The recent ruling by the European Court of Justice on beneficial owner registers, in the case of C-37/20 and C-601/20 on November 22, 2022, has ignited a vital discussion about the intersection of privacy rights and anti-money laundering efforts. This landmark decision is poised to reshape the landscape of beneficial owner registers and their accessibility across the European Union and beyond.
Background
In accordance with the 5th EU anti-Money-Laundering Directive (2018/843), which requires information on beneficial owner registers to be available to any member of the public, Luxembourg implemented the Directive into local legislation, and gave access to the Luxembourg Business Register to the general public. Previously, under the 4th EU anti-Money-Laundering Directive (2015/849), the register was only accessible to any person or organization that can demonstrate a legitimate interest.
Luxembourg District Court
A Luxembourg company and its beneficial owner brought an action in the Luxembourg District Court to restrict public access to beneficial ownership information filed with the Luxembourg Business Register. The District Court considered that the public disclosure of such information to the general public, with no requirement for a “legitimate interest” to be shown interfered with the rights of beneficial owners under Charter of Fundamental Rights of the European Union (‘the Charter’), and referred the matter to the European Court of Justice.
European Court of Justice
The European Court considered that the fundamental rights enshrined in the Charter, in particular Article 7 (privacy rights) and Article 8 (personal data rights), are not absolute and must be balanced against the objectives of general interest to society in combating money laundering, etc. The European Court found that registers of beneficial owner information accessible by the general public constituted a serious interference with these fundamental rights, which was not justified because the measure was not necessary or proportionate. Accordingly, it held that Article 1(15)(c) of Directive 2018/843 was invalid. In its ruling, the European Court considered that the language of the prior Directive, which made access to beneficial ownership information conditional upon a showing of a “legitimate interest”, to be less intrusive and more proportionate. The European Court noted that persons with a “legitimate interest” include the press and civil society organizations, as well as commercial counterparties and financial institutions involved in combating money laundering, as well as competent authorities and Financial Intelligence Units.
The United Kingdom
The UK is committed to unrestricted public beneficial owner registers for UK companies and partnerships, and has the Persons of Significant Control (PSC) register. However, although the judgment will not be binding on the UK, it does have GDPR laws and may face litigation on similar grounds.
The UK Crown Dependencies and Overseas Territories have made commitments to the UK to establish public beneficial owner registers. However, following the ECJ decision, the UK Crown Dependencies, Jersey, Guernsey and the Isle of Man, in a joint statement announced a delay in the implementation of public beneficial owner registers. The Overseas Territories are also considering their commitments in light of the ECJ decision.
Conclusion
In conclusion, the European Court of Justice’s judgment on beneficial owner registers highlights the delicate balance between fundamental rights, such as privacy and personal data protection, and the broader societal objectives of combating money laundering. This ruling signifies a significant shift in the accessibility of beneficial ownership information, which has implications that stretch beyond Luxembourg’s borders. As the UK and other regions consider their commitments in light of this decision, it’s evident that the landscape of public beneficial owner registers is undergoing transformation.
