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The law of 19 April 2023 amending Part Two, Book III, 1st Chapter of the new Code of Civil Procedure aimed at reforming arbitration* (the ‘New Arbitration Law‘) entered into force on 25 April 2023.
The New Arbitration Law overhauls arbitration law applicable in the Grand Duchy of Luxembourg in its entirety, which is reflected in the amendments to the provisions on arbitration in the New Code of Civil Procedure (the “NCPC”).
Every arbitration practitioner has been waiting and hoping for the passing of this new law, which provides a wide range of legal tools that will address the evolution of arbitration and allow Luxembourg to continue to develop a competitive arbitration practice adapted to both domestic and international disputes.
We wholly welcome the adoption of the New Arbitration Law which, together with the new arbitration rules of the Arbitration Centre of the Chamber of Commerce of the Grand Duchy of Luxembourg, which entered into force on 1 January 2020, should contribute to reinforce the attractiveness of Luxembourg as a seat for arbitration proceedings.
*Memorial A, no. 203.
Why opt for arbitration ?
By choosing to submit their disputes to arbitration, parties agree that the issues at stake will be decided not by a court, but by a private tribunal where specialist arbitrators, usually chosen by the parties, will render an award that is binding on them.
This alternative dispute resolution method may be preferred by the parties for the following reasons:
The Luxembourg legislator, with the help of the Think Tank for Arbitration in Luxembourg (TTA), was inspired mainly by the French Code of Civil Procedure and the Model Law of the United Nations Commission on International Trade Law (UNCITRAL).
However, unlike French law, which subjects domestic arbitration to a more restrictive regime than international arbitration, the New Arbitration Law only provides for a unitary set of rules. This choice is notably motivated by the frequency of international arbitration proceedings in Luxembourg.
Here are the key provisions of the New Arbitration Law in a nutshell.
1. SCOPE OF APPLICATION OF THE NEW ARBITRATION LAW
In principle, parties may consider entering into an arbitration agreement for disputes relating to rights for which they can enjoy freely, with the proviso that the arbitral tribunal will apply the public policy rules of the Grand Duchy of Luxembourg.
The New Arbitration Law therefore specifies that it is not possible to submit to arbitration disputes concerning:
In addition, certain disputes which may involve parties considered weak or vulnerable may not be submitted to arbitration, namely:
The New Arbitration Law further clarifies that it is possible to implement or conclude an arbitration agreement even when insolvency proceedings are opened. However, disputes arising from insolvency proceedings themselves cannot be submitted to arbitration.
When applied to the Banking and financial sector, these rules allow financial institutions to resort to arbitration in their dealings with their professional clients but not with consumers.
2. THE ARBITRATION AGREEMENT AND THE ARBITRAL TRIBUNAL
The New Arbitration Law introduces the definition of an arbitration agreement (convention d’arbitrage). It specifies that the agreement is not subject to any formal requirements and that two types of agreements are possible: (i) an arbitration clause (clause compromissoire, which is inserted in a contract before the dispute between the parties has arisen) or (ii) a compromise (compromis, which is an autonomous agreement concluded after the dispute has arisen).
It is now clearly stated that parties can compromise at any time and opt for arbitration, even if proceedings have already been initiated before a court (Article 1227-1 of the NCPC).
The new Article 1227-2 of the NCPC confirms the application of the “competence-competence” principle, according to which the arbitral tribunal is competent to rule on its own jurisdiction.
The parties may only apply to courts for investigatory, protective or interim measures before the arbitral tribunal is constituted or when it appears that the arbitral tribunal cannot grant such measures.
The provisions relating to the arbitral tribunal, which are inspired by Article 20 of the UNCITRAL Model Law, set out the procedures for the constitution of a tribunal, such as the determination of the seat of arbitration and the appointment of arbitrators, and define the rules relating to the impartiality and independence of the arbitrators, as well as the formalities for the removal, disqualification and resignation of the arbitrators.
3. THE SUPPORTING JUDGE
The supporting judge is a judge who may intervene during the arbitration proceedings in support of the arbitral tribunal, often with the aim of resolving situations that block the proceedings.
Before the New Law on Arbitration, the NCPC contained only two articles which briefly mentioned interventions by a judge (former articles 1227 and 1238 of the NCPC).
The New Law on Arbitration innovates by integrating the notion of “supporting judge” (which it defines), as well as by introducing new rules governing his/her referral and his/her intervention at all stages of the procedure.
For the sake of speed and efficiency, applications with the judge will be made in accordance with an accelerated procedure that does not require the intervention of a bailiff and orders made by the supporting judge will not be subject to appeal, unless otherwise provided.
4. CONDUCT OF THE ARBITRATION PROCEEDINGS
The conduct of the arbitration proceedings is governed by the New Arbitration Law, which sets out the rules applicable to arbitrators and the stages of the arbitration proceedings.
It should be noted that Article 1231-8 of the NCPC provides details on the acts of inquiry that the arbitrator may carry out, such as examinations of witnesses, as well as the forced production of documents. It also states that the arbitral tribunal has the power to rule on requests for verification of documents.
Article 1231-9 of the NCPC provides that the arbitral tribunal is competent to order any provisional or protective measure it deems appropriate, with the exception of seizures, which remain the prerogative of courts.
The New Arbitration Law further specifies that any interested third party may request the arbitral tribunal to intervene in the arbitral proceedings (Article 1231-12 of the NCPC), provided that such third party is bound to the parties by an arbitration agreement.
5. ENFORCEMENT OF THE AWARD AND REMEDIES
In order for the arbitral award to be enforced, it needs to be recognised by a court via the exequatur procedure.
Appeals against arbitral awards were simplified and streamlined during the debates leading to the adoption of the new arbitration law.
These rules can be summarised as follows:
6. TRANSITIONAL PROVISIONS
Our teams are at your disposal for any questions relating to this new law and also to assist you in drafting an arbitration agreement or in arbitration proceedings.