Conflict of beneficial ownership registration with EU law and its impact on public procurement

Posted by: 9. 9. 2025
Update: 29/10/2025

Records of beneficial owners (hereinafter "records") regulated in Act No. 37/2021 Coll., on the registration of beneficial owners as part of the transposition of the European Directive, has been part of the Czech legal order for several years. The aim was to make ownership structures transparent and ensure their transparency. The possibility of accessing and viewing the records is intended to prevent the commission of criminal activities, in particular money laundering or terrorist financing. However, the Supreme Court of the Czech Republic intervened in the possibility of accessing this record in its recent resolution issued on 25. 8. 2025, file no. 27 Cdo 1368/2024, in which it ruled that the access granted by law is contrary to EU law, because unreasonably interferes with the protection of privacy and personal data guaranteed by the EU Charter of Fundamental Rights. The aim of this article is to analyse the basic aspects of this decision with regard to its possible implications for public procurement.

Course of proceedings before the court of first instance and the court of appeal

The entire proceedings in question began in 2023, when the Municipal Court, after discovering that the registering person did not have data entered in this register, called for the removal of the discrepancy in the register of beneficial owners within 30 days of the delivery of this call (resolution) by submitting a proposal to enter the beneficial owner in the register of beneficial owners.

The registering person did not do this, so the Municipal Court initiated Act No. 37/2021 Coll., on the registration of beneficial owners (hereinafter "ZESM") expected irregularity proceedings, in which the Municipal Court once again called on the registering person to complete the missing data (remove the discrepancy) in the register of beneficial owners. The registering person again failed to do this, and so the Municipal Court declared the discrepancy as of 1 June 6 (i.e. the effective date of the ZESM).

The Municipal Court made this conclusion despite being aware of the conclusions of the Court of Justice of the European Union in the cases of WM and Sovim (hereinafter referred to as "theWM and Sovim judgment"). In this judgment, the Court of Justice addressed the question of how information on beneficial owners can be published in the Luxembourg version of the register of beneficial owners without infringing the rights to protection of private and family life and the right to protection of personal data. According to the Court of Justice this data must not be generally accessible to the general publicbecause it would constitute an interference with the said rights.

The registrar filed an appeal against this decision, where the High Court in Prague confirmed this decision and emphasized that the registrar's obligation to register the beneficial owner persists,
and this also takes into account the conclusions of the judgments of the Court of Justice of the EU, which do not have a direct impact on the wording of Czech legislation.

Supreme Court rulings

The registrant filed an appeal against this decision. appeal, when it sought the annulment of the decision of the Court of Appeal, also taking into account that the Court of Appeal (but ultimately also the court of first instance) did not sufficiently address the conclusions of the Court of Justice of the EU, on the basis of which the current regulation of the ZESM must be considered contradictory to European Union law and the registering person cannot therefore be required to comply with this obligation.

The Supreme Court in its decision on this appeal he complied and annulled the resolution. He found the appellant right, taking into account the above-mentioned case law in the WM and Sovim judgment and emphasising that the Czech legislation on the registration of beneficial owners is contrary to the conclusions of the case law of the Court of Justice and at the same time to the rights to protection of private law and to protection of personal data under the Charter of Fundamental Rights of the EU, emphasised in this judgment. According to the Supreme Court, the obligation for the registering person to enter data into this register is associated with the subsequent disclosure of this recorded data through public access to this data, which may be in conflict with the above-mentioned rights guaranteed by the EU Charter of Fundamental Rights.

For this reason, the Supreme Court concluded that the Czech ESM legislation is in conflict with European Union law and, in view of this, it is not even possible for the state to enforce an obligation for the registering persons according to the ZESM to have the data entered in the register of beneficial owners.All this until the legislator changes the legislation so that it meets the requirements of the case law of the Court of Justice, but also the newly adopted Directive (EU) 2024/1640 of the European Parliament and of the Council of 31 May 2024 on mechanisms to be put in place by Member States to prevent the use of the financial system for the purposes of money laundering or terrorist financing, amending Directive (EU) 2019/1937 and amending and repealing Directive (EU) 2015/849, which appropriately responded to the requirements for the adjustment of the AML in the WM and Sovim judgment.

Impact on public procurement

The above-mentioned decision of the Supreme Court may have a significant impact on a number of legal regulations dealing with the verification of beneficial owners. These include Act No. 134/2016 Coll., on public procurement (hereinafter referred to as the “Act”)ZZVZ").

Within the framework of the ZZVZ, verification of the beneficial owner is essential obligations of the contracting authority when selecting a supplier. The contracting authority is obliged, if it is a Czech legal entity, to find out the details of its beneficial owner from the register of beneficial owners and to include this information in the documentation on the tender procedure (Section 122, paragraph 5 of the Public Procurement Act), provided that if the contracting authority does not find out the details of the beneficial owner from this register, the law provides for the exclusion of this potential supplier (Section 122, paragraph 8 of the Public Procurement Act).

Following the Supreme Court's decision, the question now is, how should contracting authorities proceed towards suppliers who do not have data registered in the register of beneficial owners.

We believe that in the current situation A supplier cannot be excluded solely because he does not have data registered in the register of beneficial ownersIn such a case, the contracting authority would risk basing its decision on a legally questionable basis, which could lead to objections from the supplier and the need to repeat the entire procurement process.

Such a procedure can prolong the entire public procurement process, and if there are different approaches by contracting authorities to verify the beneficial owner, this may lead to unequal treatment.
with suppliers and causing legal uncertainty in relation to the tendering procedure. For these reasons It is advisable to approach the verification of beneficial owners as carefully as possible and not use the absence of an entry in the register of beneficial owners as a reason for excluding a supplier.until the legislature adopts an amendment to the ZESM reflecting the conclusions of the Supreme Court.

záver

In view of the above, it is necessary to state that until the legislator adopts an amendment reflecting the conclusions of the Supreme Court, the entire legal framework based on the obligations of ZESM may be exposed to considerable legal uncertainty, which can cause significant problems, including in public procurement. For this reason, it is necessary to hope that the legislator will be able to respond to the above-mentioned problem as quickly as possible and thus prevent possible legal problems.

Source: Epravo.cz

Do you need advice on registering the beneficial owner in the register of beneficial owners? Is it mandatory? Can you be penalized for not being registered? We will advise you on everything!