The Court of Justice of the European Union limits […]

Judgment CJEU C-37/20 and C-601/20 of 22 November 2022

In a judgment of 22 November 2022, the European Court of Justice ruled that the accessibility of companies’ registers of beneficial owners to the general public is neither necessary nor proportionate.

1. Applicable legislation

The amended Directive 2015/849 of the European Parliament and of the Council aims to identify the beneficial owners of companies in order to combat money laundering or terrorist financing and to ensure the security of commercial relations and confidence in the markets.

Under the terms of Article L.561-2-2 of the Monetary and Financial Code, the beneficial owner is defined as the natural person or persons :

“1° or who ultimately control, directly or indirectly, the customer ;

2° or for which an operation is performed or an activity carried out.

Article 30.5 c)) of the Directive requires Member States to make information on beneficial owners available to any member of the public in a register (ndlr. Register of Beneficial Owners or RBE).

Members of the general public are entitled to have access to, at least, the name, month and year of birth, country of residence and nationality of the beneficial owner and the nature and extent of the beneficial interest held.

These provisions have been included in Article L.561-46 of the Monetary and Financial Code, which states that

” Companies and entities mentioned in 1° of Article L. 561-45-1 declare to the trade and companies register, through the intermediary of the body mentioned in the second paragraph of Article 2 of Act No. 94-126 of 11 February 1994 on initiative and individual enterprise, information on beneficial owners. This information shall include the identification and personal residence of such beneficiaries and the manner in which they exercise control over the company or entity.

Only information relating to the name, surname, pseudonym, forenames, month, year of birth, country of residence and nationality of the beneficial owners and the nature and extent of their beneficial interests in the company or entity shall be publicly available. ”

Nevertheless, in order to ensure the rights to privacy and the protection of personal data, paragraph 9 of Article 30 gives Member States the possibility to provide, on a case-by-case basis, for exemptions from the disclosure of and access to information on beneficial owners via registers, but makes such exemptions subject to “exceptional circumstances to be defined in national law” which would expose the “would expose the beneficial owner to a disproportionate risk, to a risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation, or where the beneficial owner is a minor or is otherwise incapacitated.”

Articles 7 and 8 of the EU Charter of Fundamental Rights relate to respect for private and family life and the protection of personal data.

2. The facts

Luxembourg has implemented this directive and has made the register of beneficial owners public on the Internet.

A Luxembourg company challenged the validity of this transparency before the Luxembourg courts on the grounds that it violated the right to privacy and the right to protection of personal data, rights guaranteed by Articles 7 and 8 of the EU Charter of Fundamental Rights.

The Luxembourg courts have referred a number of questions to the CJEU for a preliminary ruling, in particular regarding the compatibility of public access to some of the data contained in the GBR with the EU Charter of Fundamental Rights and the GDPR.

(As a reminder : The preliminary ruling procedure allows the courts of the Member States to ask the Court of Justice about the interpretation of Union law or the validity of an act of the Union in the context of a dispute referred to them. It is then for the national court to resolve the case in accordance with the Court’s decision. This decision is likewise binding on other national courts which may be seized of a similar problem).

3. The opinion of the Court of Justice of the European Union

The CJEU recalls first of all that any interference with fundamental rights must (1) have a legal basis, (2) not undermine the “essential content” of the fundamental right, (3) pursue an objective of general interest and, finally, (4) be appropriate, necessary and proportionate to the aim pursued.

It applies these criteria to the Directive in question.

For the Court, the availability of information on beneficial owners to the general public constitutes a serious interference with the fundamental rights enshrined in Articles 7 and 8 of the EU Charter of Fundamental Rights.

Indeed, ” to the extent that the information made available to the general public relates to the identity of the beneficial owner and the nature and extent of his beneficial interests in companies, they are likely to enable a profile to be drawn up about […] the financial situation of the person concerned and the specific economic sectors, countries and companies in which it has invested ”

Nor would the interference be proportionate to the public interest objective of preventing money laundering and terrorist financing, which must be achieved only by the competent authorities.

Consequently, the Court of Justice of the European Union invalidates the provisions of Article 30(5)(c) of Directive 2015/849 as amended in that they provide thatMember States must ensure that information on the beneficial owners of companies and other legal entities incorporated on their territory be accessible in any case to any member of the general public.

4. Consequences of this decision in France

As mentioned above, Article L.561-46 of the Monetary and Financial Code reproduces the terms of Article 30(5)(c) of the Directive, which was struck down by the CJEU.

Following the publication of this decision, France, like eight other European countries, suspended access to its register of beneficial owners.

In the face of numerous reactions of discontent linked to this restriction of access, the Ministry of the Economy announced on Thursday 19 January 2023 in a press release that access to the register of beneficial owners for the general public had been temporarily restored, almost three weeks after its interruption.

However, future arrangements for access to the register of beneficial owners data taking into account the CJEU ruling will be defined shortly, while ensuring that “media organisations and [les] civil society organisations with a legitimate interest” will continue to have access to the register.

The legislator should therefore very quickly address this issue.