After years of deliberation, the so-called 28th Regime — the European Union’s bid for a pan-European legal framework for businesses — might finally become reality.
The European Parliament will vote on a series of recommendations on Monday, while a legislative proposal is due from the European Commission by the end of March. The proposal, however, is not without controversy, pitting business against labour interests.
While industry leaders and start-up founders see it as fortifying the single market in the face of stiff global competition, unions worry that a bloc-wide legal umbrella will weaken labour protections.
“It’s getting critical that the member states are not prepared or are not willing to transfer their civil law competencies to the European level,” MEP Axel Voss (EPP, DE), told The Parliament. “This creates a fragmented single-market, and this is not what we want, especially in this geopolitical environment.”
Why does Europe need a 28th Regime?
For decades, the innovation gap between the EU and the United States has widened, as many of the world’s largest tech companies have emerged and scaled on the other side of the Atlantic.
Start-up founders, venture capitalists, and analysts attribute much of that gap to Europe’s still-fragmented single-market. Unlike the US, which operates under a unified system across all 50 states, companies in the EU must navigate a thicket of different member state regulations. To give an idea, the International Monetary Fund estimates that Europe’s red tape and differing regulatory standards incur costs equivalent to 110% tariff on services traded within the EU.
Faced with such hurdles, many growing European companies move to the US. As an example, Biernat pointed to the Swedish AI-assisted coding company Loveable, which was widely celebrated as one of Europe’s tech successes in 2025. While the company’s founders are Swedish, the company is incorporated in the US, placing critical intellectual property outside European jurisdiction.
If approved, the 28th Regime aims to reverse that trend by creating a pan-European legal framework to minimize bureaucratic friction across member states. While the fine print is still being ironed out, the framework will likely include a digitized European-wide company registry, standardized stock options, and a central depository for all legal documents.
Iwona Anna Biernat, the head of legal strategy at EU Inc., a group of start-up founders and companies advocating for the regime’s implementation, said such a framework is critical for Europe to be remain competitive with the US and China.
“It’s important to address this structural issue, so we can have these companies incorporate and stay in Europe and stay as long as possible,” she said.
Helping business or harming workers?
But workers’ unions and a number of MEPs have lined-up against the proposal.
Esther Lynch, General Secretary of the European Trade Union Confederation, told The Parliament that the 28th Regime could re-open long-settled issues about workers’ rights.
“Proposals that would allow companies to opt-out of national labour law, collective agreements, or established systems of worker involvement would undermine the EU’s social model and decades of progress on workers’ rights,” she said.
While there is broad agreement that a 28th Regime would not concern member state individual labour or taxation law, it might not be a sufficient firewall. As pointed out by Marcus Meyer-Erdmann, a senior researcher at the European Trade Union Institute, company and corporate labour law are deeply intertwined, with many labour protections embedded directly in corporate governance rules.
An example is codetermination — the principle that workers must be involved in company decision making — which exists in some form in 18 of 27 member states. A pan-European company form that omitted such provisions could trigger a race to the bottom, allowing business owners to sidestep stronger protections by choosing the most permissive company structure.
At its broadest, Antonio Aloisi, an associate professor of law at IE University in Madrid, said the 28th Regime could put the EU’s social goals in direct conflict with economic integration — a long-standing tension at the heart of the European project.
What is the status of the proposal today?
The 28th Regime has gained momentum under the second mandate of Commission Chief Ursula von der Leyen who explicitly called for its implementation in her September State of the Union Speech. But with the Parliament set to vote on a series of recommendations to the Commission on 19 January, the details of the regime are still being debated. Those include which types and sizes of companies the status should apply to, and, more importantly, if the legislation takes the shape of a rule or directive.
Advocates of the regime are rooting for regulation, which means EU law applying directly to all member states. They argue that applying the 28th Regime as a directive — implemented by national parliaments instead of at the European level — would only cement the issue of patchwork implementation.
“It depends on the courage of legislators and the courage of the Commission,” Voss said, who prefers regulation to a directive. However, he added that making it regulation would require unanimity in the European Council, meaning a more uphill battle.
How would the 28th Regime change the EU?
In any case, a proposal is still years away from being finalized, with advocate Anna Biernat hoping that the first company registrations could go into effect by late 2027 or early 2028.
If implemented, however, it would undoubtedly have a profound impact on the future of Europe. A European-wide legal framework for companies — and the power it would concentrate in Brussels — would deepen integration while further diluting the power of individual member states.
Europe urgently needs to strengthen the single market and its ability to compete in technology, but the question is if that can be achieved without eroding the social model that has long defined the continent.
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