On 23 March 2023, Luxembourg adopted Bill 7671 on the reform of arbitration, which completely recasts the provisions of the New Code of Civil Procedure relating to arbitration, which had remained virtually unchanged since 1806, apart from a limited update in 1981.
This text was published in the Official Journal of the Grand Duchy of Luxembourg on 21 April 2023, and entered into force today, on 25 April 2023.
The new law will govern :
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- arbitration agreements concluded as from that date;
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- constitutions of arbitral tribunals commenced on or after that date;
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- appeals against awards made on or after that date.
The old law shall continue to apply to situations prior to that date.
The new law excludes from the field of arbitration the status and capacity of persons as well as consumer, labour and residential lease disputes.
It is based on the UNCITRAL model law, and is inspired by the French and Belgian arbitration laws.
The main innovations are the following :
– a monistic system: the same body of rules for domestic and international arbitration, the only difference being the challenges available depending on whether the award was made in Luxembourg or abroad;
– no formal requirements for the arbitration agreement;
– the principle of competence-competence is enshrined in the text: the arbitral tribunal is the sole judge of its own jurisdiction, without interference from the state courts which must, if one of the parties so requests, declare that they do not have jurisdiction in order to give precedence to the arbitral tribunal in the presence of an arbitration clause or an arbitration agreement, with the exception of a few limited exceptions, such as a measure of inquiry or the seeking of an interim or conservatory measure prior to any constitution of the arbitral tribunal, or if the arbitral tribunal does not have the power to order the measure sought, or if the dispute is not arbitrable because it falls within a field excluded from the domain of arbitration or the arbitration clause is manifestly null or unenforceable;
– autonomy of the arbitration clause in relation to the other contractual provisions (principle of separability): the arbitration clause is thus not affected by the nullity or unenforceability of the agreement providing for it;
– the number of arbitrators is chosen by the parties and is set by default at three;
– creation of a new institution in the person of the supporting judge (“juge d’appui”), who will decide on procedural difficulties, in particular in the phase of constitution of the arbitral tribunal, essentially in ad hoc arbitrations; in the case of institutional arbitrations, these difficulties will in principle and unless otherwise agreed be settled in accordance with the rules of the institution chosen by the parties, and only in the event of its failure by the supporting judge (his jurisdiction is therefore mainly suppletive in nature); the supporting judge may also be called upon to order the production of documents to third parties to the arbitration;
– the arbitration is confidential;
– the intervention of a third party is only allowed if there is an agreement between that third party and the parties to the arbitration and is in any case subject to the arbitral tribunal’s discretion;
– the arbitral tribunal has the power to impose periodic penalty payments (“astreintes”);
– the arbitral award is res judicata as soon as it is made;
– with regard to recourses, a distinction must be made depending on whether the award is made in Luxembourg or abroad;
– in the case of an award made in Luxembourg :
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- it can only be challenged by way of an action for annulment before the court of appeal, for the reasons listed exhaustively in the text, namely if: 1° the arbitral tribunal wrongly declared itself competent or incompetent; 2° the arbitral tribunal was improperly constituted; 3° the arbitral tribunal ruled without complying with the mission entrusted to it; 4° the award is contrary to public policy; 5° the award is not reasoned, unless the parties have exempted the arbitrators from giving any reasons; 6° there has been a violation of due process;
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- the annulment appeal entails an appeal against the enforcement order;
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- the time limit for an action for annulment is one month from the notification (by service or any other agreed method) of the award, on pain of foreclosure;
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- the action for annulment does not suspend enforcement, so that the law lays down without saying so the principle of provisional enforcement of awards as in French law for international awards, but the adjustment or cessation of provisional enforcement may be requested from the court of appeal, seized on request and ruling as in summary proceedings, if this enforcement is likely to seriously harm the rights of one of the parties;
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- an application for review, for the purpose of revoking the award and for a new decision on the facts and law of the dispute, may be brought before the arbitral tribunal, or failing that before the court of appeal, by one of the parties to the arbitration in the cases listed exhaustively: 1° if it is revealed, after the award has been made, that it was taken by surprise by the fraud of the party in whose favour it was made; 2° if, since the award was made, decisive documents have been recovered which had been withheld by the act of another party; 3° if it has been judged on documents recognised or judicially declared false since the award; 4° if it has been judged on certificates, testimonies or oaths recognised or judicially declared false since the award;
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- the time limit for an application for review is two months from the day on which the party became aware of the ground for review which he invokes;
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- the award may be challenged by way of third-party proceedings before the court which would have had jurisdiction in the absence of an arbitration clause;
– in the case of an award made abroad :
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- only the appeal against the recognition and enforcement order (“exequatur”) is open in the cases listed exhaustively, namely if: 1° the arbitral tribunal has wrongly declared itself competent or incompetent; 2° the arbitral tribunal was improperly constituted; 3° the arbitral tribunal has ruled without complying with the mission entrusted to it; 4° the award is contrary to public policy; 5° the award is not reasoned, unless the parties have exempted the arbitrators from giving any reasons; 6° there has been a violation of due process; 7° if it is revealed, after the award has been made, that it was taken by surprise by the fraud of the party in whose favour it was made; 8° if decisive documents have been recovered which had been withheld by the act of another party; 9° if the award has been based on documents recognised or judicially declared false since the award; 10° if the award has been based on certificates, testimonies or oaths recognised or judicially declared false since the award;
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- the time limit for appeal is one month from the service of the order, on pain of foreclosure and without increasing the time limits for distance;
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- if a case of fraud is revealed after the expiry of the time limit for appeal, an application for review of the enforcement order may be made to the court of appeal within two months of the day on which the party invoking it became aware of the alleged fact;
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- neither the appeal nor the application for review suspends enforcement, but the adjustment or cessation of provisional enforcement may be requested from the court of appeal, seized on request and ruling as in summary proceedings, if this enforcement is likely to seriously harm the rights of one of the parties;
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- the rejection of the appeal confers recognition and enforcement on the award;
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- even if the text does not expressly say so, contrary to the bill initially tabled, the parliamentary work specified that a third party opposition to the recognition and enforcement order was always permitted under the ordinary legal conditions, so that no text was needed to specify what the law already allowed to obtain.
Our teams at BONN & SCHMITT are ready to assist you with any questions relating to this new development.