EU’s Ruling On Beneficial Ownership

Last week, the Court of Justice of the European Union (CJEU) ruled that public access to registries showing personal details about companies’ beneficial owners infringes fundamental individual rights otherwise protected by the EU. The Court said the EU’s 2018 requirement for Member States to grant public access to information on beneficial ownership caused “serious interference with the fundamental rights to respect for private life and to the protectionof personal data.”Those rights and their protections are set out in the EU’s Charter of Fundamental Rights

In its November 22 decision, the Court of Justice acknowledged that requiring public access to beneficial ownership registries increased transparency and could help prevent money laundering and terrorist financing. But the court said the EU parliament’s objective in adopting the so-called 5th anti-money-laundering directive didn’t justify the “serious interferences with the fundamental rights enshrined” in the EU Charter. This is a disappointing decision, which effectively reverses many years of policy negotiations in recent years to bring greater transparency to public procurement.

What Is Beneficial Ownership?

Beneficial ownership is the legal concept that somebody other than the registered owner of a property or asset may be the person who ultimately benefits from its use or existence. In the case of a company, the beneficial owner is typically an individual or small group of individuals who control more than 25% of the company’s shares.

The beneficial ownership registry at issue in this case was created in 2018 as part of an EU directive designed to combat money laundering and terrorist financing. The directive required member states to create central registries of beneficial ownership information for companies and trusts, and made that information publicly accessible.This allowed public access to beneficiaries of contracts, providing critical transparency to the way governments purchase.

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