Capital markets run on contracts. Across primary markets and activities such as issuance and underwriting to secondary markets and the billions of transactions that take place every day, English law has, historically, been the guiding hand for many given its well-known and reputable jurisprudence.
Following Brexit however, a number of EU institutions, including the EIB, ESM and Euratom, have indicated that they will make use of Luxembourg law for financial contracts. Philippe Hoss, Partner at Elvinger Hoss Prussen, indicates that there are a number of factors that could have contributed to this. “Luxembourg law, while influenced by civil code neighbours of France and Belgium, offers a certain level of flexibility within contractual matters. Further, the use of Luxembourg law requires very few significant modifications to their existing documentation.” Additionally, given that a number of these institutions are based in the Grand Duchy, the legal ecosystem that is present, as well as a number of listings that have historically taken place here made Luxembourg law a significant contender to replace common law.
Hoss notes that this decision “is a clear signal that major players have confidence in both Luxembourg legislation and the Luxembourg judiciary to properly achieve what they need in terms of contractual terms, as well as the interpretation, construction and enforcement of those terms.” The robustness of the Luxembourg regime has impressed a number of international players, and despite the small size of the country, there is an understanding that the legal system has the competencies to deal with increasingly complex financial matters.
This decision is a clear signal that major players have confidence in both Luxembourg legislation and the Luxembourg judiciary to properly achieve what they need in terms of contractual term, ...