CJEU strikes down right of public to access beneficial ownership
Friday, 02 December 2022
Background
In recent years, there has been an increased global focus on and demand for increased corporate transparency and disclosure, primarily for the purpose of prevention of money-laundering, terrorist financing and tax evasion and to aid imposition of sanction. As a result, regulatory measures have been introduced in many jurisdictions requiring disclosure of ultimate ownership of various assets.
In the EU, as part of its package of measures, a regime for disclosure of beneficial ownership of interests in shares was introduced by the Fourth Anti-Money Laundering Directive (4AMLD) and amended and further expanded by the Fifth Anti-Money Laundering Directive (5AMLD).
Current RBO Regime
Under 4AMLD, companies in EU Member States were required to maintain a register of ultimate beneficial ownership of shares in those companies and to upload prescribed information regarding the ultimate beneficial owners (UBOs) of shares in those companies to a central Register of Beneficial Ownership (RBO) maintained by a competent authority in the relevant Member State. Public access to information on the RBO was possible for “any person or organisation that can demonstrate a legitimate interest” in the information.
5AMLD expanded the scope of the RBO regime, including by requiring Member States to facilitate public access to certain information on the RBO, including the name, month and year of birth, country of residence and nationality and nature of interest of each UBO of an in-scope company, without the previous requirement to demonstrate a ‘legitimate interest’.
In Ireland, the RBO regime is governed by the EU (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019 (the RBO Regulations) and the competent authority with responsibility for maintaining the RBO is the Registrar of Companies (CRO).
Challenge to extent of public access under RBO Regime
On 22 November 2022, the Court of Justice of the European Union (CJEU) considered the validity of the above provisions of 5AMLD which permit access to the RBO’s maintained by Member States (and In Ireland by the CRO) in two sets of proceedings, the first between WM and the Luxembourg Business Registers (LBR) (Case C-37/20) and the second between Sovim SA and LBR (Case C 601/20) (together the LBR Judgements).
The CJEU considered if the amendments in 5AMLD would infringe the right to respect for private and family life and the right to the protection of personal data, enshrined respectively in Articles 7 and 8 of the Charter of Fundamental Rights of the European Union (the Charter).
CJEU strikes down unrestricted access to beneficial ownership information on RBO
The CJEU ruled that the relevant provisions of 5AMLD did constitute a “serious interference” with the fundamental rights guaranteed in the Charter. Public access to the personal data contained in the RBO would mean that the “information is capable of enabling a profile to be drawn up concerning certain personal identifying data more or less extensive in nature depending on the configuration of national law, the state of the person’s wealth and the economic sectors, countries and specific undertakings in which he or she has invested”.
The CJEU also held that the interference by 5AMLD was neither limited to what is strictly necessary nor proportionate to the objective pursued and that the need for safeguards is all the greater where personal data is made accessible to the public.
Immediate impact of the CJEU decision for Ireland’s RBO regime
As the extent of public access to the RBO permitted in Ireland under the RBO Regulations is no longer in line with the CJEUs recent decision, public access to the RBO, managed by the CRO, has been temporarily suspended and the RBO has announced that it is currently working on providing access to the more limited category of ‘Designated Persons’ under the RBO Regulations only.
The Central Bank of Ireland (the CBI) which maintains the beneficial ownership register for certain categories of corporate entities (such as ICAVs and credit unions) has yet to suspend its search facility. However, prior to requesting information, the applicant must confirm that they are a designated person or competent authority. It remains unclear as to whether the CBI will follow the RBOs lead and suspend access to its register.
It is worth noting that the CJEU decision does not impact on the similar EU regime for maintaining and disclosing to a central register information regarding beneficial ownership of trusts (CRBOT) (governed in Ireland by the European Union (Anti-Money Laundering: Beneficial Ownership of Trusts Regulations 2021) (the CRBOT Regulations)) in respect of which the competent authority in Ireland is the Revenue Commissioners. The CRBOT Regulations have required demonstration of a ‘legitimate interest’ in order to justify public access to information on the CRBOT register from the outset and that requirement continues to apply.
What Next?
In the LBR judgements, the CJEU cited a statement by the European Commission stating that the “legitimate interest concept did not lend itself easily to a legal definition and that, while it had considered the possibility of proposing a uniform definition of that criterion, it had ultimately decided not to do so on the ground that the criterion, even if defined, remained difficult to apply and that its application could give rise to arbitrary decisions”.
Accordingly, it appears that, unless alternative and clearer grounds are established for access, it is unlikely that the suspension will be reversed in the short term. It remains to be seen whether the decision will have broader ramifications, for example, with regard to any other personal information which companies are required to file on public registers.
Please note that the content of this summary does not amount to professional advice. Legal advice should be sought in respect of specific queries. This update is provided on the basis of information available as at 30 November 2022.
For further information on the RBO regime and related disclosure requirements, please contact Gillian O’ Shaughnessy, James Moreland or any member of ByrneWallace LLP Corporate Governance and Compliance Group. For further information on data protection matters, please contact Zelda Deasy or Kelly Mackey of the ByrneWallace LLP Data Protection Team.
