in a nutshell
On 22nd November 2022, the Court of Justice of the European Union (CJEU), as the Grand Chamber, made a landmark decision on the validity of the Luxembourg provisions of the Law of 13th January 2019, establishing the Register of Beneficiaries (RBO). ) (“RBO method”) and the implementation of the EU Anti-Money Laundering Directive.
According to the CJEU, by regulation, Information about beneficial owners number of companies incorporated within the territory of the Member States; accessible to the general public in all cases, void.
content
- in more detail
- fact
- CJEU findings
- actually
- For Luxembourg and other EU member states
- For beneficial owners of companies incorporated within the EU
- for UK
- Related developments in the United States
- Conclusion
The CJEU ruling has led to claims brought by Luxembourg companies and their beneficial owners in the Luxembourg District Court after the relevant authorities refused to restrict the ability of the public to access information held in the RBO. leaving the edge.
The CJEU has determined that the “public access” feature of the RBO law constitutes an interference with the rights guaranteed by the Charter of Fundamental Rights of the European Union (“EU Charter”), more specifically constitutes serious interference with the fundamental right to personal life and the protection of personal data;The RBO law’s interference with the rights guaranteed by the EU Charter is neither strictly necessary nor proportionate to the objectives of anti-money laundering and combating the financing of terrorism.
To the extent that the Member State concerned implements similar provisions, this decision will not affect any beneficiary whose personal data is publicly available in one or more registries of the EU Member State. Must be evaluated.
For more information on what these developments mean for your organization, please contact your regular Baker McKenzie representative.
fact
The RBO Act stipulates that an RBO must be established and information about the beneficial owners of a registered entity must be entered and maintained in its register.
Some of that information is accessible to the general public, especially via the Internet. The RBO Law provides that a beneficiary may request the Luxembourg Business Register (LBR), the administrator of the RBO, to restrict access to all or part of the information about the beneficiary on a case-by-case basis. I’m here. Accessing this information exposes the Beneficial Owner to undue risk of fraud, kidnapping, intimidation, extortion, harassment, violence or intimidation, or whether the Beneficial Owner is a minor or If you are not physically capable
The beneficial owner of a Luxembourg company has requested that access to information from the general public be restricted under its exemption. Request denied. The Luxembourg District Court in charge of the case decided to refer the CJEU for a preliminary decision. The main issue here is that Article 30(5) c) of Directive (EU) 2018/843 of 30 May 2018 was replaced by the Directive on the Prevention of the Use of the Financial System for Money Laundering (EU ) was to determine whether to fix 2015/849. or the financing of terrorism, and amendments to Directives 2009/138/EC and 2013/36 EU (“5th AML Directiveprovide public access to information about beneficiaries in light of Articles 7 and 8 of the EU Charter (which refer to respect for privacy and protection of personal data respectively).
CJEU findings
CJEU is Article 30(5)c) of the Fifth AML Directive, which grants the general public access to information about beneficial owners, is invalid.The main consequences of the decision are:
Public access to information about beneficial owners constitutes a serious violation of fundamental rights.
- This provision constitutes a violation of fundamental rights: Article 30(5) of the 5th AML Directive on making personal data available to the public constitutes an interference with the fundamental rights set out in Articles 7 and 8 of the EU Charter. The judges rule out the argument that public access to information about beneficial owners is justified by the fact that the data relates to professional activity.
- Severity of interference with fundamental rights: The CJEU also emphasizes the seriousness of the interference, as the information relates not only to the identity of the beneficiary, but also to the nature and scope of the beneficiary rights held by a company or other legal entity, and anyone can You can draw your profile. It determines the beneficiaries, their wealth status, and the economic sectors, countries, and specific businesses they invested in. The judge noted that unrestricted access to this information could lead to abuse, especially when the information is freely accessible on the Internet, as is the case in Luxembourg.
Interference with fundamental rights may be seen as appropriate, but it is unnecessary and disproportionate to the objectives pursued.
The CJEU has determined that the EU Parliament seeks to prevent money laundering and terrorist financing through increased transparency. Thereby, the legislature pursues objectives of the general interest, which can justify even serious interference with the fundamental rights enshrined in Articles 7 and 8 of the EU Charter, and Public access to information about property rights serves that purpose.
However, any interference associated with the measures under consideration shall neither limited to what is strictly necessary nor proportionate to the ends pursued.
- The regime introduced by the 5th AML Directive represents a considerably more serious interference with the fundamental rights guaranteed by Articles 7 and 8 of the EU Charter than the previous regime.: The CJEU recalled that the previous version of Article 30(5) restricted access to information about beneficiaries to those who could demonstrate a “legitimate interest,” and the reason for withdrawing the restriction was an encounter. He continued to explain that it was the result of the difficulties he faced. By the European Commission in reaching consensus on the definition of “legitimate interest”. The fact that it can be difficult to provide a detailed definition of the circumstances and conditions under which legitimate interests exist is no reason for the EU Parliament to provide the general public with access to the information in question.
- An optional clause of the 5th AML Directive allowing Member States to make available information on beneficial owners subject to online registration and, in exceptional circumstances, to provide exemptions from access to that information by the general public. , should be reconsidered.: According to the CJEU, these provisions, in themselves, represent an appropriate balance between the general interest objective pursued and the fundamental rights enshrined in Articles 7 and 8 of the EU Charter. , or fail to demonstrate the existence of sufficient safeguards to allow it. Data subjects to effectively protect their personal data from the risk of misuse.
For Luxembourg and other EU member states
Based on this decision, Member States may have to reintroduce access restrictions to information on beneficiaries. To determine the framework of restrictions, the European Commission is currently considering a decision.
After consultations with the LBR, the Luxembourg Ministry of Justice has decided to temporarily suspend public access to the RBO via the Internet portal of the LBR service. The Luxembourg government says it will be in close contact with the EU Commission to discuss the consequences of the decision and he will discuss possible solutions at EU level.
For beneficial owners of companies incorporated within the EU
Beneficial owners residing in the EU or abroad may, where applicable, refer to this decision to request exemption from public access to information. Beneficial owners may act to protect personal data and seek applicable exemptions, provided that the Member State under consideration has implemented similar provisions.
for UK
The CJEU’s decision is not legally binding as the UK is no longer a member of the EU. However, since leaving the EU, the UK has continued to implement some transparency measures, including creating a register of foreign entities. The CJEU’s recent decision is relevant for the UK as it highlights the tension between transparency on the one hand and individual rights to privacy and data protection on the other. It remains to be seen what impact this decision will have on broader UK policy in this area. One possible outcome, in the long term, is that the substance of the Significant Controlling Persons (PSC) Register and the Overseas Business Register will be changed to ensure that the UK maintains its competitive advantage. It may limit public access to information about the public owner. in Europe. Alternatively, some beneficial owners who are required to be registered in her PSC Register in the UK and the Register of Overseas Entities may seek to challenge the scheme on similar grounds through the English courts. I have.
In addition, this decision may affect beneficial owner registrations in UK overseas territories (such as Bermuda and the Cayman Islands). In 2018, the UK Parliament legislated that each Overseas Territory must establish a publicly accessible register of beneficial ownership of companies registered within its jurisdiction. The rationale was that opening the registers would increase the level of scrutiny against these entities and reduce the scope of their use for financial crime purposes. We may come to partially or fully restrict (or seek to restrict) public access to information about these registries.
Related developments in the United States
The decision follows U.S. legislative and regulatory moves toward the introduction of federal beneficial owner registrations that apply to corporations, limited liability companies, and other similar entities beginning January 1, 2024. rice field. Unlike the requirements of the now-defunct Fifth AML Directive, U.S. registries will not be made available to the public in any form, and access upon request will be restricted to U.S. law enforcement agencies, U.S. authorities through applicable treaties. non-governmental and limited to financial institutions by due date. diligent purpose. Companies and organizations affected by this new registry may wish to discuss their potential reporting obligations with their advisors and potential beneficiaries.
Based on this landmark decision, certain restrictions on access to information about beneficiaries should be reintroduced. Without providing further guidance on these restrictions, the CJEU requires that any interference with fundamental rights that may arise is appropriate, necessary, and proportionate. While awaiting amendments to the 5th AML Directive, beneficiaries should act to protect their personal data and seek any applicable exemptions. For more information on what these developments mean for your organization, please contact your regular Baker his Mackenzie representative.
