Posted Wednesday, November 23, 2022
Anti-Money Laundering Directive provision requiring public access to information on beneficial ownership of companies is declared invalid by the Court of Justice of the European Union
The Court of Justice concluded that the provision in the Anti-Money Laundering Directive which outlines that any member of the general public can have access to information on the beneficial ownership of companies incorporated within the territory of the Member States, is invalid.
 
The Court received two requests in separate proceedings, first between WM and Luxembourg Business Registers (‘LBR’) (Case C‑37/20) a Luxembourgish company, and secondly between Sovim SA and LBR (Case C‑601/20), its beneficial owner, to give a preliminary ruling on the access to information on the beneficial ownership of companies. LBR and Sovim SA had previously requested the Luxembourg Business Registers (LBR) to restrict the general public’s access to information concerning them on the ground that the general public’s access to that information would seriously, actually and immediately expose WM and his family to a disproportionate risk and risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation.
 
In Case C-37/20, the LBR disputed this claim on the basis of Article 15 of the Luxembourgian Law of 13 January 2019 establishing a Register of Beneficial Ownership. Article 15 provides:
 
‘A registered entity or a beneficial owner may request, on a case-by-case basis and in the following exceptional circumstances, by way of a duly reasoned application addressed to the Administrator, that access to the information listed in Article 3 be restricted to national authorities, credit institutions, financial institutions, bailiffs and notaries acting in their capacity as public officers, where access to that information would expose the beneficial owner to disproportionate risk, risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation, or where the beneficial owner is a minor or otherwise legally incapable.
 
LBR ruled that WM cannot rely on the phrase “exceptional circumstances” or any of the risks referred to in this article. The referring court raised the question of the interpretation to be given to the concepts of ‘exceptional circumstances’, ‘risk’ and ‘disproportionate’ risk within the meaning of Article 30(9) of Directive 2015/849 as amended. Such article outlines that public access to beneficial ownership information allows greater scrutiny of information by civil society and would also help investigations on money laundering, associated predicate offences and terrorist financing.
 
In Case C-601/20, Sovim also lodged an application with the LBR pursuant to Article 15 of the law of 13 January 2019 indicating that the aims of Directive 2015/849 as amended, are to identify the beneficial owners of companies used for the purposes of money laundering or terrorist financing, as well as to ensure certainty in commercial relationships and market confidence. However, it has not been shown how granting the public entirely unrestricted access to the data held in the RBO enables those aims to be attained. Sovim explained that public access to personal data contained in the RBO constitutes an infringement of several provisions of the GDPR, in particular a number of fundamental principles set out in Article 5(1) thereof.
 
The referring Court said that although several questions have already been referred to the Court in Case C‑37/20, the proceedings in Case C‑601/20 also raised other issues, in particular that of whether the general public’s access to some of the data in the RBO is compatible with the Charter and also with the GDPR.
 
In a judgement delivered by the Court of Justice of the EU on the 22nd November 2022, said Court stated that the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data which are enshrined in Articles 7 and 8 of the Charter.
 
On the one hand, the Court of Justice entailed that the EU legislature seeks to prevent money laundering and terrorist financing by pursing an objective of general interest and that the general public’s access to information on beneficial ownership is appropriate for contributing to the attainment of that objective. However, on the other hand, the Court held that the interference entailed by that measure is neither limited to what is strictly necessary nor proportionate to the objective pursued. The new regime introduced by the Anti-Money-Laundering directive amounts to a considerably more serious interference with the fundamental rights guaranteed in Articles 7 and 8 of the Charter than the former regime, which provided access to any person demonstrating a legitimate interest.
 
The Court ruled that the fact that it may be difficult to provide a detailed definition of the circumstances and conditions under which such a legitimate interest exists, relied upon by the Commission, is no reason for the EU legislature to provide for the general public to access the information in question. The Court added that the optional provisions that allow Member States to make information on beneficial ownership available on the condition of online registration and to the general public, in exceptional circumstances, do not demonstrate a proper balance between the objective of general interest pursued and the fundamental rights enshrined in Articles 7 and 8 of the Charter.
 
On these grounds, the Court of Justice ruled that the Article 1(15) of Directive (EU) 2018/843 which provides thatMember 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, is unfounded.
 
written by Cedric Mifsud and Jodie Darmanin 
 
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