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First published in Butterworths Journal of International Banking and Financial Law, in this article, Richard Ledain Santiago, Benjamin Devouassoux and Theodoros Karantanos of the corporate and finance team at Fieldfisher Luxembourg, consider the validity of contractual subordination in Luxembourg, noting its gradual acceptance by the Luxembourg courts, its empirical development and impact on third parties.
- The Grand Duchy of Luxembourg has yet to statutorily recognise the concept of contractual subordination.
- That said, contractual subordination is and remains a fairly common mechanism which is used more frequently than not, even in financings originating from Luxembourg and implemented via Luxembourg law-governed documentation.
- The authors submit that it is time for contractual subordination to be acknowledged by the Luxembourg legislator.