BRUSSELS — The European Commission’s upcoming proposal for an EU-wide one-stop shop for founding companies will not undermine national labor standards, Justice Commissioner Michael McGrath told POLITICO.
Workers’ rights would be fully protected under the new “EU Inc.” designation, McGrath said of the proposal, which faces the ire of European trade unions ahead of its announcement on March 18.
The Irish commissioner spoke in Brussels on the eve of a labor rally Friday in his home city of Cork, where the European Trade Union Confederation (ETUC) and its Irish affiliate raised the alarm over what they see as an anti-worker proposal.
Dubbed the “European Delaware” after the U.S. state known for fast incorporation, the so-called 28th Regime is a core initiative of European Commission President Ursula von der Leyen.
The move would create a special venue, outside of the bloc’s 27 national jurisdictions, to set up firms inside two days. This single window idea, backed by reform guru Mario Draghi and the European Central Bank, is also loved by tech startups. They have led a successful lobbying campaign to rebrand it as “EU Inc.”
But the initiative is worrying organized labor, which says that important protections such as co-determination — a feature of the social market economy in countries like Germany and Austria that guarantees workers’ representation on company boards — could end up getting ditched.
‘Open fast, fire fast’
In putting together the proposal, the competitiveness-fixated Brussels policy bubble has taken “insufficient regard as to the actual world of work,” ETUC General Secretary Esther Lynch told POLITICO.
Lynch described the EU Inc. concept as an “open fast, fire fast” model that could empower “unscrupulous employers” to bypass national responsibilities.
McGrath countered that the project was strictly a corporate law instrument — and that it would not impinge on sensitive national labor arrangements such as workers’ representation.
“I believe the workers stand to gain from a more competitive European economy … good quality jobs, I believe, will flow from the EU Inc. proposal,” he said, arguing that the lessons of the past have been fully integrated into the draft.
One lesson that the trade unions have invoked is the failure of the Bolkestein directive, named after then-Commissioner Frits Bolkestein. That 2004 proposal, which sought to ease cross-border operations for service companies, was ultimately killed after fueling fears of a race to the bottom in labor standards.
With the EU admitting a phalanx of countries from eastern Europe that same year, the concern was that a stereotypical “Polish plumber” would suddenly appear all over the bloc and put local competitors out of business.
Like the earlier proposal, EU Inc. could create a “bargain basement” for workers’ rights, said Lynch, targeting aspects of the proposal such as the Commission’s promise to legislate employee stock options as a means of payment.
“Replacing proper pay and employment protections with share options is not the answer,” Lynch said.
Startup savior
The EU Inc. proposal would create a new pan-European type of company with simple registration rules, minimal capital requirements, and a promised 48-hour procedure — all intended to make it easier to create and operate startups in Europe.
The objective would also be to make it easier for startups and scale-ups to raise capital and issue stock options without navigating 27 different national systems.
A central debate has been the scope of the new law, and whether it should be accessible only to startups or to European firms writ large.
While industry groups and the Commission’s initial framing focused on “innovative” startups and scale-ups, the European Parliament has pushed for wider application.
“I would like to see a broad scope for this proposal,” said McGrath, adding that it should be open to all private limited companies.
However, he said that large, established firms will likely stay with their current structures due to existing complexities, negating a wholesale shift towards a less burdensome regulatory regime that unions fear.
The Commission is in the final stages of drafting a proposal for the new, optional legal form, and after clearing the Commission’s Regulatory Scrutiny Board last month, McGrath said he was on track to present it on March 18.
The Irish commissioner is pushing for a political agreement by the end of 2026, which could see the regime operational by 2027.
To ensure speed, McGrath is targeting a Regulation based on Article 114 TFEU, which allows for adoption by a qualified majority of member countries in the Council of the EU.
“I think we should avoid the political risk of unanimity because there is always the risk that the 28th Regime could be held hostage by other political considerations,” he said.
Success, he argues, will be measured by more capital reaching European firms on a global stage. “The sooner the better,” he said. “It cannot come a day too soon.”
