The bitter disappointment and anger of the transparency campaigners at the ruling of the Court of Justice of the European Union (CJEU) was expected, but the tenor of some responses, was surprising.
Yes, they had campaigned vigorously, and successfully, t, expending significant resources, to ensure that access to beneficial ownership information on companies should be available to the public at large. but the apparent audacity of the Court, in their view, to invalidate public access to those registers which in some cases, had been established since 2016, was a step too far and a stab in the back, among other things
The reality of the court proceedings was sufficiently persuasive to blunt the force of any criticism. Sovim SA and its legal representatives appeared to have followed all the administrative and judicial processes at the Luxembourg Business Registers (LBR) and the Luxembourg District Court (LDC). Their arguments were grounded in the 5th AMLD and the Luxembourg national law implementing law.
The LDC stayed the proceedings and referred the matter to the CJEU for a preliminary ruling.
The ruling is grounded in the court’s settled case law. It is ringfenced against giving any member of the general public, potentially an unlimited number of persons, unconditional access to the personal details on any beneficial owner which would allow them to construct a far-reaching investment profile covering countries, sectors, and companies on that individual.
The court acknowledged that the objective of preventing money laundering and terrorist financing was appropriately assisted by the general public’s access to beneficial ownership information.
However, there was a caveat in that the provisions of the Directive allowing such access in the national transparency registers were adjudged to be not clear, not sufficiently defined, nor providing sufficient safeguards against exposure to the disproportionate risk of abuse such as fraud, kidnapping, blackmail, extortion, harassment, violence, and intimidation, or where the beneficial owner is a minor or otherwise legally incapable, as Sovim argued.
The ruling cogently noted that the information could be consolidated, retained, disseminated and with successive processing make it increasingly difficult or even illusory for Ultimate Beneficial Owners to defend themselves effectively against the identified risks.
In a clear recognition of the Court’s authority and in deference to its stature, the European Union advised that it stands ready to work with legislators to ensure full compliance with the judgment. Several jurisdictions that are Financial Action Task Force (FATF) members blocked public access until further notice.
The United Kingdom’s Crown Dependencies followed their lead, and in one of the UK’s Overseas Territories, it is reported that the representative of the Crown will work with colleagues both in the territory and the UK to understand the implications of the ruling and will continue to support work towards publicly accessible registers of beneficial ownership.
Far from castigating the Court, transparency campaigners should take a measured, constructive approach in the global conversation, to create a universally agreed framework on access to beneficial ownership information, which should draw on the rich learning that is available from the Court’s ruling, in seeking to appropriately balance the fundamental rights to privacy, the protection of personal data and the public good to prevent money laundering and the financing of terrorism.
Some of the campaigners have already adopted this approach by calling on the European Parliament to include precise provisions in pursuit of this objective.
We expect that the FATF and its members who revise and finalize the texts on this issue will recognize that their decisions on Recommendations, Interpretive Notes, and other guidance are all subject to judicial review.