Is there an end to publishing of the beneficial owner coming to an end? A judgment by the European Court of Justice declares part of the Directive invalid

21. 12. 2022
Is there an end to publishing of the beneficial owner coming to an end? A judgment by the European Court of Justice declares part of the Directive invalid

In its judgment of November 22, 2022, the European Court of Justice (“ECJ”) decided that the public accessibility of the Register of Beneficial Owners breaches the right to respect for private and family life and the right to the protection of personal data.

So, the free accessibility of the Czech Register of Beneficial Owners should end in the near future, otherwise the disclosure of personal data can probably be successfully defended against before the Czech courts based on the ECJ’s judgment.

As part of the battle against money laundering and terrorist financing, the European Union’s Money Laundering Directive contains a provision stating that information about the beneficial owners of companies in the EU must be publicly accessible. According to the ECJ, the relevant parts of the Directive are contrary to EU law.

According to the ECJ, the disclosure of information enables a potentially unlimited number of persons to find out about the material and financial situation of a beneficial owner. However, the protection against the possible misuse of information is insufficient and the relevant provision of the Directive is therefore invalid.

In this regard, the ECJ found neither the mechanisms enshrined in the Directive, the implementation of which was left to the discretion of each State, in particular the opportunity to set the conditions under which it would be possible to apply for an exemption from the open disclosure of information about a beneficial owner (in the Czech Republic, according to the methodological guidelines, only in the case of a person with limited legal capacity or a minor) nor making access to the online database conditional on registration sufficient in the context of the proportionality test between the public interest in the fight against money laundering and terrorist financing and the basic rights to privacy and to the protection of personal data mentioned in the introduction.

The ECJ emphasized that it is not the general public but the public authorities and other obliged persons (such as banks or notaries and attorneys) that are the ones who have obligations in to prevent money laundering. Similarly, not disclosing a full date of birth or a specific address (but, for example, just the month or town of residence) does not prevent the identification of particular beneficial owners by the public, who will thus gain an overview of their material situation, which not only interferes with their right to privacy but justifies the fears that they may become victims of crime in certain cases.

The Court of Justice’s decision has consequences exceeding the specific proceedings that were decided – it is binding at both EU and Member State level.

Immediately after the judgment was delivered, Luxembourg blocked the public from having free access to the national transparency register. Free public access to the German transparency register is also likely to end in the near future. What’s more, the judgment could also have an impact on the legislative process of the planned EU Money Laundering Directive, which according to the current draft envisages a significant expansion of the scope of beneficial owners.

In the Czech Republic, we have not yet seen any reaction from the state even though the law on the register of beneficial owners should now be updated and before this happens, under the principle of application priority the data should no longer be public and this provision of the  Czech law on the register of beneficial owners should not apply.

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