Following the closure of the European Commission’s public consultation on the so-called “28th Regime” on 30 September 2025, the Commission plans to unveil its legislative proposal in early 2026. Instead of yet another European company form that looks good on paper but fails in practice, the EU should think differently: not a rulebook, but a sandbox. A controlled legal space where willing Member States and EU institutions trial simplified rules with common key performance indicators (KPIs).

According to the current considerations, the EU would introduce an optional EU-wide company law framework alongside the 27 national systems – the symbolic “28th Regime.” Yet, between the political impossibility of full harmonisation and the fatigue of half-hearted coordination, the Union risks repeating old mistakes: ambitious titles, hollow integration, and negligible uptake. Hence, this time I propose an innovative and alternative way forward. The 28th Regime should take a different shape: not as a fixed legal model, but as a regulatory sandbox, where willing Member States and EU institutions explore how far coordination can go. Rather than stretching the Treaties’ limits, it might learn from them by turning constitutional constraints into experimental design.

Europe innovates but does not scale

The timing is deliberate. Since 2024, a series of flagship reports including Draghi’s Report on European Competitiveness, Letta’s Future of the Single Market, and the Commission’s own Competitiveness Compass, all deliver the same message: Europe generates innovation but cannot scale it across borders. Three structural frictions persist: high energy costs, dependence on critical raw materials, and legal fragmentation. The first two are material constraints; the third is an institutional one. Divergent company law rules, inconsistent recognition of digital incorporation, and slow cross-border procedures raise transaction costs. The same structural barriers surface in Europe’s capital markets, where fragmentation continues to block private investment. These frictions also slow the diffusion of sustainable business models and investment vehicles, limiting Europe’s capacity to channel capital toward the green and digital transitions. According to the Draghi Report, the EU must attract roughly €700-800 billion in private investment each year to meet these goals. Legal harmonisation, therefore, is a strategic lever of competitiveness.

The return of an old dilemma

To address these challenges, the Commission is once again turning to an old idea: an optional European regime that sits alongside, not above, national systems. Its appeal lies in flexibility: Member States unwilling to harmonise can simply abstain. Two design proposals now dominate the debate. The first, the so-called “EU Inc.” model, envisions a supranational company form created directly under EU law. Incorporated through a single digital registry and recognised automatically across Member States. This model would give firms a genuinely European legal personality. The problem, however, is that the Treaties do not yet provide an explicit competence to incorporate firms ex lege Unionis. Article 50(2)(g) TFEU allows only the coordination of safeguards, while Article 114 TFEU concerns the approximation of national rules affecting the internal market. Accordingly, a truly uniform EU-level company form would thus require Treaty amendment. The second proposal, the Parliament’s European Start-Up and Scale-Up (ESSU) regime, takes a more reserved path. National limited-liability companies could voluntarily opt into a harmonised EU framework for digital registration, governance standards, and cross-border recognition. Matters of liability, insolvency, taxation, and labour law would remain national. While constitutionally sound, the proposal is functionally timid. Its procedural innovations add limited value for firms in Member States like Estonia, Denmark, and the Netherlands, which already offer efficient digital incorporation (Directive (EU) 2019/1151) and cross-border mobility (Directive (EU) 2019/2121).

The competence trap

While the Treaties contain no explicit competence to create a supranational company form, the EU has occasionally relied on the residual Article 352 TFEU to move beyond coordination. One example is the Societas Europaea (SE). Yet even that supposedly “European” company form, adopted after three decades of negotiation, still defers to national law on capital structure, share issuance, and liquidation. Political compromise over worker participation imported national co-determination regimes, producing 27 variants and encouraging forum shopping, most visibly among German firms.

This pattern repeated itself with the Societas Cooperativa Europaea (SCE) (2003). Although the Court of Justice in Parliament v Council (C-436/03) upheld the use of Article 308 EC (now Article 352 TFEU) as the correct legal basis for the SCE, its Article 8 refers almost entirely to national cooperative statutes, resulting in negligible uptake. Even the Pan-European Personal Pension Product (PEPP) (Reg. 2019/1238), though directly applicable and coordinated by EIOPA, leaves key aspects to Member States. Structural factors such as heterogeneous national tax regimes, high setup costs, and low consumer awareness have led to very limited market uptake (EIOPA 2024). These experiences reveal a structural truth: Article 352 TFEU provides a legal door but not a constitutional corridor. Thus, competence limits translate into dependence on national law. Yet proposals that stayed strictly within Treaty confines, such as the Societas Unius Personae (SUP), have proven too modest to overcome the European fragmentation. Henceforth, the Commission remains caught between constitutional restraint and functional ambition: every route so far has either overstepped the Treaties or fallen short of genuine integration.

From rulebook to sandbox

Between full harmonisation and half-hearted coordination lies a third approach: adaptive experimentation. Instead of adding another optional company form, the 28th Regime could operate as a regulatory sandbox – a controlled environment in which willing Member States and EU institutions jointly test simplified company-law rules under predefined conditions. The sandbox would not escape the competence trap, but it could provide a structured means of learning.

The sandbox concept is not new to EU law. It first appeared in financial regulation, notably in the DLT Pilot Regime and later in the AI Act, where legislators allowed time-limited derogations to observe how innovation functions under supervision. These instruments recognise that in fields marked by rapid technological or market change, iterative rule-making may be more effective than one-off harmonisation. A similar logic underpinned Next Generation EU, a temporary, conditional framework designed to test new fiscal coordination instruments without amending the Treaties.

Applied to company law, the same logic would enable empirical evaluation of reforms before full approximation. A sandbox would operationalise existing coordination powers under Article 50(2)(g) TFEU. Its legal basis would rest on voluntary participation and the EU’s capacity to collect and disseminate comparative evidence under Article 114(1) and (2) TFEU. Implementation could rely on Article 291(3) TFEU, under which the Commission may adopt implementing acts (subject to comitology) for approving pilots and coordinating oversight. Core parameters such as scope, duration, and the exclusion of substantive fields like taxation or insolvency would be fixed directly in the Regulation, in line with the principle of conferral (Article 5(2) TEU).

Turning fragmentation into feedback

The sandbox’s credibility depends on institutional design. The suggested regulation must turn abstract competences into a transparent, rules-based process with clear procedures, measurable outcomes, and time-bound supervision. Here, subsidiarity and proportionality are design principles: they determine where pilots may operate, how they are authorised, and when they must conclude. The outline below sketches an architecture that aims to balance legal credibility with economic utility.

Eligibility

Participation would be voluntary for both Member States and firms active in two or more jurisdictions. Applicants would submit a short dossier identifying the friction to be tested, such as digital formation, cross-border mobility, or access to finance, and measurable KPIs (e.g. transaction costs per capital raised, or sustainability gains from digitalisation). Risk-based exclusions, including anti-money-laundering flags, would apply. A refundable performance bond, scaled to company size, could ensure compliance and proportional responsibility.

Supervision and coordination

National competent authorities (NCAs) would conduct pilots with rotating case officers. A joint EU Coordination Board (DG JUST + NCAs) would approve projects, standardise KPIs, and ensure data comparability. This would prove Union-level oversight while leaving enforcement and liability to national law. All pilots would appear on a public portal for transparency, though anonymised results would be released ex post.

Exit and feedback

The sandbox would expire automatically unless renewed after a cost–benefit review. Within twelve months of each cohort’s end, the Coordination Board would publish a synthesis report. Proven improvements could then inform soft-law templates or targeted Commission proposals under Articles 50 and 114 TFEU. Integration would thus proceed through evidence-based learning rather than one-size-fits-all harmonisation.

Managing legal risks

Objections to an experimental regime, such as forum shopping, legal uncertainty, administrative burden, and two-speed integration, are well known but manageable. Forum-shopping risks are limited: participation and scope are narrowly defined, while sensitive domains such as insolvency and taxation remain under national law. A Coordination Board could suspend participants that abuse the framework. Legal certainty would be preserved: all derogations appear in a directly applicable Regulation, so companies know exactly which rules differ. Administrative costs should stay low through shared templates and proportional supervision, with data collection built into the experiment rather than added on. Finally, the sandbox would not create a two-speed Europe but a reciprocal learning mechanism. Participation would be open to all Member States, yet the benefits would be tied to contribution: only those engaging in pilots would gain early access to shared data, templates, and technical support. This design curbs free-riding while preserving openness.

Implications

Reframing the 28th Regime as a sandbox marks a broader shift in EU governance. Examples such as Next Generation EU showed that temporary, conditional instruments can operate within the Treaties, while the AI Act proved that iterative learning need not undermine legal certainty. A company-law sandbox would extend this logic from regulating technologies to regulating institutions. Where the ESSU would fix a harmonised regime, the sandbox would test one. It stays within Articles 50 and 114 TFEU, not to create new company forms but to coordinate structured experimentation among willing Member States. It respects the principle of conferral while pursuing integration through evidence rather than assertion.

The 28th Regime will not solve Europe’s energy dependence or capital-market fragmentation. Yet it could show how integration advances when politics stalls: not by declaring uniformity, but by generating proof of what works. Unlike optional regimes, it is not a flexibility device but an evidence-generation framework. It tests rules before legislating them. It scales up through data-driven standards, deep through iterative governance, and out through comparable evidence across Member States. The sandbox value lies in creating a European coordination infrastructure. It lets the EU govern as it increasingly aspires: through data, learning, and adaptation.

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