The European Union has been struggling for years to create a single market for capital – what used to be called the capital markets union but is now the savings and investments union. This, according to the European Commission, would improve the “financial system’s capability to connect savings with productive investments,” while spurring innovation. But progress on the plan has been “embarrassingly modest”.
Could a so-called 28th regime – a harmonised alternative to 27 national procedures – offer a way forward? Ideas for such regimes have typically involved a disparate mix of corporate structures, insolvency procedures, tax ideas and executive pay models. However, European policymakers have been unable to agree on what problem they want a 28th regime to solve, and the EU already has places where it is very easy to start a company. Past efforts to create a pan-European corporate form have not been game-changers. But what if a new type of contract, rather than a new kind of company or comprehensive legal framework, could be the best way to get from theory to practice?
A better way would be to think about 28th regimes – plural – rather than an overarching new framework. By focusing on one goal at a time, the EU could set standards more likely to work. Specific and targeted goals might also find a smoother political path, overcoming the argument that any meaningful plan would be buried by member states so it would be better to shore up the EU’s existing freedom of establishment while strengthening common supervision.
In general, 28th regimes could be characterised by two features. First, procedures would be available on a voluntary basis alongside, rather than automatically instead of, national systems. Second, these standardised rules could be adopted by enhanced cooperation – coalitions of nine or more willing EU countries – rather than all 27.
The process should be used where effective. The EU already has the single unitary patent, so far adopted by 18 countries, and provisions on cross-border divorce, currently agreed to by 17 countries, as existing ‘28th regimes’. Other proposals range from speedy and paperless incorporation, which could be proposed by the European Commission on 18 March, to a European Central Bank-backed regime for cross-border tokenised assets. The 2024 competitiveness report for the European Commission by former ECB president Mario Draghi, meanwhile, offered two options: one to boost investment in innovation and the other to help Important Projects of Common European Interest.
For capital markets, money is the most practical lens through which to view the problem. Fragmented capital markets limit cross-border investment, making it hard for new companies to find scale-up funding in Europe. What would improve that?
Seen from this angle, the top priority should be supporting capital investment and reducing investor uncertainty. If people understand clearly what happens to their cash, equity and intellectual property when a deal goes sour, they can focus on seeking out the best ideas to bet on, and take risks based on the deal itself, rather than on navigating the fragmented legal landscape. Some of those investments may pay off big.
The EU should thus refocus its efforts into developing a type of contract – not necessarily a whole corporate structure – that an investor and an investee can agree to. A ‘28th regime’ regulation could create a common understanding of what this contract would look like. Countries could decide, via enhanced cooperation, whether to allow this EU-standard contract in their jurisdictions. Parties would decide whether a particular business deal would be governed by those practices.
This kind of standard-setting would fill a gap in the EU’s efforts to make its insolvency laws more compatible. In 2025, lawmakers approved a new directive intended to simplify procedures and make it easier to value assets in businesses that will be sold as a going concern, rather than liquidated piece by piece. A follow-on regime could tackle issues such as what happens to a startup’s residual equity and technology, or how to unwind a failing deal even if the parent business has not gone wholly bankrupt.
If the new framework works, countries will want to make sure it is available in their jurisdiction so their economies benefit. They also could develop modular add-ons, such as common tax treatment for 28th regime deals.
The EU has tried comprehensive big-bang advances before, like the pan-European personal pension product or the unwieldy, and now-pared-back sustainable finance disclosure laws. Efforts to solve too many problems simultaneously can end up solving none.
Europe needs growth and growth requires investment. A 28th regime could help, as long as policymakers find the will to proceed and do not ask it to do too much at once.