Europe should approach the fashionable idea of a “28th regime” with clear eyes. A new legal framework will not by itself improve the Single Market unless it changes the incentives that keep fragmentation alive. The real lesson from America’s Uniform Commercial Code (UCC) is that integration succeeds when rules reward efficiency and adoption – not when national ministries and European institutions protect bureaucratic complexity.
For decades the European Union has claimed to possess the world’s largest Single Market. In practice it resembles something closer to a federation of 27 legal islands operating in 24 official languages. Tariffs may have vanished, but the rules governing companies, insolvency, taxation and labour relations still differ widely across the bloc. For firms that want to expand beyond their home country, Europe often behaves less like one market than twenty-seven.
Brussels now believes it has found a workaround. The proposal currently circulating through EU institutions – the creation of a so-called “28th regime” – is wrapped in the familiar language of innovation and competitiveness. Yet at its core the idea is far less dramatic: an optional European rulebook that would coexist with the 27 national legal systems and that companies could choose to adopt for their corporate structures.
The attraction is obvious. Regulatory fragmentation remains one of the EU’s most persistent legal shortcomings. Studies suggest that remaining barriers within the Single Market impose costs equivalent to tariffs of roughly 45% for goods and more than 100% for services. In other words, Europe’s biggest trade barriers are internal. And these figures are conservative. For many smaller firms the reality is simpler: navigating 27 legal systems often makes cross-border trade and investment prohibitively difficult.
Against that background, the appeal of a unified corporate regime is clear. If designed well, it could mark a rare moment of institutional pragmatism in European integration. A common rulebook could finally provide what businesses have long demanded: predictable and interoperable rules that work across borders.
The Vague Promise of a Continental Rulebook
The political momentum behind the proposal has grown rapidly. Enrico Letta’s recent report on the future of the Single Market championed the idea of a European business code. Mario Draghi’s competitiveness agenda echoed the call. The European Commission has now incorporated the concept into its broader strategy to close Europe’s innovation gap.
Meanwhile the European Parliament has sketched out what such a system might look like. Under one proposal, companies could register as a Societas Europaea Unificata, a unified European company form. Incorporation could be completed digitally within 48 hours, with harmonised shareholder rules, capital requirements and employee participation frameworks. Yet the parliamentary text remains vague on crucial legal questions, reinforcing the impression that policymakers themselves have not fully settled what the regime would cover – or how it would interact with national law.
Such changes may sound technical. But their economic implications could be considerable. Europe’s difficulty is not that it lacks entrepreneurs. It is that those entrepreneurs rarely scale across borders. Legal fragmentation increases costs, discourages investment and slows the growth of young firms.
The result is familiar. Europe produces plenty of start-ups but comparatively few growing “champions”.
A credible 28th regime could help address this gap. By lowering legal friction, it might allow companies to expand across the EU almost as easily as they expand across American states.
Integration by Workaround
Yet the proposal also highlights an uncomfortable truth about European integration. Brussels is reaching for a new instrument not because harmonisation has succeeded, but because it has seldom worked as intended.
Many of the most consequential barriers to cross-border business lie in areas where Member States guard their sovereignty fiercely: taxation, labour law, insolvency regimes and social policy. Full harmonisation in these domains remains politically remote.
The Commission’s likely solution is therefore pragmatic. The first version of the 28th regime will probably focus primarily on company law, leaving other areas largely untouched.
Politically, this is an easy sell. The promise of a simpler Single Market appeals to voters across the spectrum and attracts broad cross-party support in Brussels. The real resistance lies elsewhere: in national ministries, professional guilds such as notaries and lawyers, tax advisers, labour unions and parts of academia – institutions whose influence and income often depend on the persistence of legal complexity, and whose roles often expand when rules remain fragmented.
Corporate law is only one piece of the puzzle. Companies operate across entire legal ecosystems. They hire workers, raise capital, restructure debts and eventually close down. If these surrounding frameworks remain fragmented, the practical benefits of a unified company form may prove limited.
Europe has tried similar experiments before. Optional EU frameworks already exist in areas ranging from pensions to intellectual property and company structures. Some, such as the European Company statute, achieved modest uptake. Others attracted little enthusiasm from businesses.
The lesson is that optional regimes succeed only when they offer clear and tangible advantages over national alternatives. Even then, success is not guaranteed and may require a measure of luck. The many actors involved in lawmaking – national ministries, professional lobbyists and EU institutions alike – routinely praise integration while quietly reproducing the legal complexity that sustains their influence.
The Big Lesson from Elsewhere
In this respect Europe might look across the Atlantic. The United States solved similar problems through a different mechanism. The Uniform Commercial Code, adopted voluntarily by American states, gradually created a shared legal foundation for commerce without federalising private law.
The crucial point is often overlooked. The UCC did not succeed because Washington imposed it. States adopted it voluntarily because the promise was straightforward: better laws make better states. Legal convergence followed not from political pressure, but from economic usefulness.
Critics often object that the United States is not a perfectly integrated market either. That is true. But its practical barriers are far lower. Businesses operate largely in a single language – perhaps one and a half if Spanish is included – and typically rely on a single legal or tax advisory firm to navigate several states. In Europe, by contrast, operating across borders often means dealing with different laBox nguages, legal traditions and professional ecosystems at every step.
Europe’s 28th regime could serve a comparable function – provided it follows the same logic. Integration should reward efficiency, not perpetuate institutional complexity.
If the framework merely adds another optional legal form without simplifying the broader regulatory environment, businesses may simply ignore it.
The Real Test
For the reform to succeed, several conditions will matter.
First, the regime should be accessible broadly, not restricted to narrowly defined “innovative” firms. A Single Market instrument loses much of its value if most companies cannot use it – a “28forAll”.
Second, the legal framework must be genuinely uniform across the Union. If Member States retain wide discretion in implementation, the regime will replicate the fragmentation it seeks to overcome.
Third, and perhaps most importantly, the new system must be much simpler than national alternatives. European integration has often produced more rules rather than clearer ones. Entrepreneurs will only adopt the framework if it reduces complexity rather than adds to it. This may also require questioning entrenched institutional roles. If company formation is meant to be digital and swift, why should processes remain tied to traditional intermediaries such as notaries? Other trusted actors – or even digital platforms with global experience in verifying identities and onboarding users at scale – might perform some of these functions more efficiently. A genuinely future-oriented system would be pragmatic about how trust and verification are organised.
If policymakers truly want to spur adoption, they might go further. Why not give companies operating under such a regime meaningful economic incentives to use it? For instance, firms could be exempted from corporate income taxes or from compulsory membership in national chambers and similar bodies (also acting as a business tax).
Such ideas would undoubtedly provoke outrage in some quarters. Yet corporate income taxes account for a relatively small share of overall tax revenues compared with instruments such as VAT. Their political symbolism often exceeds their fiscal importance. Allowing European companies to reinvest European profits rather than taxing them early could help young firms scale across Europe – and would give the Single Market something it has often lacked: a reason for businesses to choose it.
A Modest Revolution?
The EU’s Single Market has long been described as Europe’s greatest economic achievement. Yet in many crucial respects it does not exist. Substantial legal fragmentation continues to limit scale, productivity and investment – while also sustaining government and professional structures that have grown large, slow and close to impossible to reform.
The idea of working towards a 28th regime offers a rare opportunity to address that weakness without forcing Member States into politically explosive harmonisation. But its success will depend less on rhetoric than on design.
The real lesson from the United States lies in the incentive structure behind the Uniform Commercial Code. American states were not compelled to adopt it. They did so because failing to participate risked putting them at a competitive disadvantage. Crucially, the UCC did not focus narrowly on one corner of commercial law. It addressed the practical legal infrastructure that businesses rely on across domestic “federal” markets.
Europe could replicate that dynamic. But reforming corporate law alone will not be enough. Companies operating across borders face a wider set of frictions – from tax regimes and contract law to insolvency procedures and labour market rules.
And here the idea becomes genuinely interesting. If a group of economically significant countries – say Germany, the Netherlands, Sweden, Denmark, Finland and some Central and Eastern European economies – were to move ahead and make such a regime genuinely attractive across these horizontal policy areas, others would quickly feel the pressure to follow. Convergence would emerge not from political declarations but from competitive necessity.
If that logic takes hold, the reform could become one of the most meaningful steps in the evolution of the Single Market. If not, Europe may simply discover that its Single Market now contains not twenty-seven legal systems – but twenty-eight.
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