SOVIM SA – CJEU Judgment (European Union, 2022)

In Case C-37/20, YO, a real estate company, lodget a request to Luxembourg Business Registers (LBR) pursuant Article 15 Law of 13 January 2019 (Law of 13 January 2019 of Luxembourg establishing the Beneficial Owner Register - transposing the provisions of Article 30 Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing) requesting that access to the information concerning WM, its beneficial owner, contained in the register, to be restricted solely to the entities mentioned in that provision, on the ground that the general public’s access to that information would seriously, actually and immediately expose WM and his family to a disproportionate risk and risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation. On November 20, 2019 the request was rejected by LBR arguing that WM’s situation does not meet the requirements of Article 15 Law of 13 January 2019, since WM cannot rely either on ‘exceptional circumstances’ or on any of the risks referred to in that article. On 5 December 2019, WM brought an action before the tribunal d’arrondissement de Luxembourg (Luxembourg District Court, Luxembourg), maintaining that his position as executive officer and beneficial owner of YO and of a number of commercial companies requires him frequently to travel to countries whose political regime is unstable and where there is a high level of crime, which creates a significant risk of his being kidnapped, abducted, subjected to violence or even killed. In that regard, the referring court raised the question of the interpretation to be given to the concepts of ‘exceptional circumstances’, ‘risk’ and ‘disproportionate’ risk within the meaning of Article 30(9) Directive 2015/849, as amended. In Case C‑601/20, Sovim lodged a request to LBR, pursuant to Article 15 Law of 13 January 2019, requesting that access to the information concerning its beneficial owner, contained in the register, be restricted solely to the entities mentioned in that provision. On February 6, 2020, the request was rejected by LBR. On 24 February 2020, Sovim brought an action before the referring court seeking a declaration that Article 12 Law of 13 January 2019, pursuant to which access to certain information contained in the register is open to ‘any person’, and/or Article 15 Law of 13 January 2019 are inapplicable and an order for the information provided by Sovim pursuant to Article 3 Law of 13 January 2019 not to be made publicly accessible. Sovim argued that granting public access to the identity and personal data of its beneficial owner would infringe the right to respect for private and family life and the right to the protection of personal data, enshrined respectively in Articles 7 and 8 EU Charter of Fundamental Rights. They also stated that the aim of Directive 2015/849, on the basis of which the Law of 13 January 2019 was introduced into Luxembourg law, are to identify the beneficial owners of companies used for the purposes of money laundering or terrorist financing, as well as to ensure certainty in commercial relationships and market confidence. However, it has not been shown how granting the public entirely unrestricted access to the data held in the register enables those aims to be attained. Sovim highlighted that public access to personal data contained in the register constitutes an infringement of several provisions of the GDPR, in particular a number of fundamental principles set out in Article 5(1) thereof. In the alternative, Sovim claims that the referring court should hold that there is a disproportionate risk in the present case, within the meaning of Article 15(1) Law of 13 January 2019, and accordingly make an order requiring LBR to restrict access to the information referred to in Article 3 Law of 13 January 2019. CJEU examined if Directive 2018/843's amendment, mandating public access to beneficial ownership data, was valid under Articles 7 and 8 EU Charter of Fundamental Rights. This amendment requires Member States to ensure that information on beneficial ownership is accessible to the general public. The Court identified that making beneficial ownership information publicly accessible does indeed constitute an interference with these fundamental rights. CJEU emphasized the potential for creating detailed profiles on individuals based on their economic activities and the unlimited access by potentially any person, which could lead to misuse of this information. Despite recognizing that such transparency aims to deter money laundering and terrorist financing, the Court questioned whether this broad access is strictly necessary and proportionate to the objectives pursued. The CJEU questioned the justification for this interference, considering whether the measures respect the essence of the fundamental rights under the Charter, whether they genuinely meet objectives of general interest recognized by the EU, and whether they are necessary and proportionate. Despite acknowledging the importance of combating financial crimes, CJEU found that the directive's approach to providing unrestricted public access to beneficial ownership information did not guarantee a proper balance between the objective of general interest and the protection of fundamental rights, such as privacy. The Court highlighted the lack of clear and precise rules on the scope and application of this measure, raising concerns over the adequacy of safeguards against the risk of abuse and the difficulty for individuals to control or challenge the use of their data. Ultimately, the CJEU declared Article 1(15)(c) Directive 2018/843 invalid, concluding that making beneficial ownership information universally accessible to the public constitutes a serious interference of the rights pursuant Articles 7 and 8 EU Charter of Fundamental Rights that is not justified by the objectives of general interest it seeks to achieve.