Register of beneficial owners - identification of beneficiaries – limitation of access to information - assessment criteria
Background surrounding the setting up of the Register of beneficial owners
In view to comply with international requirements on transparency of legal persons, Luxembourg legislator enacted on 13 January 2019 the law establishing the Register of beneficial owners¹ (the “Law”).
The philosophy of the European Union regulation on which the Law is based is to ensure the widest access to information on the identity of the economic beneficiaries of legal persons.
Article 3 of the Law sets out the information on beneficial owners that shall be included in the register (which is accessible to the public) such as full name, date and place of birth, country of residence and description of the participation held.
In addition, other data such as the private address of the beneficial owner(s) is available to a restricted circle of recipients (certain national authorities and certain professionals such as bailiffs, notaries and credit and financial institutions).
Article 15 of the Law provides for an exemption from this general principle, according to which “A registered entity or a beneficial owner may request, on a case-by-case basis and in the following exceptional circumstances, on the basis of a duly motivated request addressed to the manager, to limit access to the information referred to in Article 3 to national authorities only, credit and financial institutions and bailiffs and notaries acting in their official capacity, where such access would expose the beneficial owner to a disproportionate risk, to the risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation or where the beneficial owner is a minor […]”.
Following the establishment of the Register of beneficial owners, many individuals have requested its manager, i.e. the Luxembourg Business Registers (“LBR“), to benefit from the derogatory regime provided for by the Law (i.e. to restrict access to information concerning them to the national authorities and to a limited circle of professionals). In most of the cases, these requests were rejected.
Considering the LBR’s interpretation as too restrictive several legal proceedings were lodged.
During one of these proceedings the Luxembourg District Court (Tribunal d’Arrondissement de Luxembourg) has had to examine the judicial action lodged by an individual requesting the cancellation of the decision of the LBR which had denied to limit the access to information concerning him.
Background of the legal proceeding
The applicant argued, among other things, that he was in a situation where the publication of personal information would expose him and his family to “a disproportionate risk, to the risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation“.
He argued that his position as a corporate officer of several companies meant that he had to travel regularly to countries with unstable political regimes and exposed to a high level of common crime, which could lead to a significant risk of kidnapping, sequestration, violence and even death.
All these factors meant that he had to take great precautions when travelling to certain countries, including close personal protection and special insurance policy to cover himself against the risk of kidnapping.
The LBR, on its side, relied, among other things, on the philosophy of the European Union texts on which the Law is based, which is to guarantee the widest possible access to information on the identity of the economic beneficiaries of legal persons, and considered that in this case the concept of “exceptional circumstances” were not fulfilled.
With regard to the notion of “risk”, the LBR argued that the risk should be characterised, real, actual and actually affect the person of the beneficial owner. Again, the LBR did not agree with the litigant’s position.
Identification of legal issues
On the merits, the court had to answer the question of whether the applicant fulfilled the conditions set out in the Law for limiting access to information.
The limitation on access to information provided for in Article 15 of the Law, is subject to the demonstration that the relevant person is in “exceptional circumstances” and faces “a disproportionate risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation”.
It worth mentioning that Article 15 is the national provision corresponding to Article 30(9) of Directive 2015/849 of the European Parliament and of the Council, as amended².
The judge considered that the Law (and the the Directive) raised a number of questions of interpretation.
The condition of proportionality as formulated in the Community texts could give rise to two possible interpretations, and the concept of risk also required clarification.
Being a question of interpretation of European Union law, the Luxembourg judge decided to stay the proceedings and submitted a request for a preliminary ruling to the ECJ on the following concepts:
- “exceptional circumstances”;
- “risk”; and
- “disproportionate” risk.
Expectations as to the position the ECJ will take
The Law, and more particularly the implementing rules aimed at limiting access to information on the beneficial owners of legal persons, gives rise to a feeling of intrusion into the private life of some people and as a result generates a significant number of complaints to the LBR, which in turn leads to litigation before the courts.
Given the willingness to fight the use of the financial system for money laundering or terrorism financing, it is worth asking whether the ECJ will take a protective approach to personal data, as it has done in the past, or whether other interests will prevail?
The decision should lead to a better understanding and clarification of the conditions of application of the limitation to the principle of access to information on the beneficial owners of legal persons.
2 In this case, transposition of the provisions of Article 30 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 by Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018. Text of the Directive: EUR-Lex – 32015L0849 – EN – EUR-Lex (europa.eu) amended version EUR-Lex – 02015L0849-20180709 – EN – EUR-Lex (europa.eu).
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