There are two philosophies to refereeing. You can either view yourself as the defender of the LOTG, or as the peacekeeper. The defender of the LOTG does the game of "Soccer" justice. He follows all the rules, even if both teams are not aware of one particular law, the referee does not care, he enforces them. This is a good refereeing philosophy for most games, especially the competitive games that determine futures.
Then there is the refereeing as a peacekeeper. What you do in this style is you imagine that the two teams are just having a scrimmage or pick up game with each other without a referee. You then call whatever both teams think need to be called and are there in case the teams cannot agree on what the result should be.
For example, two unskilled girls are running side by side, there is fair contact and one girl falls down and sprains her wrist because she doesn't know how to fall properly. Under the LOTG, this is not a foul. However, everyone on the injured girls team think it is a foul, what's more, the girl that bumped her down thinks it was a foul and her whole team thinks she committed a foul. You are now in a situation where everyone on the pitch except you thinks there was a foul.
I think that's a valid observation. It always struck me that a scrimmage with the coaches "officiating" always has this nice flow and openness that you don't see in a ref directed game. Of course, coaches want to see kids play and ref's are charged with enforcing the LOTG as they deem appropriate, so it's bit of an apples to oranges comparison. Maybe a simpler definition of your point is officiating from a "player's perspective" or a "ref's perspective". Maybe the former is the what a lot of us refer to as "let them play".
I don't pretend to be an expert on how things are done in Europe, but my son played in the Gothia Cup this summer. I probably watched a couple dozen games and spoke to a few refs and they definitely have a "let them play" philosophy. The refs I spoke to said they are taught to maximize playing time and to keep their interference to a minimum. They take a much lower profile in games than here in the States. Unless the foul resulted in loss of possession by your team (or there was blood!), they typically didn't call it, kind of like a defacto advantage. They managed the game with communication as opposed to the whistle. A lot of American parents would completely lose their minds if little Johnny's game was reffed this way, I had some WTF moments myself, but it did result in a better flow and more soccer. Of course, one of the issues with this approach is that it can give the more physical, but less skilled, team an advantage.
Not saying that either approach is better than the other, just different, with their own pros and cons.