French Constitutional Court rules on public register of trusts

Monday, 24 October 2016

France's Supreme Court (Conseil Constitutionnel) published on Friday 21 October its decision on the legality of the French government's public register of trusts.

Creation of the register and its challenge

The register was created in 2013, following the issue of the supplementary budget, LFR, in 2011 requiring an obligation worldwide to disclose to the French tax authorities full details of any trusts (being any structure, not created under the law of France) which have a French resident settlor or beneficiary, or which have assets in France.

The register was then made public on the Internet on 5 July this year. The launch of the public register of trusts led to a legal challenge from an 89-year-old American woman, resident in France, who is a beneficiary of one of the trusts thus made public. On 22 July, a judge from the Conseil d'Etat, France's highest administrative court, agreed to provisionally suspend the register with immediate effect.

France's Constitutional Court (Conseil Constitutionnel Décision no.2016-591 QPC du 21 octobre 2016 3/3) has now issued its decision.

Differing interpretations

The decision itself states:

'A reference in a publicly accessible register of the names of the settlor, beneficiary and administrator of a trust provides information on how a person intends to dispose of his or her estate. This results in a breach of the right to respect for private life.'

The judgment further states that the legislature had not 'limited the persons having access to data in the register' and that therefore the provisions being challenged 'disproportionately interfere with the right to private life in light of the pursued objective'. It concludes that 'the second paragraph of Article 1649 AB of the General Tax Code should be declared unconstitutional.'

The decision is contentious – with some commentators arguing that only the 'public' aspect of the trusts register is unconstitutional and others arguing that the register itself (and not only its public nature) are deemed unconstitutional following the Conseil Constitutionnel’s decision. It is clear however, that the reporting obligations continue to apply.

Olivier Matuchansky of Arkwood SCP, representing the beneficiary who challenged the registry, said: 'This decision is a great victory for the protection of fundamental freedoms in tax law'.

STEP's position on public registers of trusts

George Hodgson, STEP's Interim Chief Executive has stated, 'STEP has long argued that allowing public access to the details of family trusts was highly invasive and breached legitimate expectations of a right to confidentiality in financial affairs. There is little evidence that allowing public access to such information will provide a matching improvement in effectiveness in fighting money laundering and other crimes.'

Richard Frimston TEP, partner at law firm Russell-Cooke, said it would be 'interesting' to see the extent to which a decision of the French Constitutional Court will influence the considerations of the EU institutions that are currently still debating the final wording to the Fourth Money Laundering Directive.



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