European Union | Guardrails for »EU Inc.«

The new legal form is intended to help innovative start-ups, but critics warn of the dismantling of social rights and co-determination. Photo: IMAGO/ZUMA Pres Wire The European Parliament's employment committee voted on Thursday in Brussels on the restructuring of the so-called 28th regime in order to preserve occupational safety and co-determination rights. In doing so, it is making crucial changes to the new legal form proposed by the EU Commission, also known as “EU Inc.”. The highest authority presented a corresponding draft regulation in March, which is intended to sit alongside the 27 national legal frameworks of the member states.

The conflict over the new form of company touches on the core of European economic policy, which the EU Commission under President Ursula von der Leyen wants to focus on competition and innovation. With “EU Inc.”, setting up companies in Europe is intended to be made significantly easier by allowing founders to register their companies completely digitally within 48 hours and for less than 100 euros. The draft also allows accelerated liquidation of companies within 30 days, which is primarily intended to make it easier to found start-ups.

"The Commission wants to introduce a new form of company that massively violates employee interests and undermines co-determination rights."

While business associations such as Business Europe are calling for the regulation to be implemented quickly, experts close to trade unions are warning of significant risks for employees and creditors. Companies could easily circumvent co-determination rights by moving their headquarters to countries without co-determination rights, analyzes Marcus Meyer-Erdmann, researcher at the European Trade Union Institute. In addition, the accelerated company dissolution makes it easier to set up virtual mailboxes. »The Commission wants to work with “EU Inc.” "Introduce a new form of company that massively violates employee interests and undermines co-determination rights," criticized Özlem Alev Demirel, shadow rapporteur for the Left Party, on the occasion of the vote in the Employment Committee.

Economists like Rebecca Christie from the economic think tank Bruegel generally welcome the project as an effective instrument for reducing internal market hurdles. But according to her, the introduction of a pure corporate status would lead to confusion in legal conflict areas such as labor and corporate law, she warns in an analysis. She advocates using the instrument primarily for standardized cross-border investments in order to quickly mobilize capital flows. "A 28th regime should focus on treaties and not try to solve all problems at once," emphasizes Christie.

According to the resolution, the members of the European Parliament are sticking to the new form of company, but are establishing mandatory rules against social dumping. With 26 votes to 19, the Employment Committee is committed to strict protective rights in the upcoming negotiations with the Commission and the Council of the European Union. This includes the requirement that the regulation remains limited to start-ups and scale-ups that have established themselves in the market. In addition, high-risk sectors such as construction and transport, catering or meat processing should be excluded. In the future, companies would also have to maintain a local branch at the actual place of work of their employees and comply with the local labor and protection laws.

Demirel describes these guard rails as a “big interim victory.” But she continues to fundamentally question the new legal form. “Co-determination rights, which have been fought for by employees and unions in many European countries, must not be undermined by the 'EU Inc.',” she underlines her position.

In a next step, the EU ministers will discuss the proposed law in Brussels on September 24th. The European Trade Union Confederation (ETUC) and Belgian associations are calling for a major demonstration and demanding significant improvements under the motto “fix it or sink it”: “If companies can move their headquarters at will, there is a risk of a continent-wide race to the bottom in wages and working conditions,” warns ETUC General Secretary Esther Lynch in the call.

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