EU closes access to registers of beneficiaries of companies

Public access to business owner registries is shutting down across Europe after a court allowed EU countries to shut down their databases for privacy reasons. Campaigners, meanwhile, fear the controversial decision marks a return to fiscal secrecy after years spent promoting greater corporate transparency.

It only took Luxembourg authorities a few hours to shut down the beneficial owner registry after the European Court of Justice declared public access to the database “null and void” in a ruling that activists called a “blow” to corporate transparency.

In a judgment dated November 22, which was asked to settle two complaints respectively from Sovim SA and the beneficial owner of the real estate company known as WM, public access to registries “violates fundamental rights to respect for privacy and protection of personal data” is guaranteed by the EU Charter.

The next day, the Netherlands, another European country with a generous tax policy on foreign investment, closed access to its own registries. It is followed by Austria, Belgium and Malta. On November 30, Germany also announced that it had closed public access to its “Transparenzregister” immediately after the announcement of the decision.

It was only in 2018 that, under the EU anti-money laundering directive, member states were required to start maintaining registers of the ultimate owners of companies. What followed was a patchwork of systems offering varying degrees of transparency, if at all.

The November decision came as a shock to NGOs that have been fighting for corporate transparency for years, as well as to journalists who use registries to try to expose the true owners of opaque companies.

“There’s no reason why the person who starts the company should keep it a secret,” Myra Martini of Transparency International told IE. “It comes with rights like insolvency protection and also needs to be accompanied by obligations like transparency. This decision is a blow to beneficial ownership transparency, and it comes at a time when we really need more information, not less.”

Graham Barrow, transparency activist and founder of the Dark Money Files podcast, regularly reviews the UK public registry for anomalies or red flags. He opposes the idea that only the competent authorities can carry out such studies.

“I think that much of the work that I and others have done with the UK registry, which is completely free and open to the public, shows that with enough people putting in the effort, the registry can be a major source of potential crime. By that I mean that it can provide a basis for an investigation, not just provide supporting evidence for an existing investigation.”

This decision could further inspire lagging countries that do not yet have a BO registry, namely Italy and Spain, or not fully operational, such as Greece and Cyprus.

“The decision will not affect the creation of the BO registry in Italy, which remains mandatory under the EU anti-money laundering regime,” says Professor Michele Riccardi from the Transcrime Research Center at the Catholic University of Milan. He says the ruling risks, among other things, limiting the ability of local governments to adequately verify the integrity of public procurement, and could also create “a chaotic aftermarket of BO data exchanges, vendors and resellers, benefiting only a few, not the public good.”

The European Court’s decision revived the old debate about the “legitimate interest” in knowing who the ultimate owner of the property is. Should everyone know who is behind the company, or just people with a legitimate interest, such as activists and journalists?

“Today’s decision represents a victory for data protection and the rule of law in a highly politicized context,” said Filippo Noseda, a partner at London-based law firm Mishcon de Reya, who represented WM in the Luxembourg case.

MEP Damien Carem is more reserved in his assessments. “The court has the power to carry out a proportionality test and find that violations of these fundamental rights are justified and strictly necessary to combat money laundering,” he told IE. “However, the court is particularly harsh in its analysis.”