On 22 November 2022, the Court of justice of the EU ruled on the compatibility of a provision relating to the Register of Beneficial Ownership with the right to respect for private life and the right to protection of personal data. The Court held that the provision, which prescribes public accessibility to the information on the beneficial ownership of companies, is invalid on the grounds that the interference with the above-mentioned rights is neither limited to what is strictly necessary nor proportionate to the objective pursued (joined cases C‑37/20 and C‑601/20).
The Anti-Money Laundering Directive and the Register of Beneficial Ownership
The European Union has legislated on money laundering by adopting, on 20 May 2015, Directive 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (“the Anti-Money Laundering Directive”).
Amended by Directive 2018/843 of 30 May 2018, the Anti-Money Laundering Directive provides that Member States must ensure that information on the beneficial ownership of companies and of other legal entities incorporated within their territory is accessible in all cases to any member of the general public.
Consequently, certain countries, including Luxembourg, have adopted laws establishing a Register of Beneficial Ownership (“the RBO”), which the general public can consult on the internet.
The judgment of 22 November 2022
This ruling was issued in response to preliminary questions raised by a Luxembourg court, which had received two actions brought by a Luxembourg company and its beneficial owner, unsuccessfully requesting, on the basis of the 2019 Luxembourg law establishing a RBO, that the general public’s access to information concerning them should be restricted.
Following the preliminary questions referred by the Luxembourg judge, the Grand Chamber of the Court of justice (“the Court”) interpreted certain provisions of the Anti-Money Laundering Directive and ruled on the validity of those provisions in light of the Charter of Fundamental Rights of the EU (“the Charter”).
- On the serious interference with fundamental rights
According to the Court, the general public’s access to information on beneficial ownership constitutes serious interference with the fundamental rights enshrined in articles 7 and 8 of the Charter, which respectively guarantee the right to respect for private and family life, home and communications, and the right to the protection of personal data.
Indeed, the general public’s access to data containing information about identified natural persons constitutes processing of personal data and therefore interferes with the two above-mentioned fundamental rights. Furthermore, this interference should be considered serious given that the information made available enables a profile to be established concerning the material and financial situation of a beneficial owner. This information would be accessible to a potentially unlimited number of people and could be freely retained and disseminated.
- On the examination of the interference with fundamental rights
In accordance with Article 52(1) of the Charter, any limitation on the exercise of the rights protected by the Charter must meet the following criteria in order to be lawful:
It must be provided for by law
It must respect the essence of the rights
It must genuinely meet objectives of general interest recognised by the EU or the need to protect the rights and freedoms of others
It must be necessary
It must be proportional.
However, after establishing that the first three criteria were met, the Court held that the interference is neither limited to what is necessary nor proportionate to the objective pursued.
Indeed, the Court found that the justification provided by Directive 2018/843, which consists of asserting that the general public’s access to information on beneficial ownership “can contribute” to combatting the misuse of corporate legal entities and that it “would also help” criminal investigations, cannot lead to the assumption that the measure is limited to what is strictly necessary.
Moreover, the Court found that the interference with the relevant fundamental rights is also disproportionate given that the Anti-Money Laundering Directive provides for access by any member of the general public “at least” to the data referred to therein. As those data are not sufficiently defined and identifiable, the rules governing interference do not meet the requirements of clarity and precision.
The Court therefore concluded that the relevant provisions of the Anti-Money Laundering Directive are invalid insofar as they create an obligation for Member States to ensure that information on the beneficial ownership of companies and of other legal entities incorporated within their territory is accessible in all cases to any member of the general public.
Review of the judgment
A few days after its ruling, the Court provided clarifications on its judgment of 22 November 2022. In particular, it explained that: “The effect of this declaration of invalidity is that the 2018 amendment should be regarded as never having taken place”. Therefore, following this judgment, “information on beneficial owners must be accessible in all cases to any person or organisation able to demonstrate a legitimate interest”.
The Court further explained that consequently, the Anti-Money Laundering Directive “still allows access to beneficial owner information for persons and organisations with a legitimate interest, including the press and certain organisations in society”.
What are the consequences of this ruling for national RBOs?
Following this judgment of 22 November 2022, Luxembourg and other countries, including Belgium and the Netherlands, have already announced the temporary suspension of their RBOs. However, access is maintained for competent authorities and reporting entities.
Please contact Karel Janssens for further information on the above and/or for general legal advice relating to privacy and data protection.