Elvinger Hoss Prussen triggered a landmark preliminary ruling on 22 November 2022, in which the Court of Justice of the European Union ("CJEU") has declared the 5th AML Directive ("5AMLD") invalid insofar as it imposes a public access regime for national UBO registers.
What is the context and our involvement?
In accordance with 5AMLD, the Law of 13 January 2019 establishing the Register of Beneficial Owners, as amended ("RBO Law") foresees unlimited public access of certain personal data of beneficial owners ("BOs") registered with the Register of Beneficial Owners ("RBO"). It also provides for the possibility to obtain an exemption from that public access under very strict conditions, proving, in essence, the existence of a disproportionate risk for the BO's personal situation.
Certain Luxembourg companies or their BOs which had unsuccessfully requested the application of the exemption, have launched an appeal before the Luxembourg District Court. In such proceedings, we have asked the District Court to refer to the Court of Justice of the European Union ("CJEU") several preliminary questions concerning, in essence, the validity of the public access regime in light of the Charter of Fundamental Rights of the European Union ("Charter") as well as the interpretation of specific provisions of 5AMLD. The District Court has acceded to such request in one of our cases and stayed the others, pending the outcome of the CJEU proceedings.
Key cjeu findings?
In its judgment of 22 November in Joined Cases C-37/20 and C-601/20, the Grand Chamber of the CJEU concludes that the provision of 5AMLD, which requires Member States to ensure that the information on the beneficial ownership of corporate and other legal entities incorporated within their territory is accessible in all cases to any member of the general public, is invalid.
According to the CJEU, the general public’s access constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data enshrined in Articles 7 and 8 of the Charter, respectively, without the interference being limited to what is strictly necessary or proportionate to the objective pursued by 5AMLD. That interference is held to be considerably more serious than the regime under the 4th AML Directive, which provided for access on demonstration of a legitimate interest, without the increased interference being capable of being offset by any additional benefits.
Furthermore, the optional provisions allowing Member States to make information on beneficial ownership available on condition of online registration and to provide, in exceptional circumstances, for an exemption from access, cannot demonstrate a proper balance between the objective of general interest pursued by 5AMLD and the fundamental rights at issue or the existence of sufficient safeguards enabling data subjects to protect their personal data effectively against the risks of abuse.
What does this mean?
The general public’s access to the RBO without limitation constitutes a unjustified interference with certain fundamental rights, as protected notably by the Charter, and can therefore no longer apply.
The right of access to UBO registers of public authorities and AML professionals is not affected since it is enshrined in other provisions of the AML Directives whose validity is not at issue.
The CJEU leaves open the possibility to define further which persons or entities can demonstrate a legitimate interest to access BO data. It seems reasonable to expect legislative developments in that area.
In practice, access by AML professionals to the RBO has been blocked following the judgment since it was based on the online public access available to the public at large, which is invalid. As indicated in the press release of the Ministry of Justice of 6 December 2022, in line with the judgment, the RBO will be open to representatives of the press who have a legitimate interest in consulting the RBO in the context of their research. Access for national journalists will be managed by the Luxembourg Press Council under an agreement with the Luxembourg Business Registers.
In the meantime, access has been restored for professionals as defined in the Law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended, on the basis of a new procedure set out on the website of the RBO. Access will be restored at a later stage for other persons with a legitimate interest and a link to the fight against money laundering and terrorist financing. In parallel, discussions are held at European level to bring the text of the proposed 6th AML directive into line with the judgment.
Finally, national judges must draw all necessary conclusions from the judgment but it does not give them guidance how to do so with respect to pending appeals regarding exemption requests.