The European Union’s Court of Justice on Tuesday ruled that private information on the ultimate ownership of companies and investment funds registered in the Luxembourg Business Register does not always need to be made available to the general public. The court ruled that fundamental rights of individuals can sometimes outweigh the general interest of fighting money laundering.
The EU court ruling in effect poses a new challenge to Europe’s ambitions to crack down on money laundering and the financing of terrorism and raises new questions on the effectiveness of requirements to companies and funds to disclose ownership data.
The ruling concerns the UBO Register, with data Ultimate Beneficial Ownership, and applies to relatively new EU rules against money laundering, which demand that companies incorporated in all EU member states need to report information on the beneficial ownership.
Luxembourg’s Business Register, known as LBR, had argued that all this information also needed to be made available to the general public. The EU court now has ruled that this premise is “invalid”. A similar discussion is also ongoing in other EU member states, including the Netherlands.
In Luxembourg, all registered companies, including the many investment funds that have found a legal home in the grand duchy, are required to report their Ultimate Beneficial Ownership, or UBO, data of the LBR. This LBR makes this information available also to the general public via its website.
Luxembourg says will abide by EU court ruling
LBR, in a statement issued jointly with Luxembourg’s justice ministry, said the EU court ruling ruled against the EU directive itself, and not against Luxembourg’s transposition of the EU rules.
“The decision of partial invalidation therefore relates to the provision of the Directive itself and not to the transposition of the Directive into Luxembourg law, as the Luxembourg legislation is in conformity with the Directive,” LBR said.. “However, it is clear that Luxembourg will comply with this provision, given that the problem arises in the same terms in all Member States that have transposed the Directive.”
‘Fundamental rights’
The EU court however noted that the law also provides an option where a beneficial owner may request LBR “to restrict access to such information in certain cases”. One Luxembourg company and a beneficial owner used that option to fight the LBR at the Luxembourg District Court in 2020, arguing that disclosure of detailed ownership information is “capable of entailing a disproportionate risk of interference with the fundamental rights of the beneficial owners concerned”. The Luxembourg court referred the case to its EU counterpart.
“The general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data,” the EU court said. “The information disclosed enables a potentially unlimited number of persons to find out about the material and financial situation of a beneficial owner.”
The EU court also agreed that disclosure in some cases can expose subjects to “possible abuse of their personal data”.
Although the court notes that the EU law on UBO disclosures serves a general interest as it is intended to prevent money laundering and terrorist financing by means of increased transparency, it said that, on balance, the EU directive “amounts to a considerably more serious interference with the fundamental rights”.
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