Luxembourg new arbitration law coming into force on 25 April
Locations
This long-awaited reform is based on three fundamental features:
- First, it is inspired by Belgian law, French law and the UNCITRAL Model Law on International Commercial Arbitration, the latter having been widely transposed throughout the world;
- Second, it opts for a liberal regime in order to facilitate recourse to arbitration, while maintaining the exclusion of certain types of disputes from the scope of arbitration so as not to undermine the protections from which certain categories of litigants must benefit.
- Third, it rejects the distinction between domestic and international arbitration – contrary to French law.
The legislative process to adopt this bill started in 2013 and was based on the need to modernise the content of Luxembourg arbitration law, which had only known some minor and sporadic amendments since the adoption of its Code of Civil Procedure in 1806.
The new law shall apply to arbitration agreements that have been concluded after its entry into force (unless the parties have agreed otherwise), as well as to arbitral tribunals constituted and arbitral awards rendered after that point too.
Defining features
The underlying aim behind the new law is to improve flexibility and effectiveness, thereby making Luxembourg an attractive hub for any future arbitration. In that respect, the 2018-2023 government program stated: "This alternative dispute resolution method will be modernized in order to highlight its advantages in terms of flexibility, speed and confidentiality, while at the same time providing appropriate guarantees, particularly with regard to public order, the rights of the parties to the arbitration as well as the respect of the rights of third parties".
- Exclusion of investment arbitration
Firstly, the scope of application of arbitration law in the Grand Duchy of Luxembourg will be limited to commercial arbitration. The reform therefore does not affect international investment arbitration – which is a matter of public international law – except for the provisions governing the recognition of investment arbitration awards in Luxembourg.
- Luxembourg courts as supporting judge
Secondly, the reform introduces the concept of the supporting judge ("juge d'appui"), i.e. a judge whose main task is to "resolve deadlock situations and difficulties relating to the conduct of the arbitration proceedings. As a central element of the system and guarantor of the proper functioning of the arbitration, the [juge d'appui] will have a supporting role for the arbitral tribunal and will be able to intervene at all stages of the arbitration proceedings in order to facilitate their progress" (Report of the Commission de la Justice of 15 March 2023, commentary on the articles, p. 18).
For example, the juge d'appui will be responsible for deciding any dispute between the parties relating to the constitution of the arbitral tribunal. However, the role of the juge d'appui remains supplementary: priority is given to the "person in charge of organising the arbitration" (i.e. the dispute resolution mechanisms set up by the arbitral institutions for the composition of the arbitral tribunal) to resolve this type of dispute. Only if the mechanism proves ineffective – or in the case of ad hoc arbitration – will the juge d'appui intervene to resolve the deadlock.
Luxembourg courts (i.e. the President of the District court designated in the arbitration clause or, in the absence thereof, the President of the District court of Luxembourg) are supporting judge. It will have jurisdiction if the seat of the arbitration is Luxembourg or, in the absence of a designated seat, (i) if the parties have submitted the dispute to Luxembourg procedural law, (ii) in cases where the parties have expressly given jurisdiction to the Luxembourg courts over procedural disputes or (iii) where the dispute is closely connected with Luxembourg (e.g. if the underlying contract is to be performed in Luxembourg or if the defendant has its seat in Luxembourg). In any case, Luxembourg courts will be competent in case there is a risk of denial of justice.
- Limited challenge of an arbitral award
The new law for arbitration provides that an action for setting aside an arbitral award seated in Luxembourg can only be brought on certain grounds listed exhaustively (incompetence of the tribunal, irregularity in the constitution of the tribunal, the tribunal did not comply with its mission, the award contradicts Luxembourg public policy, the award is not reasoned or an infringement of the right of defence).
The Court of Appeal – and no longer before the District Court – is the only competent jurisdiction for setting aside arbitral awards seated in Luxembourg.
The action to set aside the award will automatically entail, within the limits of the referral to the Court of Appeal, an appeal against the order of the judge who ruled on the exequatur of the award, if any.
In addition, the action for annulment does not suspend the enforcement of the award. However, the Court of Appeal, ruling as in summary proceedings ("statuant comme en matière de référé"), can suspend or amend enforcement of the award if such enforcement is likely to seriously prejudice the rights of one of the parties.
Finally, parties can also request the revision of the award (i.e. to withdraw the award and re-examine the case in fact and in law) to the arbitral tribunal (or the Court of Appeal if the arbitral tribunal cannot be reconvened) if, after the award has been rendered, (i) there are evidence of fraud by the party for the benefit of whom the award was made, (ii) new evidence is found that was concealed by the other party, or (iii) exhibits, testimony, or statements have been declared, recognized or judicially declared false.
- New features in the arbitration procedure
If the arbitration agreement does not set a time limit, the duration of the arbitral tribunal's mission is limited to six months from the acceptance of the mission by the last arbitrator. In order to maintain the flexibility that may be required in certain disputes, the legal or contractual time limit may be extended by agreement of the parties or by the person in charge of organising the arbitration if he has been empowered to do so by the parties, or, failing that, by the supporting judge.
The new Law of 19 April 2023 also introduces a requirement of confidentiality in the arbitration procedure, as well as certain powers of the arbitral tribunal in case of default.
Do not hesitate to reach out to our local experts Maxime Berlingin, and Esther Lanotte at Fieldfisher Belgium if you have any further questions.