The concept of a 28^th regime, a recurring European topic, has resurfaced in very recent European news, particularly with the release of Mario Draghi's report on European competitiveness and the start of the new mandate of the European Commission, on 1^st of December. The concept of an optional legal framework to harmonize contract laws within the European Union has come up repeatedly, such as in the 2011 opinion of the European Economic and Social Committee. This opinion highlighted the potential benefits of such a regime, a relevant tool to reduce disparities between national legal systems and to facilitate cross-border transactions. Despite proposals that have thrived in certain areas (such as the European unitary patent), the concrete implementation of a 28^th regime represents untapped potential and constitutes a major challenge for the European Union.

Proposals from the Draghi Report

The report by Mario Draghi - the former President of the European Central Bank – shines a new light on the 28^th regime, with a strong emphasis on the promotion of innovation and support for high-growth companies. Acknowledging the European Union's lagging behind other regions, Mario Draghi suggests the creation of an EU-wide legal status for innovative companies, providing companies with a unique digital identity recognized by all EU Member states. This proposal for an optional regime applied to company law should not come as a surprise: the Statute for a European Company (SE) is one of the main achievements of an optional legal regime in the Union. However, the SE is a (somehow complex) synthesis of several national laws, primarily designed for large companies, enabling them notably to easily change their Member State of establishment.

By proposing a new (optional) status for an ‘Innovative European Company’, the Draghi report goes further than the SE status: the aim would be to provide European start-ups with a harmonized legal framework that is tailored to their specificities. This status would allow companies to benefit from harmonized legislation with respect to company law, insolvency, labor law, and even taxation, facilitating activity across the Union without requiring separate incorporation in each Member State.

In addition, Draghi recommends assessing the impact of regulations on smaller businesses (the 24 million European SMEs represent 99% of all EU companies and nearly two-thirds of private sector jobs), with the goal of reducing the regulatory burden on SMEs and encouraging innovation and growth by excluding SMEs from regulations that only large companies can comply with.

Commissioner McGrath's Roadmap

Commissioner Michael McGrath (in charge of Democracy, Justice, the Rule of Law and Consumer Protection), was repeatedly questioned on the 28^th regime theme during his hearing by MEPs on 5^th of November. Here, Commissioner McGrath clearly aligns with the Commission's motto of simplification and Better regulation. He thus aims to create an EU-wide legal status to help innovative companies grow by offering them a set of simplified and harmonized rules.

While he was forthcoming regarding his overall objectives as Commissioner—improving European competitiveness, reducing administrative burdens, and ensuring the smooth and efficient functioning of the single market — the path through which these goals will be achieved remains unclear. Commissioner McGrath has committed to working closely with other Commissioners and stakeholders, highlighting at the occasion several principles that could characterize the 28^th regime: being set up fully online, materialising the once-only principle when setting up subsidiaries and branches in another Member State, ending the requirement for an apostille, establishing a European unique identifier for companies which would provide a single identity and a multilingual digital EU company certificate.

Obstacles & Challenges to Overcome

At a time when European competitiveness and innovation deficit dominate the EU debate, it is not surprising that the 28^th regime is again at the heart of discussions. Such an optional regime would offer the advantage of a harmonized European legal regime without eliminating existing national regimes – such an approach may facilitate the difficult political negotiation on harmonization. It would arguably address a real economic need but it raises nonetheless fundamental questions of acceptability by European and national authorities.

The implementation of the 28^th regime will undoubtedly face numerous obstacles and challenges. Compromising on the proper degree of ‘harmonization’ is one of the main challenges, since obtaining consensus among Member States on a unified legal framework (even an optional one) can be difficult due to different national regulations, legal traditions, and divergent economic interests – all the more so if sensitive issues such as labor law or taxation are involved in the proposal. Political will, therefore, will be of the essence if the 28^th regime project is to flourish. The reluctance of some Member States could delay this project, despite the significant reflections and the work already undertaken, such as those related to a European business code. Ensuring consistent application and compliance across all Member States will be essential to maintain fair competition conditions and build trust in this new regime.

Finally, the involvement of companies, legal experts, civil society, will be necessary to ensure that the 28^th regime meets the needs of all stakeholders. The theme of the 28th regime has been brought back to the forefront of the European political agenda. Promising solutions are being considered, inspired by the Draghi Report, with the ultimate goal of improving European competitiveness and supporting businesses. However, the success of this project will depend on the commitment of the new Commission, stakeholders, and of the Member States. This commitment will be tested very soon, with the Commission's Work Programme for 2025 – which will provide the first indications as to whether a 28^th regime could fly, or whether it will remain wishful thinking.