European Court of Justice puts a stop to right of inspection for the public in Dutch UBO register

On November 22, 2022, the European Court of Justice issued a judgment with important implications for the Dutch UBO register. This is the Dutch register that has been drawn up in connection with the 5th AML Directive 2018/843 ("AML V"). The AML V directive provides that EU Member States must make sure that information on the ultimate beneficial owners of companies is accessible to all members of the general public. The CJEU declared this regulation invalid. In this blog, we will dwell on the discussion that led to this ruling, the decision of the CJEU and its consequences.

The discussion regarding the UBO register

The UBO register has caused controversy ever since its introduction in September 2020. The purpose of this register is to prevent fraud and money laundering. In this register, every organization must register its UBO’s (in full: Ultimate Benificial Owners). The UBO’s of an organization are the owner(s), any party (or parties) with an interest in the organization, or the person who has control over the organization. In the UBO register are recorded, for instance, the name and interest in the organization of the UBO. But furthermore, also the residence of the UBO’s is included in the register. This information was, upon request and for a small fee, publicly available to anyone.

Many UBO’s were not happy with this registry from the beginning. They feared that malicious persons could use this register to find out that they are financially wealthy. This information, combined with their place of residence, makes them vulnerable. For this reason, the Dutch foundation Privacy First initiated a lawsuit against the Dutch State in 2020. This case did not make it to the European Court of Justice, because there was already a Luxembourg case, which has now been decided by the Court of Justice.

The decision of the EU Court of Justice

In the Luxembourg case, various questions were submitted to the Court of Justice from Luxembourg, concerning the ability of the public to access the UBO register. Although the Luxembourg courts asked many different questions, the European Court decided to answer only one. This did address the core of the questions. Namely, the Court ruled on the question of whether anyone should be able to access the data recorded in the UBO register.

The European Court of Justice ruled that by allowing unrestricted access by anyone, data could potentially be accessed by an unlimited number of people. The data can also be stored and further shared without limitation. This makes it almost impossible to protect UBO’s from misuse of their data. For this reason, the European Court ruled that there was a violation of the EU Charter of Fundamental Rights, which states that everyone has the right to respect for his or her private and family life and the protection of his or her personal data. The Court rejected the argument put forward from the European legislator that it is difficult to define criteria under which access to data would then be allowed. The fact that this is difficult does not justify everyone being allowed access to these data.

Consequences

It follows from the Court of Justice's decision that it is not permissible to give access to the data in the UBO register to every member of the public in all cases. In the Netherlands, in response to this, it has been decided not to provide any information from the UBO register to anyone for the time being. This however seems a temporary solution, for as long as an evaluation is made of the cases in which information from the register can be provided. After all, in many cases it is still important to have access to this type of information from the UBO register. Think, for example, of employees of the Dutch FIOD (Financial Intelligence and Investigation Service), whose task is to combat fraud and money laundering.

Other professional groups also wish to claim the use of data from the UBO register. For example, journalists point out that the UBO register aims precisely at transparency and that, as a profession, they are gatekeepers to society. Who ultimately will still have access to the data from the UBO register is as yet unclear. We will keep an eye on developments.

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