Europe’s business advantage: Rule of law

Elisabeth Braw is a senior fellow at the Atlantic Council, author of the award-winning “Goodbye Globalization” and a regular columnist for POLITICO. Her new book, “The Undersea War,” is out later this year.

The ship crews trapped in the Persian Gulf, unable to pass the Strait of Hormuz, have no doubt: Geopolitics is back.

But these unfortunate seafarers are not the only ones discovering international disputes can hit them. On the contrary, across the business world, companies are realizing they’re on the new front line and need to figure out how to navigate today’s tumultuous political landscape.

And on that front, Europe has an advantage.

Speaking at a global real-estate conference recently, I was struck by a recurring theme: the European continent as a safe haven. Real estate is, of course, a long-term kind of business. Real-estate investors have to have faith in the neighborhoods, cities, countries they’re buying properties in. And as the conference went on, executive after executive returned to Europe as a safe place to do business in because — well, because it’s true.

Rule of law is regressing all over the world. According to the World Justice Project’s Rule of Law Index, nearly seven in 10 countries saw a decline in rule of law in 2025. This, the World Justice Project notes, is connected to growing authoritarianism.

Europe, though, is standing strong: Denmark leads the ranking, followed by Norway, Finland, Sweden, New Zealand, Germany, Luxembourg, Ireland, the Netherlands and Australia. Places 11 through 20 are also occupied by European countries, along with Canada, Japan, Singapore and South Korea. The U.S. comes in 27th.

For businesses, rule of law is not just nice to have; it’s a necessity. Imagine a company trying to make decisions without knowing whether a country’s laws will even matter: impossible. Businesses can operate in a few legally risky countries, but their core must be in nations that respect rule of law.

And outside the safe bubble that is Europe — with honorable mentions going to the Rule of Law Index’s other top performers — things are increasingly unsafe. In addition to deteriorating rule of law, there’s more geopolitical turbulence and even wars.

The Political Risk Survey, published by Willis Towers Watson, a global insurance broker, annually documents the political and geopolitical risks multinationals face. According to this year’s report, which was published last month, the dangers companies are most concerned about this year are rising trade barriers, political polarization within society and the growing intensity of gray-zone attacks — geopolitically motivated acts of harm that don’t involve military force.

Of the multinationals surveyed, 65 percent reported being affected by tariffs (only 7 percent said they had benefited from the import taxes), 60 percent by the war in Ukraine’s global repercussions, 53 percent by tensions between the West and China, and 44 percent by gray-zone attacks.

Topping this year’s list of countries where companies sustained the largest financial losses due to political risk: the U.S., followed by China, Russia, Ukraine and India.

Last year, Russia topped that list. It topped the list in 2024 too. And the year before that. In 2022, it was Argentina. In 2021, it was Egypt, and in 2020 it was Iran. Now, it’s the U.S.

These are, indeed, extraordinary times for global business. No wonder Europe looks like a safe haven.

Plus, there are foreign-policy-related advantages to being based on the continent. Today, companies are the new front line because they are, by definition, internationally active, and an easy target if their home governments cause harm to other nations.

The Willis Towers Watson survey illustrates how seriously corporates take this risk: “Asked whether their company faces increased risks overseas because of the foreign policies of its home government, nearly 39% of respondents said this was true to a large or very large extent, while another 40% said the effect was moderate. In other words, close to four-fifths of respondents see at least a moderate degree of overseas risk arising from the actions of their own government,” it reports.

So significant is the foreign-policy risk today that Willis Towers Watson has now begun asking this question. But European countries specialize in diplomacy, not the kind of belligerent behavior that would prompt other nations to retaliate. (Russia, though, displays a perennial desire to harm European neighbors.)

Hopes and prayers are not a strategy. That is why a fast-growing number of businesses, large and small, are now factoring geopolitics into their plans. That in itself is fraught with uncertainty, precisely because the trajectory of international squabbles is, by nature, hard to predict. However, developing and exercising scenarios is a whole lot better than clinging to the belief that nothing will happen because business is neutral.

Businesses may well consider themselves to be neutral, but what matters is not what they think. What matters is what squabbling states think.

Ships in the Persian Gulf were peacefully transporting oil and other cargo around the world, posing a threat to no one. But when the U.S. and Israel launched their war against Iran, these vessels became a convenient tool for Tehran. A similar fate could easily befall companies in other places, and wise ones that plan for that possibility will weather the approaching storms best.

POLITICO occasionally publishes opinion pieces from guest authors to offer our readers a range of perspectives on the intersection of power and politics. The views expressed are those of the authors and do not reflect the views of POLITICO.