to introduce real subsidiarity, but the decentralisers lost to those wanting more integration and who were opposed to returning powers (competence) to the member states.
The EU Constitution proposes transfering more power (competence) to the EU, not less. However, there will also be an “alarm bell” system. Under this system, one-third of the national parliaments, acting in unison, can object to an EU Commission proposal within six weeks of its publication on the grounds of breaching the principle of subsidiarity. This "reasoned opinion" may then be taken into account, but there is no obligation to alter or withdraw the proposal.
For reasons of infringement of the subsidiarity principle, the member states´governments can take a case to the EU Court on behalf of their national parliaments. That means that national parliaments cannot do so on their own.
The "Democracy-Forum" in the Convention has proposed that the annual catalogue of EU law should be approved by the national parliaments, including the legal bases for EU action, so that subsidiarity will be organised bottom-up instead of top-down.
See also the report of the Working Group "Subsidiarity" of the Convention: http://european-Convention.eu.int/doc_register.asp?lang=EN&Content=WGI
as well as: sovereignty, Political rights.