Luxembourg government introduces draft bill to modernise and enhance arbitration in the Grand Duchy

On 15 September 2020, the Luxembourg government published its draft bill no. 7671 to modernise the Luxembourg arbitration rules.

The text, which can be accessed here, is largely inspired by and aims at consolidating both the French procedural rules and the UNCITRAL Model Law.

Its objective is to create a streamlined arbitration regime in Luxembourg, offering the advantages of flexibility, speediness and confidentiality, and representing a valid alternative to the local courts. Contrary to French law, and in order to favour both types of arbitration, the draft bill does not distinguish between national and international arbitration awards.

You will find below a summary of the main provisions:

Creation of the Luxembourg supporting judge

The draft bill introduces the role and competence of the Luxembourg supporting judge (“juge d’appui”). The Luxembourg supporting judge will intervene in support of an arbitration by resolving procedural difficulties, especially during the constitution of the arbitral tribunal (in connection with the appointment of, or challenge in relation to, an arbitrator). The Luxembourg supporting judge will not only be competent if the seat of arbitration is Luxembourg or if the parties have submitted their arbitration to Luxembourg procedural law, but also in cases where the dispute is closely linked to Luxembourg (e.g. if the underlying contract has to be executed in Luxembourg or if the defendant has its seat in Luxembourg).

Confirmation of the “competence-competence” doctrine

The draft bill further confirms the doctrine of “competence-competence”, i.e. the arbitral tribunal’s power to consider and decide on its own jurisdiction.

When faced with an arbitral agreement, the Luxembourg courts will not have competence to decide on the dispute or to decide on the validity of the agreement unless that agreement is prima facie null and void or if the underlying matter is excluded from arbitration. The state court may however not raise its lack of jurisdiction of its own motion.

The parties are free to decide whether or not the arbitral tribunal will be competent to hear provisional or conservatory measures. However, as long as the arbitral tribunal has not been constituted or if the state court is solely competent to rule on the requested measure, in particular on a freeze of assets (“saisie-arrêt”), the Luxembourg court will remain competent to rule on an investigative, provisional or conservatory measure.

Streamlining of the right of appeal

The Court of Appeal will replace the District Court as appeal court for an award made in Luxembourg, which will avoid having the award appealed twice, i.e. first before the District Court and again before the Court of Appeal.

Under the draft bill, the principle is that both a request to set aside an award and an appeal of a decision upholding enforcement have no suspensive effect, so that an arbitral award is immediately enforceable. As an exception, the draft bill introduces the possibility for the Court of Appeal to stay or adjust the enforcement if such enforcement is “susceptible to severely prejudice the rights of a party”.

Next steps

As currently drafted, the new procedural rules will help streamline and enhance arbitration in Luxembourg. Luxembourg, as an international, multilingual and financial hub, already has all that is required to become an arbitration centre in the future.

The draft bill will now be commented on and discussed in parliament. We will keep you informed if and when the new law is passed.