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Tuesday, February 11, 2014

Are MEPs about to take on the English legal profession?


English knights seeking to protect their estates were a driver behind 
the creation of English Trust law.
MEPs are set to vote this Thursday on the 4th Anti-Money Laundering Directive - which aims to shed light into who owns private companies. This sounds positive and innocuous and the sort of thing politicians, including David Cameron, often - and rightly - call for. But the devil is in the detail. Some MEPs are reportedly now proposing to extend this 'transparency' into Trusts as well as companies, which could have major impact on UK business.

Making a register of the beneficial owners of all private companies, based on millions of underlying arrangements, changing on a day to day basis, was already looking to be complex. But when it comes to Trusts, transparency runs into a serious intellectual and practical problems. Who is the beneficial owner of a discretionary trust? How do you report that a spouse has an interest in a property/company - something that may only become apparent in a divorce court?  Trusts encompass all manner of arrangements; trusts to protect children, trusts holding money pending a transaction, insurance policies, pensions, collective investment schemes etc. Without Trusts the UK's financial services industry would not be able to operate. Will MEPs really seek to have all this reported on a potentially public register? If it is indeed possible, reporting millions of ever changing arrangements could add a massive regulatory cost to everyone's financial affairs. Logic would dictate they would steer clear but lobbyists are already in full swing, pushing amendments that would radically increase the scope of the report.

This is also an important test for how the EU balances the interests of different member states. Trusts are a major innovation of the UK's, (particularly the English) legal system. Whereas continental legal systems traditionally tended not to look beyond the legal ownership of a property, the English legal system has taken a different approach, for better or worse dating back to the Crusades. Essentially, if you hand over the legal ownership of property to a relative in the expectation that you retain an interest (i.e when you come back alive from a Crusade) and it is not respected you could go to the King to receive justice - in the jargon you retained an 'equitable interest'. Other EU states have different set ups such as Stiftungs and Anstalts but these are not as widespread as UK Trusts.

What will happen? Well there are signs that some MEPs are aware of the problem, the EPP for one seems to be against, but David Cameron's ECR group (perhaps to save him embarrassment?) seems, for now at least, curiously undecided about coming out against these ideas.

This is not to say the English legal system should be exempt from transparency, but rather than EU politicians of all colours need to be acutelyy aware of the unintended consequences of regulating 28 different legal systems - with practices sometimes dating back centuries - with one broad brush.

6 comments:

Rik said...

Simply technically impossible if you donot create uniformity in the different legal forms.
Which will not happen: the Continent is not going to start with the figure and the UK is not going to abolish it.
You need more or less uniform legal systems for this part of legislation to make it work.

Same thing with marriages. Spouses have all sort of legal right from that with all sorts of limitations. Or legitimite parts by children. Massive creditors rights.

By opening up the legal systems for the flaws in the present system you very likely create flaws somewhere else. Especially as said the legal systems are different. This wil likley end up as incorporating a French-style legal figure in an AnloSaxon legal system which is very different. Recipe for disaster, same as the other way around btw.
Look at a lot of former not-British colonies. Usually they have a French system but their top lawyers are educated in the AngloSaxon world and hardly anybody can read French, German or Dutch texts which would be much more useful. Simply the system it results into is 9 out of 10 times simply a legal mess.

new gaps either more legal in nature or more economic. Simply move the trust abroad.

One thing is clear the red tape machine is still properly functioning.
Simply looks at best marginal advantages compared to a new considerable stream of administrative duties. Hard to see how it can pass any reasonable test in that respect.

Anonymous said...

Well it would show just how much politicians are really involved in business' that tends to get richer although the rest of us don't due to eussr legislation they vote on.

Cork said...

I have never yet meant anyone from the continent who could understand what a trust was. Perhaps my explanation wasn't up to it or perhaps the concept of trusting third parties to hold and administer your assets without stealing them was just simply thought unbelievable. Yet another reason for having a stand offish association with the EU.

Anonymous said...

Yet another attack "from our friends" in the EU on our financial services market.

The fact that half of Europe will have to leave London/the UK and return home when the EU shuts it down is a fact that they continually overlook.

Why is it that the EU only destroys things and cannot build anything lasting?

Free trade. No sovereignty.

SC

johnlandseer said...

As I said yesterday...another case of EU

"One side fits none.
..."

Albert bob said...

The task of payroll information directly from the company’s administrative authority is also undertaken by these lawyers.Solicitor chatswood