It’s no secret that Europe lags on tech innovation. The EU has even given this a name – the “innovation gap” – and is now taking major steps to make things easier for the continent’s startups, particularly digital businesses.

While the EU’s contested Digital Omnibus Regulation seeks to fix existing barriers to business, another new measure aims to more actively cut red tape and make the continent more hospitable to modern companies and entrepreneurs: the 28th regime.

This new template proposes a single, harmonised set of rules that would allow companies to be truly EU-based instead of being bound to one member state’s laws. It aims to make Europe a startup-friendly economy, but it has also received fierce criticism, mainly because it risks hollowing out labour standards and enabling widespread social dumping.

The 28th regime is a proposed, optional EU-wide company status that provides an alternative to the national company law models of the EU’s 27 member states.

It was officially presented by President Ursula von der Leyen in July 2024, in her current mandate’s Political Guidelines, but the idea had been floated before; the Letta Report, published in April 2024, explicitly recommended its implementation.

The Draghi Report, which came in September 2024, made the same recommendation. It essentially stated that the EU will not achieve economic growth or catch up in the global innovation race unless entrepreneurs can expand across borders much more easily – “frictionlessly”, as tech pundits would say.

The Commission’s more recent Start-up and Scale-up Strategy presented the 28th regime as a “single and simple” digital-by-default rulebook with fast online incorporation, reduced cost of failure and template documents that work across borders.

The 28th regime’s goal is to overcome the patchwork of national company laws that makes it difficult and expensive for smaller firms to expand beyond their home state.

Barriers within the single market currently amount to a de facto tariff of about 44% on goods and 110% on services, which makes........

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