Freeing the European Company

by Régis Jamin
18/04/2005

By Régis Jamin, Member of Europe2020, Member of the Internet Society, Member of the Senate Club, Member of the Institut Montaigne.

A prospective study published by the NIC (National Intelligence Council, the CIA Director’s Think Tank) provoked an outcry from our Brussels officials last week. It states that “Europe’s ability to influence world affairs will depend on its political coherence” or that without major economic reforms in Germany, France or Italy, “the EU risks disintegration”. In short, according to the CIA, by 2020 the EU would be outperformed economically by China, India or Brazil. While this somewhat alarmist view of our Union may seem biased, the fact remains that many arguments seem to be correct.

Despite the success of the Euro, even if limited by several EU countries that have not yet joined the single currency, the Economic Union remains to be built. After more than forty (!!!!) years of preparatory work, the Nice Summit in December 2000 ratified the principle of creating the SE (European Company or Societas Europea) followed by the adoption of Regulation (EC) 2157/2001. Finally, this Regulation would make it possible to give a European “nationality” to a public limited company of a European State which would like to extend its local market to the EU. Unfortunately, despite 70 articles on the formation of an SE, its operation or its annual accounts, the Regulation still refers to the law in force in the State to which the SE has its registered office. And if from 8 October 2004, companies can use the SE, there is still a huge amount of work to be done to harmonise the legislation of the 25 Member States of the Union in order to make it operational.

American, Indian or Chinese entrepreneurs can therefore rub their hands together, as they can take advantage of a huge domestic market to launch or develop their activities before going international. Thus, an entrepreneur based in New York can create a company recognized in the 50 states of his Federation within 48 hours, set up a simple accounting administration, establish model contracts valid from Florida to Alaska, or decide overnight to open an agency remote from several time zones in Los Angeles if he believes that his product can be sold more easily there. He will be able to address his customers in the same language, develop a single marketing approach, offer the same invoicing, payment method, delivery method and finally be paid in a single currency. When he hires employees, only one type of contract will be usable, he will be able to opt for the same social security coverage for them at the Federal level and use the same rules of remuneration or profit-sharing regardless of the country in which they will work. Finally, with success, it will be able to prepare for its initial public offering on a market such as the Nasdaq and immediately benefit from the resources of the world’s largest stock market, which is largely funded by the pension funds of American retirees.

EU entrepreneurs are light years away from such freedom to create or develop their businesses. We let you imagine the “fighter’s path” of the French entrepreneur who is looking for an opportunity to sell his products in the United Kingdom when he is only two hours away by train. He will have to learn English, create a local company, pay English lawyers to develop contracts or hire employees locally with radically different social and tax rules, use another VAT rate, open a local bank account and set up an inter-company billing, an inter-company distribution contract, manage the Euro/Pound Sterling conversion rates, etc…. The level of investment to achieve such an effort is beyond comparison with its American counterpart, and if this entrepreneur decides to expand into Germany or Hungary, as the New York entrepreneur would decide to go to Washington or Seattle, the start-up cost ratio of his structure would be 100 times higher. And if, despite this, the European entrepreneur succeeds in developing his activity and preparing an initial public offering, he will have to confine himself to a local stock market because he will not be able to dream of addressing the volume of investors of a Nasdaq. The development capacities of his company will therefore once again be largely handicapped. Is the European Union really a market of 460 million consumers? No doubt for large companies able to pay the high price of the entry ticket to each state of the Union, but is it not paradoxical to see many American companies taking monopolistic positions in our own markets largely because of our inability to intelligently harmonise our internal economic affairs? It will have taken more than 40 years to obtain a Statutory Regulation of the SE, how many European jobs or companies will it take to see die to achieve this harmonisation that is essential to our survival? How many markets will we have lost to the USA, India, China? When the CIA Think Tank announces the decline of our economy by 2020 compared to those of the latter countries, would they not be right? It is not the offended cries or gestures of our Brussels officials that will reverse the trend. It is the European people, who, by their desire to build their political or economic unity, will be able to put in place the tools they need so that all their children have a job or can create their businesses freely without being subjected to the will of non-EU financiers.