Time to tone down the arrogance - we need the 28th regime to be ambitious

One of the truly important milestones for European competitiveness this year will be the 28th regime - a common business law framework for startups and smaller innovative companies - which is to be proposed by the European Commission in the first quarter of this year.

Although the 28th regime idea, like any other in the EU, does receive a fair share of criticism (from all sides), this will be an important step in judging whether the EU will actually move boldly in helping European competitiveness, or whether this will end up being a paper initiative without major impact.

An important note: countries with a functioning, properly digitalised public sector, as well as business-friendly corporate law, should not look down on the 28th regime.

Quo vadis: European Parliament’s position and Commission’s proposal in 2026 Q1 

In a few weeks, on January 19th, the European Parliament in Strasbourg will vote on the JURI Committee’s report on the 28th regime, which has received criticism for not being ambitious enough from European founders, including EU INC.

The related discussions revolve around directive vs. regulation format, and the definition of the companies the regime would apply to.

European founders think the 28th regime should be a regulation instead of a directive,  otherwise, there is a high chance it would end up fragmented and not really work. And, traditionally, trade unions and more left-wing organisations worry that the regime would apply to too many companies, overriding national laws.

Why some are still dismissive about the 28th regime: the small country case

We can often hear dismissive statements about the 28th regime, like “this won’t solve all of our problems,” among both founders and policymakers. As a Lithuanian, I have participated in many conversations about the 28th regime in the past, and have had some doubts of my own.

Indeed, the 28th regime won’t solve all the problems European founders face, and by now we know the litany by heart: the need to harmonise the implementation of different regulations, the need for a Savings and Investment Union (aka better access to European capital), and a better business climate.

The reasons for a dismissive approach towards the 28th regime are many (proposals to harmonise tax and labor laws are a few of them), but one of the main ones, especially among more digitised, bureaucratically progressive (and smaller) countries (hint: Nordics, Baltics, CEE), is that both businesses and policymakers cannot relate to the problems founders and companies in Western Europe face.

Reading horror stories from founders in Germany about having to spend dozens of hours at notary offices, where notaries read all the documents out loud just to establish a company, is somewhat strange for anyone from the Nordics, Baltics, or CEE. Many of us cannot understand the concept of not having centralised registers, let alone having to spend more than 10 minutes filing personal income tax reports.

Lastly, most of us are aware of how long, arduous, and frustrating pan-European initiatives can be, especially those that aim to create centralised systems across very different jurisdictions and bureaucratic traditions. There are very few initiatives that can be treated as actual success stories (p.s. good luck with the EU Business Wallet).

Strategic blind spots against the 28th regime

The main blind spots behind the small-country, slightly arrogant take on the 28th regime are that people overestimate the importance of their own systems in the global context, underestimate economic nationalism in bigger EU countries, miss the opportunity for their own businesses to lead the implementation of centralised EU registers, and undervalue the importance of supporting the initiative even if it doesn’t benefit them immediately.

Founders from smaller countries know their markets are small and tend to be globally oriented. The formula is simple: start at home, scale in the US, come back to Europe when you have enough money to deal with European compliance costs and needs. There are exceptions, of course. But scaling within Europe is still an arduous process, usually requiring local entities in multiple countries just to meet local requirements.

Like it or not, economic nationalism and distrust of foreign companies (even if they’re from the EU) is still very real: look at Revolut launching new IBANs across Europe, even though, in theory, a Lithuanian IBAN should be accepted everywhere. This is also why the “Delaware” model in Europe won’t work long term: national regulators, policymakers, and even consumers will favor their own. That’s exactly why the 28th regime is a silver-bullet alternative to all of this.

Lastly, the 28th regime could become a jackpot for countries with digitised bureaucracies and centralised registers. Instead of being observers, the Nordics, Baltics, and others should take an active role and lead, rather than passively follow.

European markets are fragmented, but interdependent

An ambitious proposal for the 28th regime would greatly improve conditions for European founders and would create a path toward a more integrated market for startups that would otherwise choose other, non-EU jurisdictions.

The costs are very real: the European Parliament’s Think Tank quoted the International Monetary Fund, noting that “persistent barriers to the EU single market still represented the equivalent of a 110% tariff on services.”

Like it or not, our economies in Europe are interdependent: if German and French companies don’t do well, we will all feel the consequences. Especially us, in the smaller countries. This is especially important to remember now, when Europe seems to be on its own, geopolitically and economically.