International arbitration law and rules in Luxembourg

1.1.1 Arbitration was first introduced to Luxembourg by decree on 29 April 1806. Some key reforms took place, notably in 1939 to recognise the validity of arbitration clauses, and in 1981 to modernise the rules governing the cancellation and recognition of arbitral awards. The procedures then established were later incorporated, unamended, into the New Civil Procedure Code (Nouveau Code de Procedure Civile) (NCPC) in 2012. 

1.1.2 To pave the way for the modernisation of Luxembourg arbitration law, a think tank comprising academics, judges and practitioners was created in 2013. It compared legislation from various jurisdictions and the UNCITRAL Model Law and considered the rules of arbitration of the most recognised arbitration institutions to identify the pros and cons of these models. 

1.1.3 This work led the Luxembourg government to include, in the governmental programme for 2018-2023, a promise to modernise Luxembourg arbitration law and a draft bill to that effect was introduced in 2020. 

1.1.4 The authors of the draft bill were transparent about the objectives for reform:

• The first objective was to make sure that the new system was – in its approach and concepts – consistent with existing sets of rules which are internationally recognised and have proven to be effective. In this regard, the authors of the draft bill  took  articles from French international arbitration law and the UNCITRAL Model Law, indicating when and why the wording of the draft bill departs from these rules. 
• The second objective was to strike a balance between a liberal system favourable to arbitration and the protection of weaker parties. Certain types of disputes such as those concerning consumer protection, employment matters, and residential leases are therefore non-arbitrable. 
• The third objective was to have a unified regime, which meant rejecting the distinction made in French law between international and domestic arbitration.

1.1.5 The bill was enacted on 19 April 2023 and the resulting act (Arbitration Act 2023) implements all its changes within the NCPC. 

1.1.6 The Luxembourg Chamber of Commerce (LCC) founded an arbitration centre in 1987. The LCC’s rules are based on those of the International Chamber of Commerce. The centre aims to strengthen Luxembourg’s reputation for arbitration internationally and, in particular, its reputation in the field of financial arbitration in which it is highly specialised and has a large number of experts. 

1.1.7  Luxembourg ratified the 1923 Geneva Protocol on 16 March 1927 and the New York Convention on 20 May 1983. 

1.2.1 The legislative provisions and legal principles governing arbitration can be found in articles 1224 to 1249 of the NCPC. 

2.1.1  The NCPC rules apply to: 

• all arbitration agreements subject to Luxembourg law; 
• all arbitrations (whether ad hoc or institutional) where Luxembourg has been designated by the parties as the seat of arbitration. They may also apply, if no seat was agreed upon, where: (i) the parties have elected Luxembourg procedural law to govern the arbitration process; (ii) the parties have conferred jurisdiction to Luxembourg courts to resolve disputes relating to the arbitration process; (iii) there is a significant connection with Luxembourg; or (iv) where there is a risk that justice may be denied; and 
• The recognition and enforcement of arbitral awards in Luxembourg, with a different set of rules applying depending on whether the award as made in Luxembourg or abroad. 

2.2.1 One key principle introduced by the Arbitration Act 2023 is the principle of “competence-competence”. 

• As in French law, this principle has a positive effect in that the arbitral tribunal can rule on its own jurisdiction, including in relation to the existence or validity of the arbitration agreement. It also has a negative effect as a court seized with a dispute covered by an arbitration agreement must decline jurisdiction, although there are limited exceptions. 
• These exceptions include where the arbitration agreement is invalid as a result of the non-arbitrability of the subject matter or where, for any other reason, it is manifestly null or inapplicable. Contrary to French law, the composition of the arbitral tribunal is not an obstacle to a Luxembourg court finding that it has jurisdiction on the basis of this exception. 
• Another exception relates to interim measures (of provisional or conservatory nature) where the arbitral tribunal has not been composed yet or where the arbitral tribunal is unable for any reason to order them, for example,  attachment measures. 

2.2.2 Another principle is that the scope of intervention of the courts is limited: 

• By the competence-competence principle described in paragraph 2.2.1; 
• In the arbitration process, as the supervisory judge will only intervene on limited occasions and, only if the arbitral tribunal or institution does not act itself; and 
• In the context of the judicial review of awards, as their review is limited to specific grounds and a review of an award on its merits is excluded. 

3.1.1 The NCPC defines an “arbitration agreement” as an agreement by which parties submit to arbitration all or some disputes which have arisen or may arise between them as a result of a determined legal relationship, whether contractual or not. 1

3.1.2 Furthermore, the NCPC distinguishes between arbitration clauses (clauses compromissoires) which are inserted in a contract and relate to potential disputes arising from such a contract and ad hoc arbitration agreements (compromis d’arbitrage) by which parties submit an already existing dispute to arbitration. 

3.2.1 Article 1227 of the NCPC states that arbitration agreements are not subject to any formal requirement, including being written. Common rules of evidence apply to the proof of the existence and content of the arbitration agreement. 

3.3.1 Article 1224 of the NCPC excludes arbitration in respect of: 

• matters relating to the status and capacity of persons; 
• the representation of incapable persons and matters involving incapable persons, as well as absent (or deemed absent) persons; 
• disputes between professionals and consumers; 
• disputes between employers and employees; and 
• disputes relating to residential leases. 

3.4.1 Article 1227-2 of the NCPC provides that an arbitration clause shall be treated as separate from the agreement in which it is included and is not affected by the main contract’s voidness, nullity or rescission.   

3.5.1 An arbitration agreement establishes the jurisdiction of the designated arbitral tribunal. A judicial court seized with a dispute covered by such an arbitration agreement must decline jurisdiction (although it would not do so on its own motion). 2

3.5.2  Exceptions to this principle include: 

• where the arbitration agreement is null because of the non-arbitrability of the matter in dispute or where, for any other reason, it is manifestly null or inapplicable; and 
• the possibility to apply for a provisional or investigatory measure either (i) before the arbitral tribunal is constituted or (ii) where the arbitral tribunal cannot grant such measure.  

4.1.1 Parties are free to designate the arbitrators or to determine the rules for their designation and their number, either expressly in the arbitration agreement or by reference to a set of arbitration or procedural rules. 3  Only natural persons may be arbitrators. 4  

4.1.2 The NCPC provides for the following by default rules: 

• By default, three arbitrators are appointed. 
• In an arbitration with three arbitrators, each party appoints an arbitrator, and such two arbitrators appoint the third. 

4.1.2.3  If a party fails to appoint an arbitrator within one month as from being requested to do so by the other party or if the arbitrators cannot agree on the third arbitrator within one month as from the designation of the last arbitrator, the arbitral institution or, failing that, the supervisory judge, will designate such arbitrator. 

4.1.2.4  Where there are more than two parties and where such parties do not agree on the rules for the constitution of the arbitral tribunal, the arbitral institution or, failing that, the supervisory judge, will appoint the arbitrators. 5

4.1.3  All disputes relating to the constitution of the arbitration tribunal shall be settled by the arbitral institution or, failing that, the supervisory judge. 

4.2.1 Arbitrators can be disqualified in case of circumstances giving rise to legitimate doubts regarding their impartiality or independence, or if they do not possess the qualifications required by the parties.  6 

4.2.2 Arbitrator appointments can also be revoked by the unanimous consent of the parties. In the case of a dispute, the arbitral institution or, failing that, the supervisory judge (seized within one month from the arising or discovery of the litigious fact), will have jurisdiction. 7

4.2.3 The new arbitrator is designated in accordance with the rules agreed between the parties or, by default, with the rules under which the replaced arbitrator was designated. 

4.3.1 Before accepting their appointment, arbitrators must disclose any circumstance likely to affect their independence or impartiality. They must also disclose without delay any such circumstance arising after their designation. 8

4.3.2 The liability regime of arbitrators is not defined in the NCPC, so common rules of contractual liability apply. Nonetheless, their liability is likely to be limited to instances of wilful misconduct and gross negligence (although this has not been confirmed by case law). Limitation of liability clauses (for example included in arbitration rules) are a priori valid, although they would not be enforceable in cases of wilful misconduct or gross negligence. 

4.4.1 The NCPC is silent on the allocation of fees and expenses. Absent any agreement between the parties on this point, the arbitral tribunal will have wide discretion in their allocation. 

5.1.1 According to the competence-competence principle, the arbitral tribunal has jurisdiction to rule on its own jurisdiction, including in relation to the existence or validity of the arbitration agreement. 9

5.2.1 Absent any agreement of the parties to the contrary, the arbitral tribunal may order any interim or conservatory measures considered relevant, with the exception of attachment measures for which only judicial courts have jurisdiction. 10

6.1.1 Absent any agreement between the parties, arbitration is commenced by the claimant’s notification of the arbitration request to the respondent or, if at an earlier date and where applicable, by the notification of the arbitration request to the arbitral institution. 11

6.2.1 The arbitration agreement may, either directly or by reference to arbitration rules, set the applicable procedural rules. If the arbitration agreement is silent, the arbitral tribunal sets such rules itself and is not bound to comply with procedural rules applicable before judicial courts. 12

6.2.2 Nonetheless, the arbitral tribunal must always guarantee the principle of equal treatment between parties and the adversarial principle. 13

6.2.3 In addition, the NCPC includes a form of estoppel by providing that a party that knowingly and without legitimate reason fails to object before the arbitral tribunal to an irregularity in a timely manner is deemed to have renounced its right to object. 14

6.3.1 The seat of the arbitration is freely determined by the parties. Parties may also choose to delegate this choice to the arbitral institution. If no choice is made, the seat is determined by the arbitral tribunal. 15  

6.3.2  Unless otherwise agreed, the arbitral tribunal may hold hearings and conduct meetings in any location which it considers appropriate. 

6.4.1 The rules governing oral hearings and the exchange of written submissions are determined by the arbitration agreement, by the arbitration rules if any are applicable, or by the arbitral tribunal if the arbitration agreement is silent. 

6.5.1 Except otherwise agreed between the parties and unless there is a legitimate excuse: 16

• If the claimant does not substantiate its request, the arbitral tribunal will close the proceedings, without prejudice to the requests made by the other parties; 
• If the respondent does not substantiate its defence, the arbitral tribunal shall continue the arbitration process without considering that such respondent has accepted the claimant’s allegations; and
• If a party does not attend the pleadings or does not produce evidence, the arbitral tribunal shall continue the arbitration process and rule on the basis of the evidence at its disposal. 

6.6.1 The arbitral tribunal (or one of its appointed members) carries out necessary investigative measures. 17

6.6.2  The arbitral tribunal may inter alia: 

• Hear parties and any witness;
• Order a party to disclose evidence held by it; or 
• Invite a party that intends to rely on evidence held by a third party to initiate a specific procedure before the supervisory judge seeking a disclosure order against such third party. 

6.7.1 Except otherwise agreed between the parties and subject to contrary legal obligations, arbitration proceedings are confidential. 18

7.1.1 The parties are free to determine the rules of law (which can be the law of a jurisdiction of any other set of rules, such as UNIDROIT principles) applicable to the dispute. Absent any agreement between the parties, the arbitral tribunal will apply those which it deems the most appropriate. 

7.1.2 The arbitral tribunal may also act as amiable compositeur, in which case the arbitration tribunal will not rule in accordance with a strict application of legal rules, but by reference to notions of fairness and equity. 19

7.2.1 Unless expressly provided for in the arbitration agreement or the arbitration rules, the arbitration process is limited to six months as from the acceptance by the last arbitrator of its appointment. This timeframe, or any contractually agreed timeframe, can be extended by the parties, by the arbitral institution if it has been empowered to do so by the parties or, failing that, by the supervisory judge. 20

7.3.1 The award must be signed by all arbitrators, although should a minority of arbitrators refuse to sign, the award must indicate this and it will have the same effect as if signed by all arbitrators. 21

7.3.2 The award must be reasoned unless otherwise agreed by the parties. 22

7.3.3 The parties may authorise arbitrators to include their individual or dissenting opinion in the award. 23

7.3.4  The notification of the award can be served by a Luxembourg bailiff (huissier de justice) on the other parties or by any other means agreed between the parties. 24

7.4.1 Parties may settle their dispute during the course of arbitration proceedings. Settlement agreements must be in writing. According to article 2052 of the Luxembourg Civil Code, they have the force of res judicata and therefore end the arbitration process. 

7.5.1 The arbitral tribunal enjoys wide discretion in the award of interests and costs, although this issue will most often be determined in accordance with the applicable arbitration rules and/or the applicable law. 

7.6.1 The award has the force of res judicata as soon as it is made, which means that, from that date, neither judicial courts nor any arbitral tribunal can rule on the issues which have been settled in the award. 25  

7.7.1 The arbitral tribunal may, at the request of a party and after having heard the parties, interpret the award and rectify material mistakes and omissions or supplement the award where it has omitted to rule on a claim. 26

7.8 Review of the award  27

7.8.1 An application for a review of the award can be made by a party on the following grounds: 

• If, after the award is made, it appears that the award was obtained by the fraud of the successful party; 
• If, after the award is made, it appears that decisive evidence has been withheld by the other party; 
• If the award was made on the basis of evidence which has been recognised or judicially declared as being counterfeit after the award is made; or 
• If the award was made on the basis of testimonies, affidavits or sworn declarations which have been recognised or judicially declared as being counterfeit after the award is made.

7.8.2  An application for review must be made within two months as from the date when the party acquired knowledge of the ground(s) for review. It must be filed with the arbitral tribunal. It can however be filed with the Court of Appeal if the arbitral tribunal cannot be reconstituted. 

7.8.3 Where the application is successfully made before the arbitral tribunal, the latter will rule again on the parts of the award which have been vitiated and make a new award. 

7.8.4 Where the application is successfully made before the Court of Appeal, the Court of Appeal will only rule on the merits of the case if the parties refuse to submit their dispute to a new arbitral tribunal. 

8.1.1 The scope of intervention of the courts is limited: 

• By the competence-competence principle described in paragraph 2.2.1; 
• In the arbitration process, as the supervisory judge will only intervene on limited occasions and, only if the arbitral tribunal or institution does not act itself; and 
• In the context of the judicial review of awards, as their review is limited to specific grounds and a review of an award on its merits is excluded.

8.1.2 There are certain circumstances where the courts may become involved. For example: 

• Courts may order interim measures (of provisional or conservatory nature) where the arbitral tribunal has not been composed yet or where the arbitral tribunal is unable for any reason to order them and may order third-party attachment measures and third-party disclosures.
• Courts may hear an application for review of an arbitral award if the arbitral tribunal cannot be constituted again.
• The supervisory judge may hear disputes on the appointment of arbitrators ( see paragraphs 4.1 and 4.2) or extend the duration of the proceedings (see paragraph 7.2) but only if the arbitral institution is not empowered to act. 

8.2.1 The President of the District Court of Justice and the District Court of Justice are generally courts of competent jurisdiction. The party who wishes to seize a court should do so wherever the arbitral tribunal is based.  

9.1.1 Awards made in Luxembourg cannot be appealed before Luxembourg courts. They can only be cancelled (see paragraph 9.2) or reviewed (see paragraph 7.8) by the Court of Appeal. 

9.1.2 They can also be challenged by third parties who are negatively impacted by the award via third-party opposition proceedings (tierce opposition). In that case, the opposition is brought before the jurisdiction which would have been competent in the absence of an arbitration agreement. 28

9.2.1 Foreign awards cannot be challenged before Luxembourg courts. Only their recognition and enforcement can be challenged in the context of the exequatur proceedings (see paragraph 10).

9.3.1 An application to cancel an award made in Luxembourg must be made before the Court of Appeal within one month from the date of the notification of the award and can be made as soon as the award is made. 

9.3.2 An award can only be cancelled on the following grounds:  29

• The arbitral tribunal wrongly upheld or declined jurisdiction;
• The arbitral tribunal was irregularly composed;
• The arbitral tribunal ruled without complying with the mandate conferred upon it;
• The award contravenes Luxembourg public order;
• The award is not reasoned, unless the parties waived this requirement; and
• Due process was not followed. 

9.3.3 Cancellation proceedings do not suspend the enforceability of the award unless the Court of Appeal issues a preliminary judgment to that effect. 

9.3.4 The Court of Appeal’s judgment denying the application to cancel an award automatically confers the exequatur to the award. 

10.1.1 Domestic awards can only be enforced in Luxembourg after receiving the exequatur (ie an order on the recognition and enforceability) from the President of the District Court.  30

10.1.2 The exequatur is sought via a unilateral application and the procedure is not adversarial. 

10.1.3 The application must include an original or a copy of the award and of the arbitration agreement. If these documents are not written in an official language of Luxembourg (French, German, Luxembourgish), the judge may request a translation in one of these languages. 

10.1.4 The exequatur can only be refused for the same grounds as those applicable in cancellation proceedings. In that case, the order can be appealed before the Court of Appeal. 

10.1.5 Where the exequatur is granted, the only recourse available to the party against whom enforcement is sought is the cancellation procedure before the Court of Appeal (see paragraph 9.3.1). 

10.2.1 Foreign awards can only be enforced in Luxembourg after receiving the exequatur from the President of the District Court.  31

10.2.2 The exequatur is sought via a unilateral application and the procedure is not adversarial.

10.2.3  The content of the application and the grounds for refusing the exequatur will be governed by the New York Convention where it applies. 

10.2.4  Where the New York Convention does not apply, the content of the application is the same as for domestic awards (paragraph 10.1) and the grounds for refusal are the same as those for cancellation (paragraph 9.3) and review proceedings (paragraph 7.8). 

10.2.5 The President of District Court may only refuse to grant the exequatur if the award is manifestly vitiated by one of those grounds. 

10.2.6 The order of the President of the District Court can be appealed before the Court of Appeal within one month of service of the order. The Court of Appeal only has to find that the award is vitiated by a ground for refusal and does not have to find that it is manifestly vitiated. 

10.2.7 After that period, the award is still subject to review proceedings before the Court of Appeal but only (paragraph 7.8) but only if it appears that the award was obtained by the fraud of the successful party. In that case, the Court of Appeal only withdraws the exequatur. 

10.2.8 The appeal against the exequatur order and the application for review do not suspend the enforceability of the award unless the Court of Appeal issues a preliminary judgment to that effect.