The EU's planned '28th regime' is Bolkestein revisited

In 2004, Frits Bolkestein — a Dutch liberal politician and EU commissioner for the internal market — introduced a controversial piece of legislation that would forever carry his name. The “Bolkestein Directive” would allow companies to provide services in other EU countries under the labour conditions of their home country.

The image of a Polish plumber coming to work in France for Polish minimum wages alarmed both workers and decent employers. 

The infamous “country-of-origin” principle would have institutionalised unfair competition. Local companies from higher-wage countries would have been unable to compete with companies based in low-wage countries, offering the exact same service. Instead of competition on quality, innovation, efficiency or client-focus; competition would have been wage-focused. 

The consequences would be predictable: declining wages, pressure on working conditions, and less scope for collective bargaining. That would have been no less than a full-throated attack on the European social model with collective bargaining and social dialogue at its heart.

It is therefore hardly surprising that trade unions quickly dubbed the legislation the 'Frankenstein Directive.'

After extensive and successful mobilisations by trade unions, NGOs and citizens — who rallied with over 80,000 people in Brussels today twenty years ago — the principle was reversed: a Polish plumber could still work in France, but only under French wages and working conditions. This ensured fair competition on a level playing field. The Frankenstein Directive was buried for good. 

Or so we thought.

Now, twenty years later, some of its core ideas have resurfaced. The European Commission recently announced that it is working on a so-called “28^th regime”, a new legal framework for a separate legal entity for “innovative companies” within the EU.

While this may sound technical and complex, in reality, it is quite simple – and very concerning. In its misguided push for EU-wide deregulation, the commission wants to recreate the US’s lower standards, in particular for ‘innovative’ IT start-ups.

But it might go further than that: recent statements by the European Commission suggest that ‘innovative’ would encompass almost every companies that want to operate transnationally.

The EU’s analysis is that such and other companies struggle with differing tax laws, labour laws and company regulations across member states, which makes it harder for them to operate Europe-wide.

That assessment is correct.

But the commission’s proposed solution is radical and misguided: it aims to create an entirely new set of rules, independent of any member state — a kind of European corporate, tax and labour law. A “28^th regime” as if there was a virtual 28^th EU member state.

Why would this be so dangerous? 

Imagine you work for a small chain of clothing stores. You are paid according to, let’s say, Danish wage standards, your company pays Danish taxes and it complies with all Danish regulations. Competing with large international retailers is already tough because they benefit from economies of scale.

Now, imagine those big corporations could suddenly opt out of national labour standards and instead pay “European” (read: lower) wages. Unfair competition would intensify, as would the pressure on your employer to downgrade your working conditions. The “28^th regime” would enshrine unfair competition, with local businesses and workers paying the price.

Just like the Bolkestein Directive, this new plan risks becoming a free pass for companies to bypass national collective bargaining agreements, union rights, and social protections.

Worse even, the commission knows this as it has experience with such loopholes: in 2001, it introduced the European Company (Societas Europaea, SE), which has since been abused by German firms to circumvent worker participation and union influence.

While companies have such new rights at European level, workers do not: for instance, there is no European right to strike. 

The EU presents this new plan as a step toward modernisation and innovation, but in reality, it opens the door to further labour market liberalisation without adequate worker protections. The burden will fall on Europe’s workers and small businesses.

The European Union was built on a social model that fosters fair competition. The commission’s plans go in the opposite direction. But one thing is certain: should the European Commission go ahead with these plans, it can be sure that the labour movement will respond.

Twenty years ago we defeated the Bolkenstein Directive by mobilising hundreds and thousands of working people. We are prepared to do the same again.