The European Commission’s plan to create a 28th regulatory regime for innovative companies may be a flop. Commission President Ursula von der Leyen promised a “framework that would allow companies to operate all across our Union under one single set of rules”. Startup groups have their misgivings.
A coalition of 27 startup associations sent an open letter to Ms von der Leyen to express “their deep concern over the leaked draft of the 2026 European Commission Work Programme”. Their main fear is that, rather than the simplification promised by the Commission President, the regime will in practice mean further fragmentation: “For founders, it will mean 27 transpositions, 27 interpretations, and 27 opportunities for divergence and delay. It means replacing one patchwork with another,” the letter reads.
“This poses two major problems. First, it would mean that the 28th regime would be a directive,” the entrepreneurs complain. “Second, that it would only apply to a few companies and potentially only at some stages of their lifecycle. If confirmed, this would be a profound disappointment for Europe’s entrepreneurs and founders, who have counted on, and celebrated, the vision for Europe that you have shared with them.”
In her September State of the Union address, the Commission president spoke of the regime as an innovative tool to reverse Europe’s trend of startups leaving the continent. “We want the best of Europe to choose Europe,” she said at the time. By making major investments in young, fast-growing companies in critical technologies, the continent’s technological sovereignty should be preserved.
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An old idea revived
The idea of creating a single EU-wide legal framework for companies gained new traction in 2024, when former Italian premiers Enrico Letta and Mario Draghi both endorsed it in landmark reports on the future of Europe’s economy. Their analyses called for bold measures to strengthen competitiveness and deepen the Single Market, placing a “28th regime” at the centre of that vision.
The concept itself, however, is not new. The European Commission tried to introduce similar structures in 2004 and again in 2011, but both initiatives collapsed amid opposition from trade unions and member state governments.
Now established as part of the Commission’s Competitiveness Compass, the idea aims to simplify rules, reduce barriers for startups, and make the EU more attractive for investors. The legislative proposal is to arrive in the first quarter of 2026, but leaks and early consultations have already raised alarms. A 2026 work programme that Ms von der Leyen presented this week suggests that the 28th regime may enter the books as a directive rather than a regulation. Various startups have now expressed concern that this change appears detrimental to them.
Concerns about legal status
Ms von der Leyen first introduced the current initiative at the World Economic Forum in Davos in January 2025. She presented it as an effort to give European companies the option to operate under a single set of rules for corporate law, insolvency, labour law, and taxation.
The directive approach would follow the suggestions of MEP René Repasi (S&D/DEU), the Parliament’s rapporteur on the topic. In June, the Committee on Legal Affairs published a draft report on the 28th regime, in which Repasi cites the unlikelihood of unanimous support in the Council that a regulation would require. Other MEPs echoed that concern, with Ton Diepeveen and Auke Zijlstra (both PfE/NLD) inquiring whether tax revenues generated would become EU own resources — a step that also requires Council unanimity.
It means replacing one patchwork with another. — letter ot the European Commission by 27 national startup associations
Meanwhile, regional agreements may also cause complications. As MEP Oihane Agirregoitia Martínez (Renew/ESP) noted, taxation in the Basque Country and Navarra follows historic agreements. The 28th regime would create parallel legal structures without clarity on how it would interact with these special systems.
Labour rights
Business Europe, Europe’s largest business organisation, has expressed strong support for the regime, though it also favours a regulation over a directive. At least, it says, it should at include a full harmonisation clause.
Aside from the legal uncertainties, MEPs have expressed concerns that unified labour rules could erode labour standards if the 28th regime introduces weaker provisions than some national systems. Civil society organisation Corporate Europe Observatory echoes these worries and warns that the unified rules may not be as strong as national workers’ rights. “Trade unions warn against the emergence of a two-tier labour market and a race to the bottom in social rights,” the NGO notes.
The Commission is expected to present its final proposal for the 28th regime in the first quarter of 2026. A Commission spokesperson confirmed that the final decision on whether the measure will take the form of a directive or a regulation has not yet been made.
