The top European court has struck down a European Union mandate for public registers of beneficial ownership of all companies.
In a decision which could stall global efforts to force countries to have open beneficial registers, the European Court of Justice said that public registers infringed upon fundamental rights of privacy and personal data protection.
Bermuda has long resisted efforts to make beneficial ownership registers public, arguing that authorities which can show reasonable cause to identify beneficial owners have always been able to do so.
However, the island said in 2020 that it would make ownership registers public in 2023, provided this was a global standard by then. The EU ruling throws that commitment in doubt.
Upon hearing of the court ruling, former finance minister Bob Richards responded: “This is good news for Bermuda, although I am under no illusion that our opponents won’t try some other tactic.”
The European Justices ruled that the provision whereby the information on the beneficial ownership of companies incorporated within the territory of member states is accessible in all cases to any member of the general public, is invalid.
The court has ruled that registers containing the personal details of the owners of a company and accessible to the general public is an infringement of fundamental rights of privacy and personal data protection.
In accordance with the anti-money-laundering directive of the European Parliament and of the Council, a Luxembourg law adopted in 2019 established a Register of Beneficial Ownership and provided that a whole series of information on the beneficial owners of registered entities must be entered and retained on that register.
A statement from the court said: “Some of that information is accessible to the general public, in particular through the internet.
“That law also provides that a beneficial owner may request Luxembourg Business Registers, the administrator of the register, to restrict access to such information in certain cases.
“In that context, the tribunal d’arrondissement de Luxembourg [Luxembourg District Court, Luxembourg] was seized of two actions, brought by a Luxembourgish company and by the beneficial owner of such a company, respectively, which had previously unsuccessfully requested LBR to restrict the general public’s access to information concerning them.
“Since that court considered that the disclosure of such information is capable of entailing a disproportionate risk of interference with the fundamental rights of the beneficial owners concerned, it referred a series of questions to the Court of Justice for a preliminary ruling concerning the interpretation of certain provisions of the anti-money laundering directive and the validity of those provisions in the light of the Charter of Fundamental Rights of the European Union.
“In today’s judgment, the court, sitting as the Grand Chamber, holds that, in the light of the Charter, the provision of the anti-money laundering directive whereby member states must ensure that the information on the beneficial ownership of corporate and other legal entities incorporated within their territory is accessible in all cases to any member of the general public, is invalid.
“According to the court, the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data, enshrined in Articles 7 and 8 of the Charter, respectively.
“Indeed, the information disclosed enables a potentially unlimited number of persons to find out about the material and financial situation of a beneficial owner.
“Furthermore, the potential consequences for the data subjects resulting from possible abuse of their personal data are exacerbated by the fact that, once those data have been made available to the general public, they cannot only be freely consulted, but also retained and disseminated.”
Previously, the UK government said it had drafted an order-in-council in accordance with section 51 of the UK’s Sanctions and Anti-Money Laundering Act 2018.
The order would have had the power of law but was left dormant after Bermuda and eight other Overseas Territories committed to making company ownership registers public.
The Overseas Territories had already agreed to share company beneficial ownership information with UK law enforcement agencies at short notice.
David Cameron, the former British Prime Minister, demanded in 2013 that the OTs should keep company owner information and make it available to the public.
Bermuda’s position has long been that it would be willing to make its register public only when this became a global standard, otherwise the island would suffer economic damage.
Although Britain subsequently left the EU, global pressure has continued to push countries to make company registers public.
In response to a request for comment on the ruling, a Bermuda finance ministry spokeswoman said last night: “The Ministry of Finance has taken note of the ruling and will continue to monitor developments in this regard.
“Consistent with our reputation as a premier international financial centre, Bermuda remains committed to transparency, compliance with international standards and co-operation.”