Banking secrecy is mainly founded on a duty of confidentiality. It is derived from the contractual relationship existing between the customer and the bank. In the recent past, inroads to banking secrecy in Europe have been made in order to curtail tax evasion in the form of a duty of disclosure of assets held in financial institutions. This is an admission of the principle that secrecy cannot be conceived in a way as to hide or support criminal activity.

The scope of banking secrecy rules met with a further challenge in a recent dispute that was referred to the Court of Justice of the European Union (CJEU) by the German Federal Court. The issue arose in the context of intellectual property rights.

A German company, Coty Germany, was the exclusive licensee of the Community trademark Davidoff Hot Water. Coty Germany purchased a bottle of perfume bearing its trademark from an online auction platform and paid the price into the Sparkasse bank account that the online seller had supplied upon purchase.

It transpired that Coty Germany had purchased a counterfeit product and, in its capacity of exclusive licensee, requested the auction platform to provide it with the name of the seller of the fake perfume. Since no information was forthcoming, Coty Germany directed its request to Sparkasse Bank, asking it for the name and address of the holder of the bank account to which it had made the wire transfer of the purchase price.

The bank invoked banking secrecy and refused to provide the requested inform-ation. The matter escalated into a lawsuit and ended up before the German Federal Court, which stayed the proceedings and asked the CJEU for guidance as to whether a banking institution may refuse to provide information to the holder of an intellectual property right when the latter is seeking to enforce its rights.

The legislative framework on the enforcement of intellectual property rights is encapsulated in the 2004 EU Directive that harmonises enforcement procedures and affords rightholders an equivalent level of protection across the EU. In the context of proceedings concerning infringement of intellectual property rights, the directive requires member states to put the necessary mechanisms in place for competent judicial authorities to order that inform-ation on the origin and distribution networks of the goods or services which infringe an intellectual property right should be provided by the infringer and/or any other person who is found to be providing on a commercial scale services used in infringing activities.

Coty Germany argued that this requirement in the EU Directive prohibited a banking institution from citing banking secrecy in order to refuse to supply the details of the seller. The bank, on the other hand, argued that Coty Germany should have filed a complaint with the German p4207olice to initiate criminal proceedings, thereby revealing the identity of the alleged infringer of the trademark. It also contended that it was not in a position to assess whether there was or not an infringement of a right.

The ruling of the Court of Justice was preceded by the Opinion of its Advocate General. He concluded that in the matter at issue, two principles contended against each other – confidentiality and intellectual pro-perty rights – and these had to be reconciled.

Citing the Charter of Fundamental Rights of the European Union, the Advocate General opined that banking institutions cannot be unconditionally allowed to rely on banking secrecy in order to refuse to provide the name and address of the seller.

The Court of Justice upheld this view. In its ruling, the court considered that there were conflicting rights that had to be balanced against each other. It acknow-ledged that the right to effective exercise of intellectual property and the right to protection of personal data were both fundamental rights. However, the court held that a banking institution could not be allowed, in an unlimited and unconditional manner, to invoke banking secrecy and thus refuse disclosure.

Nonetheless, the court emphasised the importance of data privacy and left it to the national courts to determine, in each individual case, how to reconcile privacy with protection of other rights. In this manner, the court underlined that none of these rights prevails over another. The judgment gives hope to brand owners in their struggle to find the source of counterfeit goods.

jgrech@demarcoassociates.com

Josette Grech is adviser on EU law at Guido de Marco & Associates.