Transparency of the Regulatory System
The Government of Luxembourg uses transparent policies and effective laws to foster competition and establish clear ground rules on a non-discriminatory basis. The legal system is quite welcoming with respect to FDI, and legal, regulatory, and accounting systems are transparent and consistent with international norms. There are no informal regulatory processes managed by non-governmental organizations or private sector associations. In addition to the government, the Luxembourg Institute of Regulation, a public agency, proposes regulatory policies.
As confirmed by the World Bank report on Global Indicators of Regulatory Governance, the Luxembourg government develops forward regulatory plans – a public list of anticipated regulatory changes and proposals intended to be adopted and implemented. These plans are available to the general public, as the texts of proposed legislation are published before Parliamentary debate and voting. Draft texts are published on a unified website where all proposed regulations are published and directly distributed to interested stakeholders. While the ministries do not have a legal obligation to publish the text of proposed regulations before their enactment, the entire text of the proposed draft law is published. In addition, the government solicits comments on proposed laws and regulations from the general public. The comments are received on the same website; through public meetings; and through targeted outreach to stakeholders, such as business associations. The law requires that the rulemaking body solicit comments on proposed regulations. The consultation period is typically three months, and the government reports on the results of the consultation in the form of a consolidated response on the same website. The official journal Memorial publishes the final text of laws, both online and in print.
International Regulatory Considerations
Luxembourg is a member state of the EU and as a general practice transposes EU directives into domestic law. Luxembourg has been a World Trade Organization (WTO) member since 1995 and notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).
Luxembourg ratified the TFA on October 5, 2015 and has an implementation rate of 100 percent.
Legal System and Judicial Independence
Luxembourg is a parliamentary representative democracy headed by a constitutional monarch. The Constitution of 1868 provides for a flexible separation of powers between the executive and the parliament, with the judiciary watching over proper execution of laws. The Grand Duchy has a written commercial/contractual law. Magistrate's courts deal with cases of lesser importance in civil and commercial matters, and also under the urgent procedure in the field of law enforcement. The district courts, of which there are three, sit in civil and commercial matters for all cases not specifically attributed by law to any other court. The current judicial process is considered procedurally competent, fair, and reliable, albeit slow (the judicial sector benefits from all public school holiday periods).
Regulation and enforcement actions are appealable, and they are adjudicated in the national court system.
Laws and Regulations on Foreign Direct Investment
Luxembourg has assimilated the laws of neighboring countries according to the nature of the laws: German tax law, French civil law, and Belgian commercial law (written and consistently applied). There is no government or authority interference in the court system that could affect foreign investors. As previously mentioned, the website for doing business is: www.guichet.public.lu, and the new one-stop-shop for setting up a business is the House of Entrepreneurship within the Luxembourg Chamber of Commerce.
Competition and Anti-Trust Laws
The Competition Inspectorate, a department within the Ministry of the Economy, is in charge of investigating competition cases.
Expropriation and Compensation
The laws governing expropriation of property are quite complex, and the process can be arduous and lengthy, depending on the property. The Ministry of the Interior, along with the Ministry of Justice, sets forth the specific regulations according to each type of case. There have been no known expropriations in the recent past or policy shifts which would indicate such actions in the near future. There are no tendencies by the Luxembourg government to discriminate against U.S. investments, companies, or representatives in expropriation.
Instances of indirect expropriation or governmental action tantamount to expropriation, such as confiscatory tax regimes, that might warrant special investigation, are non-existent.
ICSID Convention and New York Convention
Luxembourg is a member state to the International Center for Settlement of Investment Disputes (ICSID Convention). Luxembourg is a signatory of the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).
Investor-State Dispute Settlement
Investment disputes involving U.S. or other foreign investors in Luxembourg are extremely uncommon. There are no known claims by or disputes with a U.S. person or foreign investors.
The Luxembourg Chamber of Commerce and the Mediation Center offer the services of domestic dispute settlement and, on an international level, with the International Chamber of Commerce. There have been no known investment disputes over the past few years involving U.S. or other foreign investors or contractors in Luxembourg.
Within the WTO, there are no known dispute settlement cases involving Luxembourg either as a complainant, respondent, or third-party entity.
International Commercial Arbitration and Foreign Courts
The government accepts international arbitration of investment disputes between foreign investors and the state, and the courts recognize and enforce foreign arbitral awards. International arbitration is accepted as a means for settling investment disputes among private parties, and there is a domestic arbitration body within the host economy, the Centre de Mediation (Mediation Center). Luxembourg is a member state to the convention known as International Centre for Settlement of Investment Disputes (ICSID Convention).
As investment disputes are extremely rare or non-existent, there is no information available concerning the duration of a resolution in the local courts.
Luxembourg has assimilated the laws of neighboring countries according to the nature of the laws: German tax law, French civil law, and Belgian commercial law (written and consistently applied). Judgments of foreign courts are accepted and enforced by the local courts, and Luxembourg does have a written and consistently-applied bankruptcy law, which is based on European Union-wide legislation. Monetary settlements are usually made in local currency (euro). Bankruptcy is not criminalized.
Luxembourg ranks 86 in “Resolving Insolvency” in the World Bank’s 2018 Doing Business Report.
At the end of 2017, the Luxembourg banking sector comprised 139 credit institutions from 28 different countries. Under Luxembourg law, two types of licenses are possible for the credit institutions, the Universal Banking License and the Mortgage Bonds Banking License. The Ministry of Finance grants credit institutions operating out of the Grand Duchy an operating license. Since the entry into force of the Single Supervisory Mechanism on November 4, 2014, credit institutions are subjected to the control of the European Central Bank, either directly or indirectly through Luxembourg’s financial sector supervisory authority, the CSSF. The supervision by the ECB/CSSF extends equally to activities performed by these undertakings in another Member State of the EU, whether by means of the establishment of a branch or by free provision of services.