The Court of Justice of the European Union (“CJEU”), in its recent judgment in Joined Cases C-37/20 | Luxembourg Business Registers and C-601/20 | Sovim of 22 November 2022, declared invalid the provisions of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing, as amended (“the Anti Money Laundering Directive”), according to which information on the beneficial owners of companies registered on the territory of the Member States must always be available to any member of the general public.

In compliance with the Anti-Money Laundering Directive, a register of beneficial owners has been established by Luxembourg law, in which a number of identifying details of registered entities must be included. Some of the data are accessible to the general public via the Internet.

In connection with this Luxembourg law, two actions were brought before the Luxembourg District Court, in which the plaintiffs sought an order that the Luxembourg register of beneficial owners restrict access by the general public to the published data. The competent court decided to refer a number of preliminary questions to the CJEU concerning the interpretation of the provisions of the Anti-Money Laundering Directive and their validity in the light of the Charter of Fundamental Rights of the European Union (“the CFREU”).

The CJEU concluded that the provision of the Anti-Money Laundering Directive allowing any member of the general public access to information on beneficial owners is invalid on the grounds of conflict with the CFREU. The CJEU sees in the provision in question as a serious interference with the right to private life enshrined in Article 7 CFREU and also with the right to protection of personal data under Article 8 CFREU.

The data available in the register enable a potentially unlimited number of persons to find out about the factual and financial situation of the beneficial owner. In addition, there is also a potential risk for data subjects arising from possible misuse of personal data, which may be compounded by the fact that once such data are made available to the general public, they may not only be freely searchable, but may also be stored and disseminated.

The main objective of the Anti-Money Laundering Directive is to prevent money laundering and terrorist financing, an objective of general interest which can justify serious interference with the fundamental rights enshrined in Articles 7 and 8 CFREU. Access by the general public to information on beneficial owners is thus an appropriate means of achieving this objective.

In spite of the above, the CJEU found that the interference with the fundamental rights guaranteed in Articles 7 and 8 of the CFREU is so serious in this case that the principle of proportionality is not respected to counterbalance the interference. Interference with fundamental rights in this case is neither limited to what is strictly necessary nor proportionate to the objective pursued. According to the CJEU, neither the disclosure of information about the beneficial owners of registrations online nor the establishment of exceptional circumstances, where access to the general public is restricted, is an adequate compensatory measure for the interference.

The CJEU declared the described provision of the Anti-Money Laundering Directive invalid. One needs to ask what the implications of this are for European law itself and for the national law that has been adopted to implement the Directive. The CJEU judgment has ex tunc effects, i.e. from the beginning of the legal rule’s entry into force. In other words, the invalid provision of the Directive is treated in this case, as if it had never existed.

The European Commission itself will need to deal with the invalid provision first and should carefully assess the implications of the verdict and then replace the invalid stipulation of the directive with a new one. Member States should do the same, where their national law contains a literal transposition of an invalid stipulation. Where national law departs from the Directive, Member States should assess whether the differences are consistent with the relevant Directive and the CFREU. As a result of the judgment of the CJEU, our Act No. 37/2021 Coll. on the registration of beneficial owners will be amended.

Author: Veronika Odrobinová, Jessica Vaculíková