The European Digital Power of Attorney: The Mountain in Labour? Or How the EU Cannot Do a Cost-Benefit Analysis Even If Europe’s Survival Depended on It

Directive (EU) 2025/25, published on 10 January 2025, amends Directive 2017/1132 to further expand and upgrade the use of digital tools and processes in company law. It is presented as a new stage in the digitalisation of European company law, following the path opened by the Business Registers Interconnection System (BRIS) and by Directive 2019/1151, which had already introduced rules on the online formation of companies, the registration of cross-border branches and the online filing of documents with business registers.

The official justification is familiar: companies operating in the EU internal market need their company data to be usable in cross-border contexts in a reliable but not overly burdensome way.

The Commission identifies as a problem the fact that, when a company acts in another Member State, it often must resubmit documents that are already held by its national register. To submit them, it has to translate, legalise or apostille them so that the foreign authority will accept them as authentic and sufficient.

The Commission has introduced two additional instruments to improve matters: the EU Company Certificate and the European digital power of attorney.

The first is a standardised, multilingual document that certifies the existence of the company and certain registered company data.

The second allows a company to authorise a person digitally to carry out certain cross-border company-law acts. It is not a general power of attorney for ordinary business dealings, nor a mechanism for identifying all the attorneys-in-fact of a company, nor a public database of company representatives. It is a document certifying that a person may act on behalf of a company in specific proceedings before registers or authorities of another Member State. Technical commentary on the Directive links it to acts such as the formation of subsidiaries in other EU countries, the registration or closure of branches, and cross-border conversions, mergers or divisions.

Take a simple example. Suppose a Spanish company wants to open a branch in Germany. Under the traditional system, it would have to prove before the German registrar that it exists, that it is validly registered, who its representatives are and who has authorised the German lawyer or agent to handle the registration. That may require Spanish registry certificates, translations, legalisations, notarial checks or equivalent documents.

Under the new system, the company could obtain a European certificate attesting to its basic data—the EU Company Certificate—and issue a European digital power of attorney in favour of the German professional entrusted with the filing. The German registrar should be able to verify those documents electronically and accept them without requiring a further round of national formalities.

The typical company incorporated in any European country that buys, sells, leases, distributes, finances, hires employees or provides services will not normally need a European digital power of attorney. It acts through its directors, national notarial powers of attorney, electronic certificates or the usual contractual mechanisms. Thus, for an SME, the expected number of uses is zero. For a company that internationalises only occasionally, the expected number of uses is perhaps once or twice over many decades. For a corporate group with a frequent presence in several Member States, it may be more useful, but it will still be linked to corporate-organisation operations, not to day-to-day business activity.

The Commission presents the initiative as a reduction of administrative burdens for companies. In the proposal that led to the Directive, a potential reduction of burdens of around EUR 437 million per year was estimated, a figure also reproduced by the European Parliamentary Research Service. But that figure does not answer the essential questions: how many companies will actually use the European digital power of attorney, how many transactions will benefit from it, what the real saving per transaction will be, and what the full cost will be of designing, negotiating, transposing, implementing and maintaining the system.

The costs for private parties do not disappear. They change form. The company will have to obtain the certificate or the power of attorney, pay any applicable fees, adapt its internal procedures, check who may validly grant that power, coordinate with advisers in the Member State of destination and learn how to use a new instrument that overlaps with national powers of attorney.

Moreover, someone will have to verify that the person issuing the power has sufficient authority, that the power covers the specific transaction, that it has not been revoked and that the authority in the Member State of destination can verify its validity. The Directive may eliminate apostilles and translations in certain cases, but it does not eliminate the need for legal scrutiny. It replaces some formalities with others, perhaps faster ones, but not cost-free ones.

The public cost is even less visible. There is, first, an enormous cost that almost never appears in regulatory accounting: the cost of producing the rule itself. Every European initiative of this kind requires years of work by the Commission, preparatory studies, public consultations, impact assessments, meetings with business registers, notaries, national ministries, experts, technology providers, legal services, translators and technical units. Then comes the ordinary legislative negotiation: the European Parliament, the Council, working groups, national positions, amendments, trilogues, legal-linguistic revision and publication in all official languages. Once the Directive has been adopted, the national phase begins: transposition by the Member States, amendment of laws, regulations, registry instructions, IT systems and administrative practices. None of this is free. It is the work of civil servants, lawyers, technicians, translators, advisers and public officials in the Member States and in the EU institutions.

On top of that cost of regulatory production comes the cost of implementation. National registers will have to adapt their systems, forms, interfaces, authentication protocols, verification mechanisms, interoperability rules, communication channels with BRIS and internal procedures. Staff will have to be trained, registers, notaries and national authorities coordinated, technical infrastructures maintained, incidents resolved and the system updated.

The Commission’s impact assessment identifies the expected benefits, but it does not provide an aggregate account of these costs.

And if we turn to the expected benefits, the paradox is that those benefits are likely to be much more modest than the Commission assumes, because the companies most likely to use the instrument are the ones that need it least. A large company or multinational group that opens branches, forms subsidiaries or participates in cross-border mergers already enjoys economies of scale in regulatory compliance. It has in-house lawyers, local law firms, regular notaries, tax advisers, auditors and standardised procedures for handling certificates, translations, legalisations and powers of attorney. For those companies, the costs that the Directive seeks to reduce are marginal costs within transactions that are already complex and expensive.

As noted above, it is doubtful that SMEs will be the typical users. An SME that does not operate internationally will never use the European digital power of attorney. And an SME that decides to open a branch or form a subsidiary in another Member State will in any event need local advice on company law, tax law, employment law, administrative law and accounting. The digital power of attorney may save it a document, a translation or a legalisation, but it does not eliminate the core costs of internationalisation. The reduction exists, but it affects a narrow slice of the costs, not the heart of the problem. And, more importantly, intermediaries—lawyers above all—have incentives to minimise those costs in order to offer the service at a competitive price.

This is another example, a small one if you like, of the European Commission’s activism, which is costing Europeans billions every year.

The European Commission tends to turn any cross-border friction into a sufficient argument for producing new regulation. A real difficulty is identified and framed as a problem of interoperability, trust is invoked, administrative savings are promised, and a new European instrument is built. But the relevant calculation—the full cost of drafting, discussing, negotiating, transposing, implementing and maintaining the instrument, compared with the actual number of uses and the effective saving per transaction—is not carried out, or at least not transparently.

Jesús Alfaro Águila-Real is a Professor of Commercial Law at Universidad Autónoma de Madrid.