In the year since the publication of Mario Draghi’s Report on the Future of European Competitiveness (“the Draghi Report”), close to 60% of its recommendations are still in progress or have not yet been touched. One recommendation that holds great potential for European businesses is the concept a “28th Regime”, a proposed single set of rules to help companies operate across the single market. Lawmakers have christened it the 28th Regime because it is envisaged to operate as an option alongside the existing 27 legal systems of the Member States. The initiative could help to remove many of the regulatory burdens and fragmentation faced by companies when expanding into new EU markets and is endorsed in both the Draghi Report and Enrico Letta in his Much More than a Market Report (“the Letta Report). In fact, the Letta Report described the establishment of a 28th Regime as a “transformative step” towards a more unified Single Market that could help overcome the current patchwork of national regulations.

Ireland and the 28th Regime

Businesses in Ireland will be especially interested to learn that responsibility for the 28th Regime lies with Michael McGrath, Commissioner for Democracy, Justice, the Rule of Law and Consumer Protection, and former Minister for Finance in Ireland. Since assuming his role in 2024, Commissioner McGrath’s work programme has largely focused on democracy and rule of law issues, the first and third of his portfolios. However, in 2026, Commissioner McGrath will become a key actor in the EU’s competitiveness and simplification agenda, when work begins in earnest under his justice portfolio to develop a new legal framework for start-up and scale-up companies wishing to operate across the EU.

The role that Ireland can play in the development of the 28th Regime is strengthened further by the fact that many of the negotiations at Council level will take place during Ireland’s presidency of the Council of the EU from July-December 2026. As president, Ireland will be responsible for setting and driving the EU policy agenda as well as building consensus among the Member States on key elements of the proposal, such as eligibility criteria and scope.

Progress Thus Far

President von der Leyen formally introduced the concept of the 28th Regime in July 2024 in her Political Guidelines for the Next European Commission 2024-2029. She reiterated her commitment to assisting innovative companies by establishing a 28th Regime for businesses operating across the EU in her State of the European Union address in September 2025.

The European Parliament has also taken great interest in the initiative. While The Draghi and Letta Reports suggest that the 28th Regime would include a completely new EU-wide legal structure under which innovative start-ups could be incorporated, the European Parliament is more cautious. The EP Legal Affairs Committee’s draft report suggests that efforts be instead placed in harmonising existing national laws, such that companies would still be incorporated under national laws, which correspond as closely as possible with each other.

In July 2025, Commissioner McGrath launched a public consultation on the proposed 28th Regime that invited businesses to share their experiences and ideas for policy options on how companies – in particular innovative ones- can invest and operate more easily in the Single Market.  The European Commission’s call for evidence describes the initiative as a single set of agreed EU-wide rules, that would include relevant aspects of corporate, insolvency, labour and tax law.

What Next?

While it is heartening for businesses to see such public commitment to enhancing the single market from top EU officials, questions remain about how exactly the implementation of the 28th Regime might come about. The problems facing start-up and scale-up companies in the EU are easy to identify, but the shape that a realistic solution could take is less readily apparent.

The European Commission has tried and failed in the past to establish new legal structures for private European companies. In 2008, the European Commission proposed introducing the Societas Privata Europaea (European Private Company) which was envisaged as a new type of limited company that would not have to face the administrative burden of reincorporation in different Member States. However, the proposal divided Member States on issues such as workers’ rights and taxation, and the initiative was ultimately shelved in 2014.

On the other hand, the current proposal offers a more targeted approach, focusing on innovative scale-up and start-up companies, with simplification and competitiveness as key drivers for the project. However, to ensure that the 28th Regime is a success, Commissioner McGrath and the Irish Presidency will have to grapple with a number of legal, procedural and political challenges.

A 28th Regime for Whom?

The European Parliament had originally considered three possible approaches to the scope of the 28th Regime;

(i) A narrow approach, that limits access to ‘innovative companies’ or start-ups and scale-ups with growth potential.

(ii) A horizontal approach, that grants all companies access to the 28th Regime.

(iii) A modular approach, which combines targeted measures of the narrow approach with opt-in legislation for all companies.

As it stands, the 28th Regime is currently envisaged as a legal instrument for innovative start-ups or scale-ups in order to boost European growth and competitiveness.

 The 28th Regime - Implications for Ireland

Ireland’s recently published Action Plan on Competitiveness and Productivity is similarly attuned to the importance of innovation-led growth, and points out that start-ups are engines of innovation and job creation.  For small innovative businesses, an immediate question is how to get access to finance which is critical for innovation and to bridge the funding gap for scale-ups and start-ups. Incentives mooted to encourage financing from the private sector and from individual investors to assist in the transformative agenda proposed in the 28th regime include innovation credits and tax incentives, reducing regulation for SMEs and simplification of the administrative red tape. It is interesting also to note that the establishment of Start-Up Ireland as a central coordination body is scheduled for Q4 of 2026, during the Irish Presidency of the Council of the EU.

Finally, on the issue of how a company can demonstrate its innovativeness, The Draghi Report suggests defining an innovative company based on various criteria such as R&D expenditure, ownership of IP rights, or workforce qualifications.

Legal Issues

Ireland will face particular challenges in agreeing on a suitable adjudication method for disputes arising under any new 28th Regime that would not infringe the Constitution. For example, The Irish Supreme Court in Costello v. Government of Ireland (2022) held that the dispute settlement mechanism envisaged in the Comprehensive Economic & Trade Agreement (CETA) between the EU and Canada would violate the judicial sovereignty envisaged in the Constitution by creating a parallel legal system with automatic enforcement in the Irish courts.

The Unified Patent Court (UPC) is another example of the difficulties facing Ireland when signing up to international adjudicative bodies. Though Ireland has signed up to the agreement, in order to ratify the treaty, Ireland must first hold a referendum to enable changes to be made to the Constitution. How would disputes be resolved for companies operating under the 28th Regime? Would Member States establish specialised national courts or would a new adjudicative body that decides on all EU disputes be established? If so, what are the implications for Ireland?

What Elements of Law to Include?

Furthermore, it is unclear what elements of law would be included in the 28th Regime beyond commercial law, insolvency law and fundraising rules. Leading voices – including Enrico Letta - have suggested that the new regime could incorporate elements of employment law and tax law. These are politically sensitive areas and would potentially be controversial at Member State level, due to the different approaches by the Member States.

The Procedure for Developing the 28th Regime

The European Commission unveiled its proposed work programme for 2026 to the European Parliament on Tuesday, 21 October 2025. The work programme outlines upcoming legislation, proposals and planned repeals that will form the basis of the Commission’s work for next year. The ‘28th Regime for Innovative Companies’ is listed as a legislative proposal for Q1 2026. The document states that the legal procedure for developing the 28th Regime will be via Articles 50 and 114 TFEU. Article 50 gives authority to the EU to support freedom of establishment via directives, and Article 114 authorises the EU to adopt measures to harmonise the internal market.

This means that the 28th Regime is likely to be developed via directive, rather than regulation. Although this may sound like a legal technicality, had the proposal been based on a regulation, it would act as a pan-EU legal regime for innovative companies who wish to expand their business across the single market, whereas a directive would allow each member state some discretion as to how it is implemented, warranting questions as to how completely the 28th Regime will remove the fragmentation across EU markets.

Conclusion

The 28th Regime offers an ambitious solution to addressing the fragmentation of the Single Market and boosting the competitiveness of the European economy. Ireland should approach its presidency with a commitment to steering the project to a viable conclusion. To do so successfully, the full legal and political implications of the 28th Regime should be considered beforehand, in consultation with businesses and employee associations, so that the Government can concentrate its full efforts during the Presidency on reaching consensus among all Member States.