EU/Unions | Trade unions against the planned “EU Inc.”

There was a successful mobilization against the “Bolkestein Directive” on the deregulation of services in the EU in the 2010s. Photo: dpa/Massimo Percossi In her speech at the World Economic Forum this year, Ursula von der Leyen, President of the European Commission, presented the world's business elites with her plans for a "new, truly European corporate structure." She praised the so-called “EU Inc.” as a miracle cure that could create a European start-up scene that could rival the American one. What is meant is the establishment of a new, digital corporate form that is uniform in Europe and is intended to make it easier to set up companies. In reality, however, there is a risk that the benefit will have the opposite effect of what it promises. Instead of building a thriving European sector, it could deepen Europe's sell-out to US private finance capital - and undermine the EU's efforts at economic autonomy.

The argument for “EU Inc.” is simple. Unlike the United States, where a company can be registered in Delaware and operate in all 50 states, the EU internal market is still based on 27 national legal systems. This fragmentation causes additional costs and makes it more difficult for start-ups if they want to expand across borders in the 450 million-strong European single market.

The "EU Inc." would provide a remedy here by - in von der Leyen's words - "introducing a simple set of rules that apply seamlessly throughout the entire Union": a new European corporate form that stands above national systems. An “EU Inc.” company could be founded online within 48 hours – without human supervision, in any EU member state and without high capital requirements. It could be dissolved just as quickly if it were to become insolvent (which happens with many start-ups).

The European trade union umbrella organization UNI Europa brings together over 240 national service sector unions from 50 countries, including the German unions Verdi and IG BAU. Together with its affiliates, UNI Europa fights for progressive EU legislation on AI, public procurement and collective bargaining, coordinates union work in multinational companies such as Amazon and organizes workers across the private services sector. On September 24th, UNI Europa and individual unions are mobilizing for a large rally in Brussels against the controversial deregulation law “EU Inc”. It's about defending workers' rights. Oliver Roethig is regional secretary of UNI Europa.

The European unions warned early on about the risks that the legal form “EU Inc.” brings with it for employees in Europe. It would allow companies to engage in “regime shopping” and select the jurisdiction in the European Union with the lowest labor standards for their registration. Leading business representatives have already argued that EU Inc. should minimize dependence on national law - a clear sign that social dumping is the real goal.

It is not the first time that the European Commission has tried to undermine the nationally established rights of employees under the guise of competitiveness. In 2004, Frits Bolkestein - a liberal politician from the Netherlands and EU Commissioner for the Internal Market - introduced a controversial bill that would forever bear his name. The “Bolkestein Directive” would have enabled companies to provide services in other EU countries under the working conditions of their home country.

The idea of ​​a Polish plumber coming to France to work at the Polish minimum wage worried the European trade union movement. The infamous “country of origin principle” would have institutionalized unfair competition. Local companies from higher wage countries would not have been able to compete with companies from low wage countries that offer exactly the same service. The consequences would be predictable: falling wages, pressure on working conditions and less scope for collective bargaining. It is therefore hardly surprising that the unions mobilized against the proposal as a “Frankenstein directive” – and were successful.

All companies – including listed multinational corporations – could convert their business activities into an “EU Inc.”

After a broad campaign, culminating in a demonstration of over 80,000 people in Brussels, the principle was reversed: a Polish plumber could continue to work in France, but only at French wages and working conditions. This ensured fair competition under equal conditions. The “Frankenstein Directive” was finally buried. Or so we thought.

Today, more than twenty years later, some of its core ideas – and the danger of social dumping – reappear in the EU Inc. proposal. The Societas Europaea, a European corporate form that has existed since 2005, is a precedent for this: it has undermined the national co-determination rules in Germany in particular.

But unlike the “Frankenstein Directive,” there is another danger that has so far been overlooked in the public debate: “EU Inc.” could accelerate the takeover of European companies by US financial capital – and thus also the decline of the European social model.

This danger manifests itself in three ways: scope, form and competitive pressure. Firstly, the European Commission initially promoted the “EU Inc.” model as a tool for innovative start-ups and scale-ups. However, in its current version, the Commission has not limited the proposal to companies of a particular size or sector. This means that everyone from small and medium-sized companies to established, listed multinational corporations could transform their operations in Europe into an “EU Inc.”

Secondly, “EU Inc.” takes the form of a limited liability company. Their new "flexible" concept is intended to attract US venture capital and private equity capital that is around five times larger - and therefore significantly more powerful - than European capital. Since "EU Inc." is not required to be listed on the stock exchange or have any associated reporting requirements, it is ideally suited to the approach of private equity funds: buying up a European company, restructuring it away from the public and shifting the "profits" to countries like the United States.

As a result, “EU Inc.” could push the sale of European companies to US private investors. This would divert value creation from Europe - and deepen the dependence on American capital and the increasingly authoritarian Trump administration. The European Commission's own research center has found that startups funded by venture capital are more likely to relocate to the United States. In addition, the Financial Times reports that US funds are buying up European asset managers more quickly than they have in decades.

Third, many large European companies are public companies, which are subject to significantly higher standards of regulation and transparency as well as some public accountability. These European companies would have a structural competitive disadvantage compared to the “EU Inc.” companies. This would lead to an intensification of the deregulation race already taking place in Europe. The private equity firms that EU Inc. would attract often have a negative impact on employees - and the company's economic performance. This is in clear contrast to the more progressive standards that the EU wanted to establish with its sustainable finance agenda.

Furthermore, the proposal contradicts the Commission's “Made in Europe” strategy, which aims at Europe's economic autonomy. As investigative research by Follow the Money revealed, a third of Brussels think tanks are funded by either US philanthropists or US multinational corporations. This is the driving force behind much of the lobbying in the European Union. There is therefore a risk that decisions will be made there that run counter to the interests of employees, the European social model and sovereign economic development.

To be clear: the fragmentation that the “EU Inc.” supposedly wants to remedy is real. However, the solution lies in upward harmonization, with strong worker protections and transparency rules, as well as the development of a serious industrial and investment plan that addresses Europe's real economic challenges. For this reason, the European trade union movement is mobilizing in Brussels on September 24th with the call: “Fix or sink EU Inc.” Twenty years ago we prevented the “Frankenstein Directive”. We are ready to repeat this successful fight.

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