The 28th Regime and the False Promise of a European Delaware

In a recent OBLB post, I offered some high-level comments on the so-called ‘28th regime’ project, which seeks to facilitate the cross-border operation and growth of Europe’s innovative companies by creating a new corporate form at the European level. My main claim, also made in a paper (on file with me) I presented at the Oxford Business Law Blog Annual Conference at Bocconi University on 7 November 2025, is that there is little point in attempting to create a new European-level corporate form. Although intuitively appealing, such a project would likely face insurmountable political barriers, provided in particular that it would have to be approved by Member States unanimously. Even if it were successful, national courts would still be able to interpret the regulation’s open-ended provisions according to their own interpretive methods, thereby reintroducing fragmentation through the backdoor. Finally, the fragmentation problem in European law can be addressed just as effectively by harmonising only those aspects of corporate law that cross-border venture capital (VC) investors—the main expected beneficiaries of harmonisation—care about at the time they invest in innovative companies.

This post focuses on a diametrically opposed line of arguments to those of the 28th regime’s proponent: why not forget about harmonisation altogether, and try instead to foster regulatory competition in the EU? The argument goes as follows. Instead of harmonising corporate law, the EU could seek to enhance corporate mobility by making it easier for companies to incorporate in whichever Member State they choose. The hoped-for outcome of such a process would be regulatory competition among Member States for the incorporation of start-ups within their territory and, ultimately, the emergence of a ‘European Delaware’ concentrating most incorporations of innovative companies. Neither the 28th regime nor the harmonisation measures I advocate would be needed if this scenario were to materialise.

Suppose for instance that Italy decided tomorrow to enact very attractive rules to startups and their investors—of the sort, presumably, that would leave substantial room for private ordering and sophisticated contractual engineering. Founders from less accommodating jurisdictions would then have a strong incentive to incorporate their companies in Italy and benefit from this favourable framework. In turn, venture capital investors would begin to develop expertise in Italian law and invest more in Italy as an increasing number of start-ups incorporated there, creating a self-reinforcing dynamic. This phenomenon would yield benefits very similar to those of harmonisation: VC investors could focus on mastering Italian law and working with legal counsel in a single jurisdiction, rather than dealing with multiple sets of rules across Member States. From this perspective, future European reforms should enhance regulatory competition from the bottom up, rather than seek to harmonise corporate law from the top down.

This argument has strong merits. Indeed, one possible reason why such regulatory competition has not yet emerged is that various administrative and regulatory barriers to cross-border incorporation remain, some of which could easily be dismantled through EU regulation. In particular, divergences in Member States’ incorporation rules, as well as the fragmentation of national corporate registers, make it difficult for start-up founders in one country to incorporate their companies in another. The creation of a single pan-European corporate register would go a long way towards enhancing corporate mobility within the EU. Imagine that, tomorrow, start-ups could incorporate anywhere in Europe using exactly the same register, procedures, and language. Founders would then be strongly incentivised to choose the country offering the most attractive corporate rules, rather than simply the one in which they live or whose register happens to be the least antiquated and burdensome.

Yet there are reasons to believe that regulatory competition could not easily be unleashed through regulation. Incorporating in a given Member State means dealing with that country’s language, lawyers, and culture. Even if Italian corporate law became highly attractive to start-ups, German founders might still feel, rightly or wrongly, that incorporating in Italy would take them into uncharted territory, adding yet another challenge to the already demanding task of getting their business off the ground.

Furthermore, making the Italian ecosystem truly attractive to foreign start-up founders and investors would arguably require the emergence of a class of English-speaking judges and lawyers able to handle an influx of foreign actors who neither speak Italian nor are familiar with Italian legal institutions. In a sense, the development of such an ecosystem and companies’ incentives to incorporate in Italy are both prerequisites for and mutually reinforcing of each other, with no guarantee that such a virtuous cycle would ever materialise.

Admittedly, some countries might be in a better position than Italy to compete in this way. Ireland and Malta, for instance, both have English as one of their national language, and may therefore be better used to dealing with international companies. But, precisely for this reason, one might wonder why, if those Member States truly had an incentive to compete for start-up incorporations, they have not already done so. The ECJ’s case law leaves founders considerable freedom in deciding where to incorporate their companies. In this context, nothing prevents Ireland, Malta or any other Member State from reforming its national register to make it more accessible to foreign founders and encourage them to incorporate within its territory. The fact that no such strategic reform seems to have been undertaken over the past decades says something about Member States’ willingness to enter this sort of competition.

None of this means that the EU should not aim to facilitate cross-border incorporations, nor that corporate regulatory competition in the EU is doomed to fail. In fact, regulatory competition may well complement harmonisation efforts. Suppose that the EU were to implement the legislative reforms I advocate, harmonising certain aspects of national corporate laws to make cross-border venture capital investment more cost-effective. Member States could still compete for incorporations by improving those areas of corporate law left untouched by harmonisation. A well-calibrated balance between harmonisation and competition may ultimately be what EU corporate law can do best to help European start-ups thrive.

Paul Oudin is an Assistant Professor of Law at ESSEC Business School.

This post is published as part of the series ‘Harmonization and Competition in Corporate and Insolvency Law Within the Framework of the Savings and Investments Union’.