This long-awaited reform is provided at articles 1224 to 1249 of the New Code of Civil Procedure (NCPC). It is the outcome of 10 years of efforts by the Luxembourg Think Tank for Arbitration to improve and modernize the Luxembourg arbitration law. It covers all aspects of the arbitration process and is inspired by Belgian law, French law and the UNCITRAL model law on international commercial arbitration with a focus on efficiency and flexibility. It constitutes a significant improvement for the Luxembourg dispute resolution ecosystem and will strengthen the jurisdiction’s position as a leading European commercial and financial center.
The Law of 19 April 2023 is applicable to arbitration agreements concluded after the law enters into force, and does not distinguish between domestic and international arbitration but rather creates a unified regime, in line with the suggestions of the UNCITRAL Model Law. It does not impact investment arbitration which remains subject to international conventions such as the ICSID Convention, expect with respect to recognition and enforcement.
We provide below a preliminary review of noteworthy provisions and novel developments of the Law of 19 April 2023.
All persons are able to submit to arbitration the rights which they may freely dispose of, which evidently focuses on civil and commercial matters. Matters explicitly excluded from arbitration as a matter of public policy include the status and capacity of persons (as already provided by the former Luxembourg arbitration law), but also disputes between professionals and consumers, employment disputes and disputes concerning residential leases (1224, 1225 and 1226 NCPC).
The Law of 19 April 2023 broadly defines arbitration clauses (clause compromissoire) and agreements (compromis) without requiring any conditions of form. Parties may subject their dispute to arbitration at any moment, even if proceedings are already pending before state courts (articles 1227 and 1227-1 NCPC). This language is in line with international standards and confirms Luxembourg’s status as an arbitration friendly jurisdiction which aims to uphold the parties’ agreement to arbitrate.
If a dispute is brought before state courts while the parties had agreed to submit it to arbitration, the state court will – upon a party’s motion but not sua sponte – declare that it lacks jurisdiction to rule on the case, unless the arbitration agreement is invalid by reason of the non-arbitrability of the subject matter or if the clause is otherwise null or not applicable (article 1227-3 NCPC).
Granting effective and efficient relief is a priority of the new law. Should an arbitral tribunal declare that it lacks jurisdiction, while the parties had initially initiated proceedings before state courts, these proceedings will continue upon one party informing the court clerk of the arbitral tribunal’s decision. The same applies when an arbitral award is annulled for a reason preventing the parties from constituting another arbitral tribunal (article 1227-3 NCPC).
The Law of 19 April 2023 expressly recognizes the separability doctrine and the autonomy of the arbitration clause which is deemed distinct from the underlying contract and is thus not impacted by its nullity or invalidity (and vice versa), and the principle of Kompetenz – Kompetenz pursuant to which the arbitral tribunal is competent to decide whether it has jurisdiction to rule on the merits of the case, whether the tribunal is properly constituted and whether matters submitted to it are arbitrable and in accordance with the arbitration agreement (article 1227-2 NCPC).
Both principles are cornerstones of international arbitration and were developed to maximize the effectiveness of the arbitration process while minimizing delay tactics. They are now enshrined by statute in the vast majority of modern arbitration laws.
As a general principle, submitting a dispute to arbitration seeks to oust the jurisdiction of the state courts, but their support will always be needed to ensure the efficiency and effectiveness of the arbitral process. For this reason, the Law of 19 April 2023 crystalizes the role of the state courts in support of the arbitration process by formally introducing the supporting judge (juge d’appui), inspired by French law. The supporting judge is the President of the District Court, which is seized by one of the parties or by the arbitral tribunal or one of its members. The supporting judge will sit as in summary matters and – unless provided otherwise – the supporting judge’s orders are not subject to appeal or oppositions (article 1230 NCPC).
The judge in support of the arbitral process will be the Luxembourg judge in the following cases:
- the parties have expressly chosen Luxembourg as the seat of the arbitration;
- the parties have chosen to submit the arbitration to Luxembourg procedural law;
- the parties have expressly granted jurisdiction to the Luxembourg state courts to rule on disputes relating to the arbitral proceedings;
- there is a significant link between the case at hand and the Grand Duchy of Luxembourg, which we expect would be the case if contractual obligations must be performed in Luxembourg or if a defending party is domiciled in Luxembourg.
The supporting judge will always be competent to prevent a denial of justice (article 1229 NCPC) but most provisions of the new law provide that its jurisdiction remains subsidiary in the event that the parties cannot themselves solve a difficulty and that the appointed institution (if any) is not able to assist.
Introducing the supporting judge sheds light on the relationship between arbitral tribunals and state courts and clarifies the extent of their respective powers. Parties will naturally benefit from such clarity and added certainty in the context of requests for interim measures, difficulties concerning the constitution of arbitral tribunals, recusals and removals of arbitrators, to obtain the disclosure of evidence held by a third party, and generally concerning disputes which cannot otherwise be resolved by the parties or with the assistance of the arbitral institution.
As an example of the crucial role of the supporting judge, the parties’ agreement to arbitrate a dispute does not prevent them from seeking the assistance of the state courts to order interim measures of protection if the arbitral tribunal is not yet constituted, or after it is constituted if it is clear that the arbitral tribunal would not be able to order the measure sought (article 1227-4 NCPC). This concerns for example attachments and other measures concerning third parties which are not bound by the arbitration agreement (article 1231-9 NCPC). It is expressly confirmed that a party’s request to a state court does not waive or otherwise affect the parties’ agreement to arbitrate (article 1227-4 NCPC). This is in line with the Rules of Arbitration of the Luxembourg Chamber of Commerce which also confirm that the parties may apply to any judicial authority for interim or conservatory measures after the constitution of the tribunal in appropriate circumstances, and that this shall not be deemed an infringement or a waiver of the arbitration agreement.
Once constituted, the arbitral tribunal may impose upon parties provisional or conservatory measures which it deems appropriate. It may also modify, complete, suspend or retract such measures (article 1231-9 NCPC). Depending on the type of measure sought and the consequences it may bear, the arbitral tribunal may require the requesting party to provide appropriate security (as also provided by the Rules of Arbitration of the Luxembourg Chamber of Commerce), and may order a party to keep the tribunal informed as to any relevant event or change of circumstances which was relevant to the measure being sought or granted (article 1231-9 NCPC).
Should the tribunal finally decide that the measure sought and granted should not have been granted, the requesting party will be held liable for costs and damages incurred by another party. The arbitral tribunal has the power to order this relief at any moment during the proceedings (article 1231-9 NCPC).
In principle, provisional or conservatory measures are expected to be immediately enforceable. Their recognition or binding effect may only be refused for grounds that justify setting aside the award provided at article 1238 NCPC (1231-9 NCPC).
In line with standards set by leading seats of arbitration and modern arbitration laws, the new Luxembourg arbitration law confirms a high degree of flexibility in the conduct of the arbitral process. While the arbitration proceedings are deemed to take place at the seat of the arbitration, and the decisions are also deemed to be rendered at the seat, the tribunal may hold meetings, hearings and otherwise meet or render decisions at any place it considers appropriate (article 1228 NCPC). Evidently, the legislator has considered and given effect to the post-pandemic practices and fully endorsed remote and virtual meetings and hearings.
Arbitrators must be physical persons and their qualifications may be specified by the parties’ agreement. In another attempt to demonstrate arbitration friendliness, the new law is clear that providing for a moral person as an arbitrator will not impact the validity of the agreement to arbitrate, but this choice will however not be upheld. In such cases, the moral person may only appoint the arbitrator (article 1228-1 NCPC).
Before accepting its appointment, each arbitrator must disclose all circumstances likely to affect its independence and impartiality. This disclosure obligation also applies to any circumstance which may take place after its acceptance of its appointment (1228-6 NCPC). An arbitrator may only be removed if there are circumstances casting legitimate doubts as to its impartiality and independence, or if it does not possess the qualifications required by the parties (article 1228-7 NCPC). The supporting judge may assist to resolve any dispute concerning the removal of an arbitrator, upon request by a party within one month of the discovery or disclosure of the event (article 1228-7 NCPC).
The parties are granted significant freedom to agree on the mechanism to appoint the arbitrators. They may do so either directly in the arbitration clause or by reference to the rules of an arbitration institution, and may provide for the modalities of their appointment. In the absence of parties’ choice concerning the number of arbitrators, three arbitrators will be appointed (article 1228-2 NCPC).
Article 1228-4 NCPC provides for the default appointment procedure which is applicable unless the parties have agreed otherwise. The supporting judge may assist in the constitution of the tribunal in several respects, for example in the case of a three-member tribunal if a party fails to appoint its co-arbitrator within a month of being requested to do so, or if the co-arbitrators fail to appoint the chairman within one month of the latest co-arbitrator’s appointment. The supporting judge may however decide not to provide assistance in the constitution of the tribunal if the subject matter is not arbitrable or the arbitration agreement is otherwise null or not applicable. Keeping in mind the drastic consequences of this decision on the arbitration process, the new arbitration law provides that this decision is subject to appeal within 15 days and will be heard urgently, according to the provisions of article 939 NCPC (article 1228-5 NCPC).
The supporting judge is generally expected to assist in resolving disputes concerning the constitution of the arbitral tribunal which cannot be resolved by the parties or by the arbitral institution (article 1228-3 NCPC). It is also expected to assist in resolving disputes concerning an arbitrator’s decision to stop its mission before its end, if disagreements arise as to the grounds brought forward by the arbitrator to justify its inability, abstention or resignation (article 1228-9 NCPC).
The new Luxembourg arbitration law sets a clear focus on the efficiency and flexibility of the proceedings and grants the arbitral tribunal appropriate powers to this end.
It is expected that the arbitral tribunal must conduct its mission until the end (article 1228-9 NCPC), which duration is limited to 6 months from the last arbitrator’s appointment. In practice, parties very rarely provide for any duration. Rather, the parties either agree to extend the deadline, or most often let the arbitration institution extend it for them. If needed, they may also rely on the assistance of the supporting judge (article 1231-6 NCPC). The 6-month deadline is in line with the provisions of the Rules of Arbitration of the Luxembourg Chamber of Commerce. When the parties have chosen these Rules, the Council may extend the time limit pursuant to a reasoned request from the tribunal or on its own initiative, and the assistance of the supporting judge will likely not be needed.
The arbitral tribunal will rule upon the dispute in accordance with the applicable law. In international matters, parties will choose the applicable law. As an example of the legislator’s efforts to uphold arbitration agreements, the new arbitration law provides that failing to choose an applicable law should not – in principle – affect the validity of the agreement to arbitrate, as the arbitral tribunal may apply the legal rules that it deems appropriate (article 1231 NCPC).
The Parties are free to choose the procedural rules applicable to their dispute, for example by reference to the rules of arbitration of an arbitration institution such as the Rules of Arbitration of the Luxembourg Chamber of Commerce. In the absence of the parties’ choice, the arbitral tribunal may resolve procedural issues either directly or by reference to arbitration rules and is not bound by the rules applicable to state courts (article 1231-2 NCPC). However, the arbitral tribunal must necessarily ensure that all parties have equal opportunities to be heard and present their case and must ensure respect of due process as a matter of public order (article 1231-3 NCPC).
The parties can decide on the seat of the arbitration or can delegate this decision to the arbitration institution. As another example of Luxembourg’s commitment to being an arbitration friendly jurisdiction, the parties’ failure to specify the seat should in principle not impact the validity of the arbitration agreement, as the arbitral tribunal is granted the powers to determine the seat (taking into account the circumstances of the case and the parties’ preferences).
The new arbitration law seeks to prevent parties from exercising delay tactics. For example, while parties may modify or complete their claims during the proceedings, these amendments must necessarily have a sufficient link to the initial request, and the arbitral tribunal has the power to reject them if it considers that they were brought forward too late (article 1231-7 NCPC). Further, in the absence of a legitimate excuse, the arbitral tribunal may dispose of the proceedings if the claimant does not develop its claims, it may proceed with the case even if a defendant does not develop its defense, and it may decide on the basis of the available information and documents even if a party does not participate in the proceedings (article 1231-10 NCPC).
The new arbitration law also grants broad powers to the arbitral tribunal with respect to the taking of evidence. It may hear any person, including the parties, and may enjoin a party to disclose information or documents on conditions that it will determine. In the event that relevant evidence is held by a third party, the requesting party may, with the approval of the tribunal, seek the assistance of the supporting judge to obtain an order of disclosure. This decision is subject to appeal within 15 days and will be heard urgently, according to the provisions of article 939 NCPC (article 1231-8 NCPC).
Other relevant powers of the arbitral tribunal expressly provided by the new Luxembourg arbitration law include the tribunal’s powers to:
- suspend proceedings and the duration of its mission, for the duration of an event or until the occurrence of an event, and resume the proceedings where they were left off (article 1231-11 NCPC);
- allow third-party interventions at the request of the third party, and third-party claims insofar as the requesting party and the third party are bound by an arbitration agreement (article 1231-12);
- impose penalties (astreinte) to enjoin parties to give effect to its decisions, including provisional and conservatory decisions (article 1231-12).
It is long established that arbitration proceedings are private, as opposed to court proceedings which are open to the public. However, arbitration proceedings are only confidential if confidentiality is provided for by the parties (for example in their arbitration agreement), in the rules of arbitration of the chosen institution, by the arbitral tribunal once constituted by way of procedural orders, or in the arbitration law. While the old arbitration law was silent in this regard, the new Luxembourg arbitration law clarifies that the arbitral proceedings are confidential (article 1231-5 NCPC). We expect that case law will interpret the extent and the limits of the confidentiality provisions, and whether these would also require parties to keep confidential the existence and the content of the award once rendered. We welcome the addition of confidentiality provisions in the new arbitration law (although these could have been more specific) in the absence of any confidentiality provisions in the Rules of Arbitration of the Luxembourg Chamber of Commerce.
In line with these confidentiality provisions, the tribunal’s deliberations are private (article 1232 NCPC).
The final award is rendered by a majority vote and is signed by all members of the tribunal. The award will carry the same effect if a member of the tribunal refuses to sign it (article 1232-1 NCPC). It must be reasoned (article 1232-2) and the parties may, by an explicit provision in their arbitration agreement or by reference to arbitration rules, allow the members of the tribunal to issue an individual or a dissenting opinion (article 1232). As soon as it is rendered, the final award enjoys the force of res judicata and the tribunal provides a signed original to each party to the proceedings. It may also be served by one party to the other (article 1232-4 NCPC).
While rendering a final award puts an end to the tribunal’s mission, the tribunal remains able to interpret its award, correct material errors and omissions and complete the award (article 1232-4 NCPC). Requests for corrections and interpretation must be submitted within 3 months of the service of the award, and the rectified or completed award must be rendered within 3 months of the request to the tribunal (article 1232-5).
Awards rendered in Luxembourg (i.e. when arbitrations are seated in Luxembourg) may be enforced in Luxembourg pursuant to a simplified procedure which seeks to streamline the enforcement process, for example by requiring annulment actions to be brought directly before the Court of Appeal (as opposed to before the District Court, subject to appeal before the Court of Appeal under the old arbitration law).
Relevant steps and information of the enforcement and annulment process include the following:
- The party requesting enforcement will need to file a request for an exequatur order (ex parte) before the President of the District Court where the award was rendered (article 1233 NCPC);
- The exequatur order will be granted unless it is clear that there are grounds to set it aside (article 1234 NCPC);
- Should the exequatur order not be granted, the order must be reasoned and the requesting party may file a recourse before the Court of Appeal sitting in civil matters, within a month of the rejection (article 1235 NCPC);
- Should the exequatur order be granted, this decision is not subject to an appeal (article 1234 NCPC);
- as a matter of public order, an award is not subject to an appeal, challenge or cassation proceedings before a state court, and may only be set aside by the Court of Appeal (article 1236 NCPC);
- such grounds to set aside an award rendered in Luxembourg are quite limited and include the following: incompetence of the arbitral tribunal, irregularity in the constitution of the arbitral tribunal, the arbitral tribunal’s failure to comply with its mission, the award was rendered in violation of Luxembourg public order, the award was not reasoned (unless the parties agreed otherwise) and violation of due process (article 1238 NCPC);
- a requesting party must initiate setting aside proceedings within one month of the notification or service of the award (article 1239 NCPC).
- initiating setting aside proceedings will not suspend the execution of the award but the Court of Appeal may stop or adjust the conditions of its enforcement if it is otherwise likely to seriously damage a party’s rights (article 1241 NCPC);
- rejection of an action seeking to set aside an award grants the exequatur of the award and renders it enforceable (article 1242 NCPC), since the order is rendered by the Court of Appeal;
- by application brought to the arbitral tribunal within 2 months, an award may be subject to reexamination to have it revoked and decided again in facts and in law, on very limited grounds such as when it was obtained by fraudulent means, after the discovery of determinative pieces of evidence that were withheld, when the award was rendered based on evidence or testimonies, statements, etc. which were afterwards recognized or decided as false (article 1243 NCPC);
- an award may be opposed by a third party before the court which would have had jurisdiction if it was not for the arbitration (article 1244 NCPC).
Arbitral awards rendered outside Luxembourg must also be recognized and exequatured in Luxembourg before being enforced in this jurisdiction. The exequatur order is rendered by the President of the District Court where the person against which enforcement is sought has its domicile or residence, or where the award is enforced, as was already provided under the old arbitration law (article 1245 NCPC).
Relevant steps and provisions include the following:
- the exequatur of a foreign award will not be granted by the President of the District Court if any of the grounds for annulment provided for at article 1246 NCPC are applicable (article 1245 NCPC);
- an order refusing the exequatur of the foreign award must be reasoned (article 1245 NCPC);
- an order concerning an exequatur may only be appealed before the Court of Appeal within 1 month from it being served on the other party, irrespective where the served party is located (article 1246 NCPC);
- if recognition and enforcement is not subject to an international treaty (such as the 1958 New York Convention or ICSID Convention), the Court of Appeal will refuse to grant the exequatur in case of incompetence of the arbitral tribunal, irregularity in the constitution of the arbitral tribunal, the arbitral tribunal’s failure to comply with its mission, the award was rendered in violation of Luxembourg public order, the award was not reasoned (unless the parties agreed otherwise), violation of due process, when the award was obtained by fraudulent means, after the discovery of determinative pieces of evidence that were withheld, and when the award was rendered based on evidence or testimonies, statements, etc. which were afterwards recognized or decided as false (article 1246 NCPC);
- if recognition and enforcement of the award is subject to an international treaty, such as the 1958 New York Convention or the ICSID Convention, the relevant provisions of these treaties apply (article 1246 NCPC);
- Recourse against an exequatur order before the Court of Appeal does not suspend the enforcement of the award, but the Court of Appeal may stop or adjust the enforcement of the award if it would otherwise be likely to seriously damage one party’s rights (article 1248 NCPC).