Worldwide: Registers Of Beneficial Ownership

An uncertain future for publicly accessible registers of beneficial ownership

In December 2023, the governments of the Crown Dependencies of Jersey, Guernsey and Isle of Man, and the British Overseas Territories (OTs) of the Virgin Islands (BVI) and Cayman Islands, rowed back on their previous commitments to establish publicly accessible registers of beneficial ownership (PARBOs) of companies. They have undertaken to allow access to beneficial ownership information by public authorities for the purposes of controlling money laundering and terrorist financing, and by others with a 'legitimate interest' in the information. However, they no longer plan to allow unrestricted access by members of the general public.

The territories sought to justify this change of position by reference to the 2022 judgment of the Court of Justice of the European Union (CJEU) in WM & Sovim SA v Luxembourg Business Registers (Joined Cases C-37/20 and C-601/20). The CJEU held that the part of the Fifth Anti-Money Laundering Directive requiring Member States to ensure full public access to beneficial ownership information was invalid, because it infringed the right to respect for private life and protection of personal data of beneficial owners. While the judgment is not binding on the UK, Crown Dependencies, or OTs, all remain closely aligned with the EU on questions of data protection and take a similar approach to the EU regarding the right to respect for private life. They must therefore take the CJEU judgment seriously and reflect on its wider impact, not least as a corrective against the notion of an emerging global standard in favour of unrestricted access to beneficial ownership information.

The skilfully worded press releases of the BVI and Cayman Islands do not quite convey the constitutional significance of the recent changes of policy in these territories. The UK Parliament has enacted legislation requiring the OTs to establish PARBOs. A cross-party amendment to the Sanctions and Anti-Money Laundering Act 2018 (SAMLA), which was initially opposed by the UK government, required the Secretary of State to prepare a draft Order in Council by 31 December 2020, requiring any OT that had not introduced a PARBO to do so. The Crown Dependencies were encouraged to establish PARBOs of their own, but were not compelled to do so; the UK government considers that Westminster has no legal right to impose its will on the Crown Dependencies (although not all UK parliamentarians share this view). A draft Order in Council was duly prepared in relation to the OTs, setting 31 December 2023 as the date for implementation of PARBOs in the territories.

The legislation provoked fierce criticism in the OTs, especially those with significant finance centres where legislative competence in financial and economic matters has been devolved to the territories' governments for decades. Unilateral intrusion by Westminster in this sphere was seen by some (e.g. the Premier of Bermuda) as a case of constitutional overreach which, in the absence of a global standard on publicly accessible registers, would place an unjustifiable burden on the OTs. Some even saw it as 'imperial legislation' by a UK Parliament in which the peoples of the OTs are not directly represented.

The UK legislation had no practical impact on Gibraltar. As the only OT within the EU legal order when the Fifth Anti-Money-Laundering Directive came into force, Gibraltar was obliged under EU law to establish a PARBO. It did so via the introduction of the Register of Ultimate Beneficial Owners, Nominators and Appointors Regulations 2017 (the UBO Regulations). Chief Minister Fabian Picardo nevertheless protested against the SAMLA amendment as a matter of constitutional principle. On the day of the Westminster vote, he warned one of the co-sponsors of the amendment that it 'would amount to an unacceptable act of modern colonialism', and 'would call into question the very nature of the relationship of consent and mutual respect which exists today between Gibraltar and the United Kingdom'.

It will be interesting to see whether other OTs follow the example of BVI and Cayman, and whether the UK government uses its SAMLA powers to force compliance. It is possible that, with a UK general election around the corner, the task of resolving the constitutional tension will fall to a new UK administration, whose approach to this issue may well set the tone for its relationships with some of the OTs.

Although the spotlight is now on BVI and Cayman, Gibraltar could soon face a dilemma. The legal framework underpinning Gibraltar's finance centre is still based to a large extent on (retained) EU law and compliance with EU standards of transparency. If an EU consensus emerges around a 'legitimate interest' test for access to beneficial ownership information, Gibraltar may find itself caught between the irresistible force of the EU's regulatory gravity, and the immovable object of the UK's PARBO requirement (unless the UK decides – quietly, no doubt – to align with the EU's new approach).

Another variable to consider is the hypothetical possibility of a constitutional challenge to the UBO Regulations in a Gibraltar court. The WM & Sovim decision would not be treated as binding in Gibraltar, but the CJEU's reasoning might prove persuasive if a beneficial owner were to argue that full public access to the register conflicts with his or her right to privacy under sections 1(c) and 7 of the 2006 Gibraltar Constitution.

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