Most financing transactions in Luxembourg are made by inbound foreign professional and institutional financing and banking investors. Transactions tend, therefore, to be governed by the law that is most familiar to the financing parties, which is generally their domestic law (eg, their law of incorporation, English, New York, German or French law). However, most of the contractual agreements relating to the Luxembourg security packages to the extent they relate to Luxembourg securities (acquisition-agreement security packages such as pledges) are governed by Luxembourg law.
Luxembourg law is very liberal and expressly states the principle of freedom of contract, including the choice of law and election of forum (articles 1123 and 1134, paragraph 1 of the Civil Code indirectly). Freedom of contract is, however, limited by mandatory rules and rules of public policy (article 6 of the Civil Code).
The principle jura novit curia does not apply to foreign law. The judge does not automatically raise the conflict of law rule, which is not mandatory in contractual matters. He or she will apply the conflict of law rule when parties have not opted for a governing law. The parties invoking the foreign law must prove the content of the foreign law, which, for the Luxembourg courts, is a matter of fact.
Choice of law
Luxembourg courts will uphold the choice of law made by the parties to the acquisition agreements. However, Luxembourg courts may exclude application of a provision of the law chosen by the parties if, and to the extent, that the result of that application would be manifestly incompatible with fundamental principles of public policy of the Luxembourg forum or they are required to take into account overriding mandatory provisions of a law.
Rules of choice of law for countries of the EU are determined by the Rome I Regulation ((EC) No. 593/2008) on the law applicable to contractual obligations. Where there has been no choice of law, the applicable law will be determined in accordance with the rule specified for the particular type of contract. Where the contract cannot be categorised as being one of the specified types or where its elements fall within more than one of the specified types, it should be governed by the law of the country where the party required to effect the characteristic performance of the contract has his or her habitual residence. In the case of a contract consisting of a bundle of rights and obligations capable of being categorised as falling within more than one of the specified types of contract, the characteristic performance of the contract will be determined with regard to its centre of gravity.
In the absence of choice, where the applicable law cannot be determined either on the basis of the fact that the contract can be categorised as one of the specified types, or as being the law of the country of habitual residence of the party required to effect the characteristic performance of the contract, the contract should be governed by the law of the country with which it is most closely connected. To determine that country, account will be taken, inter alia, of whether the contract in question has a very close relationship with another contract or contracts.
Enforceability of a judgment
When a judgment has been rendered in a non-EU member state and if no international treaty applies, that judgment will be recognised and enforced in Luxembourg after a review by the Luxembourg Court of First Instance that the conditions set out in article 678 of the Luxembourg Code of Civil Procedure are fulfilled (ie, the usual conditions relating to public policy constraints, the observance by the court of the rights of defence, etc).
When the judgment has been rendered in any EU member state, except Denmark, Regulation (EU) No. 1215/2012 (the recast Brussels Regulation), will apply. Similar provisions are provided by the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters signed in Lugano on 30 October 2007 between the European Union member states and three European Free Trade Association countries: Iceland, Norway and Switzerland. The recast Brussels Regulation provides that a judgment delivered in a EU member state, which is enforceable in that member state, shall be enforceable in any other member state without any declaration of enforceability being required (article 39). Pursuant to article 42(1) of the recast Brussels Regulation, a party who wishes to enforce a judgment delivered in another member state shall provide the competent enforcement authority with:
- a copy of the judgment that satisfies the conditions necessary to establish its authenticity; and
- a certificate issued by the court of origin in the form provided in Annex I of this regulation.
Notwithstanding the above, the new regulation still provides for grounds to refuse enforcement of a judgment (article 46 et seq of the recast Brussels Regulation). These grounds are the same as those for the refusal of recognition of a judgment (article 45 of the recast Brussels Regulation):
- if the enforcement is manifestly contrary to the public policy of Luxembourg;
- where the judgment was delivered in default of appearance, if the defendant was not served with the document that instituted the proceedings or with an equivalent document in sufficient time and in such a way as to enable him or her to arrange for his or her defence;
- if the judgment is irreconcilable with a judgment given between the same parties in Luxembourg;
- if the judgment is irreconcilable with an earlier judgment given in another member state or in a third state involving the same cause of action and between the same parties, provided that the earlier judgment fulfils the conditions necessary for its recognition in Luxembourg; or
- if the judgment conflicts with the rules governing the jurisdiction when the policyholder, the insured, a beneficiary of the insurance contract, the injured party, the consumer or the employees was the defendant (articles 10 to 23 of the recast Brussels Regulation), and the rules governing the exclusive jurisdiction (article 24 of the same).
Further, Regulation (EC) No. 805/2004 of 21 April 2004 (as amended), creating a European enforcement order for uncontested claims, provides for the abolition of exequatur for judgments on uncontested claims.
A judgment that has been certified as a European enforcement order in another EU member state, other than Denmark, will be recognised and enforced in Luxembourg without the need for a declaration of enforceability and without any possibility of opposing its recognition.
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