EU Court strikes down public Ultimate Beneficial Owner register
The Court of Justice of the EU on 22 November emphatically struck down the public accessibility of the Ultimate Beneficial Owner (UBO) register. The general public having access to information on beneficial owners of companies and other legal entities constitutes a serious breach of privacy. In a principled ruling, the 15 judges of the Grand Chamber of the European Court explain that the fight against money laundering and terrorist financing is primarily a matter for public authorities. The fight against money laundering does not justify making a register containing privacy-sensitive data public to everyone, the highest European court stated. The entire text of this landmark decision can be found here.
Privacy First very much welcomes the critical and principled ruling by the Court of Justice. It provides a substantive ruling on the questions that Privacy First previously raised about the UBO register.
In early 2021, Privacy First filed summary proceedings against the UBO register, insisting that the Dutch court would take the case to the EU Court of Justice. The Dutch judge subsequently declined to do so because a similar Luxembourg case had just been submitted to the Court of Justice. The preliminary injunction court did however confirm that there is every reason to doubt the validity of the European Money Laundering Directives that form the basis of the UBO register. The judge ruled that the possibility could not be excluded that the highest European court would conclude that the public nature of the UBO register is not in line with the principle of proportionality. This judgment was upheld on appeal.
‘The introduction of the UBO register would mean that privacy-sensitive data of millions of people will be up for grabs’, Privacy First’s attorney Otto Volgenant of Boekx Attorneys commented at the time. ‘On all sides there are strong doubts whether this is actually an effective means in the fight against money laundering and terrorism. It’s like using a sledgehammer to crack a nut. The Court of Justice of the European Union will eventually adjudicate the case, and I expect it will annul the UBO register.’
This is indeed what happened last week. The public character of the UBO register is off the table. The main considerations of the EU Court of Justice ruling can be summarized as follows:
Making UBO data available to the public is a serious intrusion into the privacy of UBOs. Based on the information from the UBO register, a profile can be created that includes certain personal identification data, details on the person’s financial situation as well as the economic sectors, countries and specific companies in which they have invested. A freely accessible UBO register makes these data available to an unlimited number of individuals, including those who wish to view it for reasons that need not be related to anti-money laundering regulations. Not only are the UBO data freely accessible to anyone, it can also be stored and further disseminated by third parties, making it increasingly difficult or even illusory for UBOs to defend themselves against improper use.
Combatting money laundering and terrorist financing is a public interest objective that may justify the privacy intrusion that arises with a UBO register, but this does not mean without question that everyone should have access to that register.
The EU Court explains that the following questions must be assessed in this context:
1. Is the public accessibility of the UBO register an appropriate tool in the fight against money laundering?
2. Does the intrusion on the privacy of UBOs through public access meet the requirement of subsidiarity and is the public access limited to what is strictly necessary? In other words, can the fight against money laundering not reasonably be carried out just as effectively in another way that less affects the fundamental rights of the individuals concerned?
3. Is the privacy intrusion resulting from full disclosure of the UBO register proportionate, when weighing the importance of combatting money laundering on the one hand and the seriousness of the privacy intrusion on the other?
The first of these questions was addressed by the Court of Justice only briefly: a publicly accessible UBO register may, through the resulting transparency, contribute to an environment that is less likely to be used for money laundering. But with regard to the other two questions, the public nature of the UBO register does not meet the requirements to be imposed.
The Court’s answer to the second question is that the privacy violation that is the consequence of full disclosure of the UBO register is not strictly necessary. A previous version of the anti-money laundering regulations stated that ‘persons or organizations that can demonstrate a legitimate interest’ can have access to the UBO register. In its ruling, the Court specified the groups that may have such a legitimate interest:
a. the press and civil society organizations concerned with preventing and combatting money laundering and terrorist financing;
b. individuals who want to know the identity of a UBO in the context of a potential financial transaction; and
c. financial institutions and authorities involved in the fight against money laundering and terrorist financing.
The European Commission indicated earlier that it is difficult to give a legal definition of the concept of ‘legitimate interest’. The Court, however, found this too short-sighted: the fact that it is difficult to define this concept does not justify giving access to everyone. And so the public accessibility of the UBO register was cast aside, because the invasion of UBO’s privacy is not limited to what is strictly necessary.
In answering the third question, as to the proportionality of the privacy invasion in relation to the importance of anti-money laundering objectives, the Court also allows privacy to prevail. The fight against money laundering and terrorist financing is primarily a task of governments and financial institutions, which already had full access to the UBO register. Extending access to the UBO register to the entire public results in a significantly greater invasion of privacy, without being offset by benefits in the fight against money laundering and terrorist financing.
For the Netherlands, this means that the UBO register may no longer be publicly accessible with immediate effect. Immediately after this ruling, Privacy First called on the Dutch Minister of Finance to comply with the Court’s decision as soon as possible. On the very day of the ruling this call was heeded and an end was put to the public accessibility of the UBO register. This is a major victory for privacy. The goal of the lawsuit that Privacy First started in 2021 has thus been achieved. The UBO register is no longer publicly accessible. In the event the Dutch government fails to comply with this ruling, Privacy First will start new summary proceedings to enforce the EU Court ruling.
There will possibly be a discussion about the delineation of the group of persons who have access to the UBO register on the basis of a ‘legitimate interest’. This discussion is best conducted at the EU level, as anti-money laundering rules are also EU rules. This will also allow the European Data Protection Supervisor (EDPS) to get involved in the substance of this matter. This independent supervisor already in 2017 advised that public accessibility of the UBO register would not be proportionate.
Unfortunately, the European legislature did not heed that advice at the time. It happens more often that the European legislator drafts rules that are a major violation of privacy, which, years later, the highest European court indeed confirms to be the case. It is good that the European Court of Justice is critical and weighs the importance of privacy. After all, the courts have the final say in any democracy under the rule of law, and the EU Court of Justice’s Grand Chamber has ruled in favor of privacy time and again in recent years. But it would be even better if regulators themselves valued the importance of privacy protection as it would mean governments would not commit as many privacy violations in the first place.
Dutch Court of Appeal rules Ultimate Beneficial Owners can request shielding of data
A Dutch court has ruled on appeal in the summary proceedings brought by Privacy First concerning the Ultimate Beneficial Owners (UBO) register. Like the preliminary relief court, the Court of Appeal of The Hague unfortunately rejected Privacy First’s claims.
The court in preliminary relief proceedings earlier confirmed that there is every reason to doubt the legal validity of the European money laundering directives that form the basis for the UBO register. The judge ruled that it cannot be precluded that the highest European court, the Court of Justice of the EU (CJEU), will conclude that the public nature of the UBO register is not in line with the principle of proportionality. The ruling of the CJEU is expected in mid-2022.
Existing legal entities in the Netherlands do not have to register their UBOs until 27 March 2022. This is different for new legal entities: these have to register their UBOs immediately. The Court of Appeal of The Hague deems it unlikely that these UBOs will suffer serious damage in the short term and points out that UBOs fearing to be at risk from the disclosure of personal data can immediately shield these data from the general public. Dutch law provides for this possibility. The Hague Court of Appeal called this ‘a simple way to prevent UBO data from becoming or remaining public’. UBOs can apply to the Trade Register for shielding. As long as such applications are pending, UBO data will actually be protected. Now that the Court of Appeal has so emphatically pointed out this possibility, it is expected that many UBOs will follow this route.
‘The solution must come from the highest European court, the Court of Justice of the EU’, comments Privacy First’s attorney, Otto Volgenant of Boekx Attorneys. ‘It will rule on this in mid-2022. I expect that the Court will mark the end of the open nature of the UBO register. Thus far hardly any data have been entered into the register and I advise everyone to just wait as long as possible. The Dutch government has arbitrarily chosen a date by which UBOs must provide their data, namely 27 March 2022. It would be wise to postpone that end date by a few months until after the CJEU has provided clarity. That would prevent a lot of trouble and unnecessary costs.’
The judgment (in Dutch) of the district court in preliminary relief proceedings can be found here:
while the judgment (in Dutch) of the Court of Appeal can be found here:
Update 14 April 2022: further legal action by Privacy First against the UBO register may follow in mid-2022, depending on the outcome of similar Luxembourg lawsuits at the EU Court. Recently, Dutch Parliament passed a motion that until the ruling of the EU Court no fines should be imposed on organizations that have not yet registered their UBOs. It also seems that the UBO registration obligation of foundations and associations will not be enforced for the time being. Privacy First closely follows these developments and tries to have a positive influence on them as much as possible.
Privacy First appeals ruling on register for Ultimate Beneficial Owners (UBO)
The hearing at the court of appeal in The Hague in the proceedings of Privacy First against the register for Ultimate Beneficial Owners (UBO) is scheduled for Monday, 27 September 2021.
Following the very critical advice of the European Data Protection Supervisor (EDPS), the district court of The Hague confirmed on 18 March 2021 that there is every reason to doubt the validity of the European money laundering directives that form the basis for the UBO register. The judge ruled that it cannot be excluded that the highest European court, the Court of Justice of the EU (CJEU), will conclude that the public nature of the UBO register is not in line with the principle of proportionality. Since a Luxembourg local court has already refered questions about this to the CJEU, the Dutch court in summary proceedings did not find it necessary to ask questions about it as well. Privacy First has appealed the judgment in these summary proceedings, taking the case to the court of appeal of The Hague. Our appeal summons can be found here (pdf in Dutch).
Privacy First requests the court of appeal to ask preliminary questions on the UBO register to the European Court of Justice and calls for the suspension of the operation of the UBO register until these questions have been answered. Privacy First also asks the court to temporarily suspend the public accessibility of the UBO register, at least until the CJEU has ruled on this matter. The court of appeal's ruling is expected a few weeks after the hearing on 27 September 2021.
‘‘The UBO register will put privacy-sensitive data of millions of people up for grabs’’, Privacy First’s attorney Otto Volgenant of Boekx Attorneys comments. ‘‘There are doubts from all sides whether this is an effective tool in the fight against money laundering and terrorism financing. It’s like using a sledgehammer to crack a nut. The Court of Justice of the EU will ultimately rule on this. I expect that it will annul the UBO register – at least its public accessibility. Until then, I advise UBOs not to submit any data to the UBO register. Once data have been made public, they cannot be retrieved.’’
Background of the lawsuit against the UBO register
Privacy First is bringing a lawsuit against the Dutch government regarding the UBO Register which was introduced in 2020. In summary proceedings, the invalidity of the EU regulations on which the UBO register is based are being invoked. The consequences of this new legislation are far-reaching. After all, it concerns very privacy-sensitive information. Data about the financial situation of natural persons will be out in the open. More than 1.5 million legal entities in the Netherlands that are listed in the Dutch Trade Register will have to disclose information about their ultimate beneficial owners. The UBO register is accessible to everyone, for €2.50 per retrieval. This level of public accessibility is not proportionate.
On 24 June 2020, the Dutch ‘Implementation Act on Registration of Ultimate Beneficial Owners of Companies and Other Legal Entities’ entered into force. Based on this new Act, a new UBO register linked to the Trade Register of the Netherlands Chamber of Commerce will contain information on all ultimate beneficial owners of companies and other legal entities incorporated in the Netherlands. This information must indicate the interest of the UBO, i.e. 25-50%, 50-75% or more than 75%. In any case, the UBO’s name, month and year of birth as well as nationality will be publicly available for everyone to consult, with all the privacy risks this entails.
Since 27 September 2020, newly established entities must register their UBO in the UBO Register. Existing legal entities have until March 27 2022 to register their UBOs. The law gives only very limited options for shielding information. This is only possible for persons secured by the police, for minors and for those under guardianship. The result will be that the interests of almost all UBOs will become public knowledge.
European Anti-Money Laundering Directive
This new law stems from the Fifth European Anti-Money Laundering Directive, which requires EU Member States to register and disclose to the public the personal data of UBOs. The aim of this is to combat money laundering and terrorist financing. According to the European legislator, the registration and subsequent disclosure of personal data of UBOs, including the interest that the UBO has in a company, contributes to that objective. The public nature of the register would have a deterrent effect on persons wishing to launder money or finance terrorism. But the effectiveness of a UBO register in the fight against money laundering and terrorism has never been substantiated.
Massive privacy violation and fundamental criticism
The question is whether the means does not defeat the purpose. Registering the personal data of all UBOs and making it accessible to everyone is a blanket measure of a preventive nature. 99.99% of all UBOs have nothing to do with money laundering or terrorist financing. If it was in fact proportionate to collect information on UBOs, it should be sufficient if that information is available to those government agencies involved in combating money laundering and terrorism. Making the information completely public is going too far. The European Data Protection Supervisor already ruled that this privacy violation is not proportionate. But this opinion has not led to an amendment of the European directive.
Leading up to the the debate on this law in the Dutch House of Representatives, fundamental criticism came from various quarters. The business community agitated because it feared – and now experiences – an increase in burdens and perceives privacy risks. UBOs of family-owned companies that have remained out of the public eye up until now are running major privacy and security risks. There was also a great deal of attention for the position of parties that attach great importance to the protection of data subjects, such as church communities and social organizations. As for associations and foundations that do not have owners, things are cumbersome: they have to put the data that is already in the Trade Register in another register. Unfortunately, this has not led to any changes in the regulations.
Dutch investigative journalism platform Follow the Money looked into the social costs of the Dutch UBO register. Follow the Money writes: ‘‘The UBO register entails costs, hassle and sometimes slightly absurd bureaucracy for millions of entrepreneurs and directors. The Ministry of Finance reckons the total costs of the register for the business community is 99 million Euros. Another 9 million Euros must be added for one-time implementation costs. When lawyer Volgenant hears about this amount, he reacts with dismay: 'The total costs are much higher than I thought! If you extrapolate that to the whole EU, the costs are astronomical.’’’
Favourable outcome of lawsuit is likely
Privacy First has initiated a lawsuit against the UBO register for violation of the fundamental right to privacy and the protection of personal data. Privacy First requests the Dutch judiciary to render the UBO register inoperative in the short term and to submit preliminary questions on this subject to the Court of Justice of the European Union. It would not be the first time privacy-violating regulations are repealed by the courts, something that previous Privacy First lawsuits attest to.
The Dutch law and also the underlying European directive are in conflict with the European Charter of Fundamental Rights as well as the General Data Protection Regulation. The legislator has created these regulations, but it is up to the courts to conduct a thorough review of them. Ultimately the judge will have the final say. If the (European) legislator does not pay enough attention to the protection of fundamental rights, then the (European) judge can cast the regulations aside. The Court of Justice of the European Union has previously declared regulations invalid due to privacy violations, for example the Telecom Data Protection Directive and the Privacy Shield. The Dutch courts also regularly invalidate privacy-invading regulations. Privacy First has previously successfully challenged the validity of legislation, for example in the proceedings about the Telecommunications Data Retention Act and in the proceedings against SyRI. Viewed against this background, the lawsuit against the UBO register is considered very promising.
Update 27 September 2021: this afternoon the court session took place in The Hague; click HERE for the pleading of our lawyer (pdf in Dutch). The judgment of the court of appeal is scheduled for 16 November 2021.
Do you have any questions? Please contact us or our attorney Otto Volgenant of Boekx Attorneys. Privacy First can use your help and would appreciate it if you would become a donor.
Privacy First warns Dutch Senate about fingerprints in identity cards
The controversial and compulsory inclusion of fingerprints in passports has been in place in the EU since 2009. From that year on, fingerprints were also included in Dutch identity cards, even though under EU law there was no such obligation. While the inclusion of fingerprints in identity cards in the Netherlands was reversed in January 2014 due to privacy concerns, there is now new European legislation that will make the inclusion of fingerprints in identity cards compulsory as of August 2, 2021.
Dutch citizens can apply for a new identity card without fingerprints until August 2. After that, only people can do so who are ‘temporarily or permanently unable physically to have fingerprints taken’.
The Dutch Senate is expected to debate and vote on the amendment of the Dutch Passport Act in connection with the reintroduction of fingerprints in Dutch identity cards on July 13. In that context, Privacy First sent the following email to the Dutch Senate yesterday:
Dear Members of Parliament,
Since Privacy First was founded in 2008, we have opposed the mandatory collection of fingerprints for passports and identity cards. Since the introduction of the new Passport Act in 2009, Privacy First has done so through lawsuits, campaigns, freedom of information requests, political lobbying and by activating the media. Despite the subsequent Dutch discontinuation of the (planned) central storage of fingerprints in both national and municipal databases in 2011, everyone’s fingerprints are still taken when applying for a passport, and soon (as a result of the new European Regulation on ID cards) again for Dutch ID cards after this was retracted in 2014.
To date, however, the millions of fingerprints taken from virtually the entire adult population in the Netherlands have hardly been used in practice, as the biometric technology had already proven to be unsound and unworkable in 2009. The compulsory collection of everyone’s fingerprints under the Dutch Passport Act therefore still constitutes the most massive and longest-lasting privacy violation that the Netherlands has ever known.
Having read the current report of the Senate on the amendment of the Passport Act to reintroduce fingerprints in ID cards, Privacy First hereby draws your attention to the following concerns. In this context, we ask you to vote against the amendment of the law, in contravention of European policy. After all:
- As early as May 2016, the Dutch Council of State (Raad van State) ruled that fingerprints in Dutch identity cards violated the right to privacy due to a lack of necessity and proportionality, see https://www.raadvanstate.nl/pers/persberichten/tekst-persbericht.html?id=956 (in Dutch).
- Freedom of information requests from Privacy First have revealed that the phenomenon to be tackled (look-alike fraud with passports and identity cards) is so small in scale that the compulsory collection of everyone’s fingerprints is completely disproportionate and therefore unlawful. See: https://www.privacyfirst.nl/rechtszaken-1/wob-procedures/item/524-onthullende-cijfers-over-look-alike-fraude-met-nederlandse-reisdocumenten.html.
- In recent years, fingerprints in passports and identity cards have had a biometric error rate as high as 30%, see https://zoek.officielebekendmakingen.nl/kst-32317-163.html (Dutch State Secretary Teeven, January 31, 2013). Before that, Minister Donner (Security & Justice) admitted an error rate of 21-25%: see https://zoek.officielebekendmakingen.nl/kst-25764-47.html (April 27, 2011). How high are these error rates today?
- Partly because of the high error rates mentioned above, fingerprints in passports and ID cards are virtually not used to date, either domestically, at borders or at airports.
- Because of these high error percentages, former Dutch State Secretary Bijleveld (Interior and Kingdom Relations) instructed all Dutch municipalities as early as September 2009 to (in principle) refrain from conducting biometric fingerprint verifications when issuing passports and identity cards. After all, in the event of a ‘mismatch’, the ID document concerned would have to be returned to the passport manufacturer, which would lead to rapid societal disruption if the numbers were high. In this respect, the Ministry of the Interior and Kingdom Relations was also concerned about large-scale unrest and even possible violence at municipal counters. These concerns and the instruction of State Secretary Bijleveld still apply today.
- Since 2016, several individual Dutch lawsuits are still pending at the European Court of Human Rights in Strasbourg, challenging the mandatory issuing of fingerprints for passports and ID cards on the grounds of violation of Art. 8 ECHR (right to privacy).
- In any case, an exception should be negotiated for people who, for whatever reason, do not wish to give their fingerprints (biometric conscientious objectors, Art. 9 ECHR).
- Partly for the above reasons, fingerprints have not been taken for the Dutch identity card since January 2014. It is up to your Chamber to maintain this status quo and also to push for the abolition of fingerprints for passports.
For background information, see the report ‘Happy Landings' by the Scientific Council for Government Policy (WRR) that Privacy First director Vincent Böhre wrote in 2010. Partly as a result of this critical report (and the large-scale lawsuit brought by Privacy First et al. against the Passport Act), the decentralized (municipal) storage of fingerprints was largely abolished in 2011 and the planned central storage of fingerprints was halted.
For further information or questions regarding the above, Privacy First can be reached at any time.
The Privacy First Foundation
Doubts over UBO register are justified, Dutch court says
A Dutch court has today handed down a judgment in preliminary injunction proceedings brought by Privacy First concerning the UBO register. The district court of The Hague confirmed that there is every reason to doubt the legality of the European money laundering directives which are the foundation of the UBO register. On this point the judge follows the very critical opinion of the European Data Protection Supervisor. The interim proceedings court rules that it cannot be excluded that the Court of Justice of the European Union (CJEU) will come to the conclusion that the public character of the UBO register is at odds with the proportionality principle. Questions over its legality were recently referred to the CJEU by a Luxembourg national court. As such, the Dutch court felt there is no need to do the same.
Privacy First had also requested a temporary deactivation of the UBO register. This, however, is a step too far for the court, which states that deactivating the register is not possible as long as the underlying EU guideline is still in force. It would put the Netherlands in a position in which it operates in violation of the European guideline. With this claim, the judge says, Privacy First is getting ahead of itself. Privacy First will examine the ruling on this point, also in view of possibly going into appeal.
‘The introduction of the UBO register would mean that privacy-sensitive data of millions of people will be up for grabs’, comments Privacy First’s attorney Otto Volgenant of Boekx Attorneys.’On all sides there are strong doubts whether this is actually an effective means in the fight against money laundering and terrorism. It’s like using a sledgehammer to crack a nut. The Court of Justice of the European Union will eventually adjudicate the case, and I expect it will annul the UBO register.’
At the start of this year, the Privacy First Foundation initiated fundamental legal action against the Dutch government on account of the new UBO register, which is linked to the Trade Register of the Dutch Chamber of Commerce. Under the law the UBO register is based on, all 1.5 million Dutch legal entities that are included in the Trade Register will have to make public all sorts of privacy-sensitive data about their Ultimate Beneficial Owners. This concerns personal data of millions of directors, shareholders and high executives of companies (including family businesses), foundations, associations, churches, social organizations, charities, etc. Privacy First deems that this is a massive privacy violation, one which also creates personal safety risks. That is why Privacy First has asked the court to immediately declare the UBO register unlawful. A lot of information in the register will be publicly available and can be requested by anyone. In Privacy First’s opinion this is completely disproportionate and an infringement of European privacy law. The CJEU will examine whether the European legislation on which the UBO register is based violates the fundamental right to privacy.
The ruling (in Dutch) by the interim proceedings court can be found here: http://deeplink.rechtspraak.nl/uitspraak?id=ECLI:NL:RBDHA:2021:2457.
Update 15 April 2021: yesterday Privacy First filed an urgent appeal against the entire judgment with the Court of Appeal of The Hague. The appeal subpoena can be found HERE (pdf in Dutch). Privacy First requests the Court, inter alia, to ask preliminary questions about the UBO register to the European Court of Justice and to suspend the UBO register until these questions are answered. In view of the major interests at stake, Privacy First hopes that the Court of Appeal of The Hague will hear this case as soon as possible.
Update 17 August 2021: the court hearing in the urgent appeal of Privacy First against the judgment will take place on Monday 27 September at the Court of Appeal in The Hague.
Privacy First initiates court case to dispel privacy-violating UBO register
Privacy First initiates legal action against the Dutch government on account of the recently-introduced UBO register. The preliminary injunction proceedings point at the invalidity of the legislation on which this register is based. The consequences of this new piece of legislation are far-reaching as the register contains very privacy-sensitive information. Data relating to the financial situation of natural persons will be up for grabs. More than 1.5 million legal entities that are registered in the Dutch Trade Register will have to make public details about their Ultimate Beneficial Owners (UBOs). The UBO register is publicly accessible: a request for information costs €2.50.
The UBO register aims to prevent money laundering but will lead to defamation.
The privacy breach that is the result of the UBO register and the public accessibility of sensitive data are disproportionate. The goal of the register is to thwart money laundering and terrorist financing. In order to achieve this goal there is no need for a UBO register, at least not one that is publicly accessible.
That is why Privacy First wants the UBO register to be rendered inoperative by a court, which, in case necessary, should submit questions of interpretation to the highest court in Europe: the European Court of Justice. In cases like these, the judiciary will have the final say. It is not uncommon for a court to overrule privacy-violating legislation and in this respect, Privacy First’s litigation has been successful in the past.
The proceedings will take place before The Hague District Court on 25 February 2021 at 12pm. The entire summons can be found HERE (pdf in Dutch). The ruling will follow two or three weeks after the hearing.
If you have any questions, please contact us or our attorney Otto Volgenant of Boekx Attorneys. Privacy First could use your help and would be very pleased to welcome you as a donor.
Background of the UBO register case
On 24 June 2020, the Dutch ‘Implementation Act for the Registration of Ultimate Beneficial Owners of Companies and Other Legal Entities’ came into effect in the Netherlands. On the basis of this new Act, a new UBO register which is linked to the Commercial Register of the Dutch Chamber of Commerce will contain information about all ultimate beneficial owners of companies and other legal entities founded in the Netherlands. The register should indicate how many shares are owned by the UBO: 25-50%, 50-75% or more than 75%. Furthermore, the name, month and year of birth as well as the nationality of the UBO will be made public, with all the privacy risks this entails.
Since 27 September 2020, newly founded entities have to register the ultimate beneficial owners in the UBO register. Existing legal entities will have to do so before 27 March 2022.
The Act provides very few possibilities to safeguard information. This is possible only for persons that are protected by the police, minors and those placed under guardianship. This means that the shares of practically every UBO will become a matter of public record. Anyone has access to the UBO register, with extracts coming at a price of €2.50.
European money laundering directive
The new Act stems from the fifth European money laundering directive, which obliges EU Member States to register UBOs and disclose their details to the public. According to the European legislator, this contributes to the proclaimed objective of countering money laundering and terrorist financing. The transparency is supposed to be a deterrent for persons who set out to launder money or finance terrorism.
Massive privacy violation and fundamental criticism
The question is whether this produces a windfall effect. Registering the personal data of all UBOs and making these publicly available is a generic precautionary measure. 99.99% of UBOs have nothing to do with money laundering or terrorist financing. Even if it were proportionate to collect information on all UBOs, making that information available only to government agencies engaged in combating money laundering and terrorism should suffice. It is not appropriate to disclose that information to everyone. The European Data Protection Supervisor (EDPS) deemed this privacy violation to be disproportionate. This opinion, however, did not lead to an amendment of the European Directive.
When this Act was discussed in Dutch Parliament, fundamental criticism came from various corners of society. The business community made its voice heard because it perceived privacy risks and feared − and now indeed experiences − an increase in costs. UBOs of family-owned companies that have remained out of the public eye up until now are running major privacy and security risks. There was also a great deal of attention for the position of social organizations − such as church communities and NGOs − that attach great importance to the protection of those affiliated with them. Associations and foundations that do not have owners face a different burden: they have to put the data that are already in the Trade Register in yet another register. Unfortunately these complaints have not resulted in any changes to the legislation.
Legal proceedings look promising
Privacy First has initiated legal proceedings against the UBO register for violation of the fundamental right to privacy and the protection of personal data. Privacy First asks the Dutch court to render the UBO register inoperative in the short term and, if necessary, to submit questions of interpretation on this matter to the highest court in Europe, the Court of Justice of the European Union.
The Dutch Act as well as the underlying European directive are in conflict with both the European Charter of Fundamental Rights and the GDPR. It is the legislator who has created this legislation, but it will be up to the court to do a thorough review thereof. Ultimately, the court has the last word. If the (European) legislator fails to take adequate account of the protection of fundamental rights, then the (European) court can invalidate this legislation. This would not be unique. The Court of Justice of the European Union has previously declared legislation invalid due to privacy violations, for example the Data Retention Directive and, more recently, the Privacy Shield. Dutch courts too regularly annul privacy-invading regulations. Privacy First has previously successfully challenged the validity of legislation, for example in the proceedings concerning the Telecommunications Data Retention Act and the System Risk Indication (SyRI). Viewed against this background, a positive outcome in the case against the UBO register is all but unlikely.
Corona apps are a danger to everyone’s privacy
With great concern, Privacy First has taken note of the intention of the Dutch government to employ special apps in the fight against the coronavirus. In Privacy First’s view, the use of such apps is a dangerous development because it could lead to stigmatisation and numerous unfounded suspicions, and may also cause unnecessary unrest and panic. Even when ‘anonymized’, the data from these apps can still be traced back to individuals through data fusion. In case this technology will be introduced on a large scale, it will result in a surveillance society in which everyone is being continuously monitored – something people will be acutely aware of and would lead to an imminent societal chilling effect. Furthermore, there is a substantial risk that the collected data will be used and misued for multiple (illegitimate) purposes by companies and public authorities. Moreover, if these data fall into the hands of criminal organizations, they will be a gold mine for criminal activities. For Privacy First, these risks of Corona apps do not outweigh their presumed benefits.
The right to anonymity in public space is a fundamental right, one that is crucial for the functioning of our democratic constitutional State. Any democratic decision to nullify this right is simply unacceptable. If indeed the deployment of ‘Corona apps’ will be widespread, then at least their use should be strictly anonymous and voluntary. That is to say, they should be used only for a legitimate, specific purpose, following individual, prior consent without any form of outside pressure and on the premise that all the necessary information is provided. In this respect, privacy by design (embedding privacy protection in technology) must be a guiding principle. For Privacy First, these are stringent and non-negotiable prerequisites. In case these conditions are not met, Privacy First will not hesitate to bring proceedings before a court.
Dutch risk profiling system SyRI banned following court decision
Today, the district court of The Hague ruled on the use of the algorithm-based system SyRI (System Risk Indication) by the Dutch government. The judges decided that the government, in trying to detect social services fraud, has to stop profiling citizens on the basis of large scale data analysis. As a result, people in the Netherlands are no longer 'suspected from the very start’ ("bij voorbaat verdacht").
The case against the Dutch government was brought by a coalition of NGOs, consisting of the Dutch Platform for the Protection of Civil Rights (Platform Bescherming Burgerrechten), the Netherlands Committee of Jurists for Human Rights (Nederlands Juristen Comité voor de Mensenrechten, NJCM), Privacy First, the KDVP Foundation (privacy in mental healthcare), Dutch trade union FNV, the National Clients Council (LCR) and authors Tommy Wieringa and Maxim Februari.
The court concludes that SyRI is in violation of the European Convention on Human Rights. SyRI impinges disproportionately on the private life of citizens. This concerns not only those that SyRI has flagged as an 'increased risk', but everyone whose data are analysed by the system. According to the court, SyRI is non-transparent and therefore cannot be scrutinized. Citizens can neither anticipate the intrusion into their private life, nor can they guard themselves against it.
Moreover, the court draws attention to the actual risk of discrimination and stigmatization on the grounds of socio-economic status and possibly migration background, of citizens in disadvantaged urban areas where SyRI is being deployed. There is a risk – which cannot be examined – that SyRI operates on the basis of prejudices. The attorneys of the claimant parties, Mr. Ekker and Mr. Linders, had this to say: "The court confirms that the large scale linking of personal data is in violation of EU law, Dutch law and fundamental human rights, including the protection of privacy. Therefore, this ruling is also important for other European countries and on a wider international level."
From now on, as long as there is no well-founded suspicion, personal data from different sources may no longer be combined.
Line in the sand
"This ruling is an important line in the sand against the unbridled collection of data and risk profiling. The court puts a clear stop to the massive surveillance that innocent citizens have been under. SyRI and similar systems should be abolished immediately", states Privacy First director Vincent Böhre.
"Today we have been proved right on all fundamental aspects. This is a well-timed victory for the legal protection of all citizens in the Netherlands", says Tijmen Wisman of the Platform for the Protection of Civil Rights.
Another plaintiff in the case, trade union FNV, equally rejects SyRI on principal grounds. "We are delighted that the court has now definitively cancelled SyRI", comments Kitty Jong, vice chair of FNV.
The parties hope that the ruling will herald a turning point in the way in which the government deals with the data of citizens. They believe this viewpoint is endorsed by the considerations of the court: these apply not only to SyRI, but also to similar practices. Many municipalities in the Netherlands have their own data linking systems which profile citizens for all sorts of policy purposes. When it comes to combining data, a legislative proposal that would be greater in scope than SyRI and would enable lumping together the databases of private parties and those of public authorities, was all but unthinkable. The decision by the Hague district court, however, clamps down on these Big Data practices. According to the claimant parties, it is therefore of crucial importance that the SyRI ruling will affect both current as well as future political policies.
The case against SyRI serves both a legal and a social goal. With this ruling, both goals are reached. Merel Hendrickx of PILP-NJCM: "Apart from stopping SyRI, we also aimed at initiating a public debate about the way the government deals with citizens in a society undergoing digitisation. This ruling shows how important it is to have that discussion."
Although SyRI was adopted in 2014 without any fuss, the discussion about its legality intensified after the lawsuit was announced. At the start of 2019, the use of SyRI in two Rotterdam neighbourhoods led to protests among inhabitants and a discussion in the municipal council. Soon after, the mayor of Rotterdam, Ahmed Aboutaleb, pulled the plug on the SyRI program because of doubts over its legal basis. In June 2019, Dutch newspaper Volkskrant revealed that SyRI had not detected a single fraudster since its inception. In October 2019, the UN Special Rapporteur on extreme poverty and human rights, Philip Alston, wrote a critical letter to the district court of The Hague expressing serious doubts over the legality of SyRI. Late November 2019, SyRI won a Big Brother Award.
The coalition of parties was represented in court by Anton Ekker (Ekker Advocatuur) and Douwe Linders (SOLV Attorneys). The proceedings were coordinated by the Public Interest Litigation Project (PILP) of the NJCM.
The full ruling of the court can be found HERE (official translation in English).
Privacy First wins lawsuit against Dutch Data Retention Act
Today the district court of The Hague has rendered the Dutch Data Retention Act inoperative in a break-through verdict. The judge did so at the request of the Privacy First Foundation and six other organizations. This puts an end to a massive privacy violation that lasted for years: retaining the telecommunications data of everyone in the Netherlands for criminal investigation purposes, which made every Dutch citizen a potential suspect.
Broad coalition of civil society organizations
Under the 2009 Dutch Data Retention Act, the telecommunications data (telephony and internet traffic) of everyone in the Netherlands had to be retained, for 12 months and 6 months respectively, for criminal investigation purposes. In interim injunction proceedings against the Dutch government, a broad coalition of civil society organizations demanded the Act to be rendered inoperative as it violated the right to privacy. The claimant organizations were the Privacy First Foundation, the Dutch Association of Defence Counsel (NVSA), the Dutch Association of Journalists (NVJ), the Netherlands Committee of Jurists for Human Rights (NJCM), Internet provider BIT and telecommunications providers VOYS and SpeakUp. The case was conducted by Boekx Attorneys (Amsterdam).
According to the claimant parties, the Dutch Data Retention Act constituted a violation of fundamental rights that protect privacy, communications and personal data. This was also the view of the European Court of Justice in April last year, followed by the Dutch Council of State (Raad van State), the Dutch Data Protection Authority (College Bescherming Persoonsgegevens) and the Dutch Senate (Eerste Kamer). However, former Dutch minister of Security and Justice, Ivo Opstelten, refused to withdraw the Act. Opstelten wanted to uphold the Act until a legislative change was implemented, which could have taken years. The district court in The Hague has now made short shrift of the Act by repealing it immediately.
Data retention is unlawful
On 8 April 2014, the European Court of Justice declared the EU Data Retention Directive entirely and retroactively unlawful. The Dutch Data Retention Act was almost identical to this invalid directive. According to the European Court, retaining the telecommunications data of everyone, without any well-founded suspicion, is in breach of the fundamental right to privacy. Randomly and unrestrictedly collecting 'metadata' in the context of mass surveillance is not permitted, according to the Court.
Privacy First is committed to maintaining and strengthening everyone's right to privacy, if necessary by filing lawsuits against the Dutch government. The Dutch Data Retention Act was an excellent cause for doing so, says Vincent Böhre of Privacy First: "This mass surveillance constituted a massive violation of the right to privacy of every Dutch citizen. It was unacceptable that minister Opstelten clinged to this practice after the highest European court had already clearly stated back in April that this privacy violation was not permitted. Privacy First works to promote a society in which innocent citizens are not burdened by the idea of constantly being watched. The judgment of the court in The Hague is an important step in that direction."
Privacy First expects Dutch telecommunications providers to comply with the judgment and stop retaining everyone's telecommunications data for criminal investigation purposes. In case the Dutch government decides to appeal the judgment, then Privacy First is confident about the outcome of proceedings before the Hague Court of Appeal.
The original judgment in Dutch can be found HERE. Click HERE (pdf) for an unofficial English translation on the website of the Interdisciplinary Internet Institute.
Lexology (United Kingdom), 15 July 2014: 'Dutch government violated article 8 ECHR by requesting and saving personal data in central register'
"Recently, the Court of Appeal of The Hague held that the storage of Dutch citizens' personal data in a central register is an unjustified violation of the right to privacy.
In light of, amongst other things, the implementation of the European regulation on standards for security features and biometrics in passports and travel documents, and to comply with this regulation, the Dutch Passport Act was amended in 2009. This new Passport Act states that future passports would have to contain a chip with a digital facial image and two fingerprints of each applicant. The Dutch government therefore planned to create a central register to hold the facial image files and four fingerprints of each applicant (two of which are included in the passport for identity verification). This new register would also serve other purposes: it would help passport fraud control, and it would allow applicants to renew their passport in any municipality in the Netherlands. The national government acknowledged that the request and saving of these personal data would form a violation of the right to privacy of Dutch citizens, but the government stated that the data storage was proportionate and justified, considering the intended purposes.
The interest group Privacy First disagreed with the government. This group, which seeks to publicly promote the enhancement and preservation of the right to privacy, believed that the creation of this central register violates this fundamental right enshrined in several international laws and regulations. The group launched legal proceedings against the Dutch government. The district court of The Hague ruled that Privacy First did not have a cause of action. Privacy First then appealed against this verdict.
Remarkably, the government meanwhile reviewed their amendments to the new Passport Act. The government concluded that the storage of these personal data in a central register did not achieve its purpose, namely passport fraud control via one's identity verification. Therefore, the Act's provisions that related to the storage of personal data in a central register would be suspended. Furthermore, the number of fingerprints to be taken for the filing would be reduced from four to two in accordance with European regulation.
On appeal, the Court of Appeal ruled that since Privacy First and the government now share the same views about the central register, Privacy First would have lost its standing in their cause of actions, so it dismissed the interest group's claims. However, the Court of Appeal found that the district court had erred when it held that Privacy First did not have a cause of action at the time. Since Privacy First is an interest group advocating the protection of the general interest of Dutch nationals' right to privacy, it should have been able to bring proceedings before the civil court according to Article 3:305 of the Dutch Civil Code (Burgerlijk Wetboek). This would only have been different if the interest group had represented the combined interest of individuals. The Court of Appeal further ruled that Privacy First incurred a financial risk.
The Court of Appeal also ruled that in view of all the circumstances of the case at first instance, the district court should have ruled in favour of Privacy First concerning their arguments against the setting up of a central register. This central register's storage of Dutch citizens' personal data is an unjustified violation of one's right to privacy enshrined in Article 8 ECHR because it did not fulfill its purpose. The Court of Appeal understands that this was a violation from the start, but this had only become evident after the first ruling."
Source: http://www.lexology.com/library/detail.aspx?g=27bf8f03-ada9-47d4-ac7f-4e4aece29cd3, 15 July 2014.