A state is sovereign when it can decide its own affairs, make its own laws and make agreements with others. In democracies this sovereignty comes from the sovereignty of the citizens, who are the source of lawful authority(subsidiarity).This is a basic political right in developed democracies guaranteed by their constitutions or fundamental laws.
In representative democracies the mandate to execute state sovereignty on the citizens' behalf is given to elected representatives for the duration of their mandate. In direct democracies the citizens execute their sovereignty also by means of the right of initiatives and referendums, which are binding on their representatives.
The EU was established as a co-operation among sovereign nation states. Its member states agreed to transfer certain areas of law-making, executive and judicial power to the supra-national institutions in Brussels and Luxembourg.This means that the EU has developed into a Union where the competences of the member states are limited. The EU has directly binding legislative powers, which do not have to be transformed into national law in certain cases because the treaties recognise that EU law has direct effect.
The EU can make binding international agreements through the concept of legal personality in Art. 47 TEU.Under the Treaty of Lisbon the EU subscribes to the European Conventon of Human Rights, just as all its member states have done.
Viewed from the outside, this makes the Union look like a state, even though the EU does not have formal representation at the United Nations, in contrast to its member states.
Ultimately, the EU Court decides what part of national sovereignty can be reduced by its interpretation of the treaties. Therefore, the member states of the EU are no longer fully sovereign in the way states outside the EU are.
Some argue that a country can gain more real influence by sharing formal sovereignty with other states. They call this "pooling" sovereignty.Others counter this view by arguing that a country can lose real influence and democracy if it shares sovereignty in areas where it could cope just as well, or better, on its own.
The Lisbon Treaty provides that a member state can regain full sovereignty by leaving the EU following two years waiting time. In such cases states may, for example, have a partnership agreement instead.
However, such a country may be in danger of merely photocopying many of the decisions of the EU members without having any say in actually making them. This is not genuine sovereignty, therefore the terms formal and real sovereignty are also used. Sovereign states may also negotiate bilateral agreements with the EU, like e.g. Switzerland.