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Public access UBO register suspended due to Court of Justice ruling

Introduction Finance Minister Kaag has decided to temporarily stop providing information from the UBO register. This is happening because of a European Union Court of...

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Finance Minister Kaag has decided to temporarily stop providing information from the UBO register. This is happening because of a European Union Court of Justice ruling. The House of Representatives was informed of this through a letter from the Minister. According to the Court of Justice of the European Union, it is contrary to privacy for the UBO register to be publicly accessible. Why the CJEU did so and what the consequences are for the Netherlands is discussed in this article.

Background UBO register

The European Anti-Money Laundering Directive (Directive EU 2015/849 of May 20, 2015) requires all member states to establish rules to protect the integrity of the Union’s financial system. Those rules should prevent opaque business and financing structures. To this end, a registry must be established that includes an organization’s beneficial owner(s), known as the Ultimate Beneficial Owner (UBO). The registry should help prevent criminal activity and facilitate the detection of fraud, money laundering and terrorist financing, among other things.

The data from the registry should not only be viewable by the government, but should be accessible to everyone according to the anti-money laundering directive. Only when exceptional circumstances arise, such as a disproportionate risk of fraud, kidnapping or other types of violence, can disclosure be limited.

In the Netherlands, anyone can access (for a fee) information on UBOs of legal entities. The UBO register is managed by the Chamber of Commerce.

There have long been objections to the disclosure of personal information of UBOs. The Privacy First Foundation already filed a lawsuit in that regard. The court found the substantive criticism of the public part of the UBO register plausible, but – contrary to what was claimed – did not raise any questions before the European court. The reason was that a Luxembourg court had already submitted similar questions to the European Court of Justice, so-called preliminary questions. In anticipation of the European Court of Justice ruling, the House of Representatives had already decided not to impose fines for the time being on organizations that had not yet registered their UBO. Thus, the judgment was already eagerly awaited.

Court of Justice of the European Union ruling

The judgment of the Court of Justice of Europe of Nov. 22, 2022, constitutes the answer to the preliminary questions of the Luxembourg court. The question before the Court of Justice of the European Union was whether public access to the UBO register violates Articles 7 and 8 of the Charter of Fundamental Rights of the European Union. These articles deal with the protection of privacy and personal data.

The CJEU answers that question in the affirmative. According to the Court, the “intended access of members of the public to information about beneficial owners is a serious interference with Articles 7 and 8 of [de in] the Charter guaranteed fundamental rights.”

The Court of Justice of the European Union comes to that conclusion because access to the personal data is possible for an unlimited number of people and, moreover, the personal data can be easily accessed via the Internet. Moreover, personal data can not only be freely accessed but also stored and disseminated.

The fact that there is an interference with fundamental rights does not in itself mean that the interference is unlawful. Indeed, there may be justification for the interference. It is possible to “deviate” from fundamental rights (“interference”) if it is done with good reasons and sufficient safeguards. The deviation must be necessary and proportionate.

The Court of Justice of the European Union rules that there is no justification for making UBO register data accessible to everyone. The anti-money laundering directive does not adequately take into account the protection of privacy because the UBO register can be accessed by anyone and the information from the UBO register can be disseminated. Thus, the interference with fundamental rights is not limited to what is strictly necessary and disproportionate to the objective pursued. The overall goal of preventing money laundering and terrorist financing does not require that opening up. The Court of Justice of the European Union therefore holds that the provision requiring member states to keep a public register is invalid.

Consequences Netherlands

The CJEU ruling is addressed primarily to the European Commission, as legislator of the Anti-Money Laundering Directive. The European Commission will look at the implications of the ruling.

Because the CJEU ruling dealt with a Luxembourg situation, the implications for the Netherlands must first be assessed. One difference, for example, is that the public part of the UBO register in Luxembourg includes more personal data than in the Netherlands. In Luxembourg, the day and place of birth, full private or business address and Luxembourg or foreign BSN are also public.

At the same time, the ruling is critical of the European anti-money laundering directive, which also underlies the Dutch UBO register. Therefore, the ruling is also relevant to the Dutch UBO register. General access to the public section is also likely to violate European fundamental rights in the Netherlands. The Minister is currently assessing the implications for the Dutch situation. In the meantime, the Minister chooses to halt the provision of information from the UBO register for the time being. Incidentally, this does not mean that the obligation to register is also suspended. Companies are still required to enroll their beneficial owners in the UBO register.

This news item was written by Jelmer Maarsen and Henk-Jan Ligtenberg.