Ireland, Britain and Luxembourg could emerge as the "Delawares" of Europe under a drive by Brussels to make it easier for companies to move their registered offices to the country offering the best business climate.
Charlie McCreevy, the European Union's internal market commissioner, yesterday outlined plans to tear down barriers that deter companies from shopping around in Europe to find the best tax and regulatory deal.
If successful, the commissioner hopes to create the kind of competition seen in the US, where the tiny state of Delaware has cornered the corporate market - about half of all big US companies are incorporated there. "Companies should enjoy full mobility within the EU, which is not the case today," Mr McCreevy told the European Parliament in Brussels.
Early next year he will outline legislation to bolster regulatory and tax competition in Europe, as countries battle to retain or attract registered offices.
In the short term the move could increase the appeal of centres such as Dublin, London and Luxembourg, which already have attractive packages of company law, regulation and taxation.
Mr McCreevy's primary objective is to sweep away national laws requiring a company to liquidate itself before it moves to another country. "This is extremely burdensome, costly and lengthy and means in practice that the free movement of companies in the internal market is not a reality," said Jerome Chauvin of Unice, the European employers' federation.
Mr McCreevy's team insists the regulation will not spark a "race to the bottom" and that countries will be forced to raise their game and improve the corporate environment.
The German presidency of the EU, which starts in January, will also insist that the new rules do not allow German companies, for example, to evade national laws on issues such as worker consultation by siting a registered office abroad.
Matthew Nardella at Think London, the inward investment agency, said: "Any directive that makes it easier for EU firms to move is going to benefit London. Once the directive goes through, you're going to see more firms moving [ their headquarters] to London."
But he said London could not be complacent and should watch what the Republic was doing. Merrill Lynch, the US investment bank, recently shifted some of its European businesses to Dublin.
The European Association of Listed Companies said business would look forward to new laws to tackle a problem it had experienced first hand. "Our association was established in France for historical reasons and we moved to Belgium two years ago," said secretary general Dorien Fransens. "I had to liquidate the association in France and start all over again in Belgium. It took me over a year in preparation. There is a lot of money in lawyers' fees."
