Non-meritorious strategic lawsuits constrain public participation and undermine the public interest
Nefarious litigation is being used to roll back hard-fought progress in delivering financial transparency in Europe. As explained in this submission to the UN Special Rapporteur on the independence of judges and lawyers, it appears that a coordinated campaign is being deployed to push back the tide of transparency. This worrying development, which has centred on lawsuits designed to undo advances in the areas of beneficial ownership transparency and automatic exchange of information, represents a serious threat to the autonomy and accountability of those in positions of judicial or political authority, including judges and lawyers, not to mention a broad spectrum of human rights.
It argues that the momentum towards greater financial transparency – and with it greater accountability for tax abuse – was dealt a devastating blow in November 2022 when the European Court of Justice issued a ruling which invalidated a 2018 amendment to the EU’s Anti-Money Laundering Directive (AMLD) requiring public access to beneficial ownership registries. The ruling came after a legal challenge brought forward by a Luxembourg businessman with companies in various financial secrecy jurisdictions arguing that the ‘right to privacy’ should supersede the public interest in financial transparency. This spurious use of the human right to privacy to counter financial transparency has also been at the heart of another recent case in the UK which sought to block automatic exchange of information between countries – another critical win of the tax justice movement. Worryingly, a further case before the European Court of Justice is now arguing that lawyers should enjoy legal professional privilege (i.e. secrecy) when they are hired to create companies and other investment structures.
As explained in the submission, this legal campaign misrepresents genuine privacy concerns as none of the transparency measures under attack would undermine this crucial right. Undoing the progress made in international financial transparency would enable crossborder tax abuse, along with a host of other illicit financial flows, and have a serious deleterious impact on economic and social rights.
The report was submitted to the Special Rapporteur in response to a call for inputs ahead of her next thematic report, which will address undue influence of economic actors on judicial systems.