EU Court of Justice: public form of UBO register is invalid

This article is based on the information as it was known on 23 November 2022.

The provision in the EU directive requiring the public form of UBO registration is ‘invalid’ according to the European Court of Justice. Although the purpose of UBO registration serves a public interest (preventing money laundering and terrorist financing through increased transparency) and may even justify serious violations of the fundamental right to privacy, the Court held that public access to UBO data is neither proportionate to this purpose nor limited to what is strictly necessary to achieve it.

Following the ruling of 22 November 2022, the Dutch finance minister ordered that the provision of UBO information from the Trade Register be suspended and the UBO data has not been publicly available since the ruling.

Underlying EU directives

The Netherlands was obliged to introduce a (partially) public UBO register based on the EU anti-money laundering directive. Initially, the Fourth Anti-Money Laundering Directive (AMLD) prescribed a closed UBO register that would only be accessible to competent authorities, reporting entities and anyone with a legitimate interest. The Fifth AMLD made UBO registration mandatory public, with some six personal data to be accessible to all. The Netherlands has planned from the beginning to introduce this public version of the UBO register.

Luxemburg court questions EU Court

The Luxembourg court asked preliminary questions to the Court on the public form of UBO registration in two cases. In response, the Court invalidated the provision in the Fifth Anti-Money Laundering Directive requiring a public form (Article 30(5)).

Court ruling on disclosure of UBO register

According to the Court, public access to information on UBOs constitutes a serious interference with the fundamental rights to respect for private life and to protection of personal data, enshrined in Articles 7 and 8 of the Charter, respectively. In the Court's view, the disclosed information enables a potentially unlimited number of persons to learn about the material and financial situation of a UBO. Furthermore, the potential consequences of any misuse of their personal data for those concerned are exacerbated by the fact that, once such data is made available to the general public, it can not only be freely accessed, but also retained and disseminated.

Disclosure of UBO data not proportionate

Although the EU legislator, with the intended purpose of the measure in question - to prevent money laundering and terrorist financing through increased transparency - pursues a weighty public interest that can justify even serious infringements of the aforementioned fundamental rights, according to the Court, public access as a means is neither proportionate to this objective nor limited to what is strictly necessary.

The interference involved in the public UBO registration under the new regulation is greater than the interference involved in the closed UBO registration under the old regulation, where third parties can only gain access with a demonstration of a legitimate interest. In particular, the European Commission's argument that it may be difficult to define in detail the circumstances and conditions under which a legitimate interest arises is not a reason for the EU legislator to grant public access to UBO data.

The Court adds that the optional provisions under which Member States provide for the blocking of certain UBO data in exceptional circumstances do not in themselves strike a fair balance between the public interest objective pursued and the fundamental rights enshrined in Articles 7 and 8 of the Charter. Nor do they provide sufficient safeguards that enable data subjects to effectively protect their personal data against the risk of misuse.

Contact

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