Lexology In-Depth : Banking Litigation - Luxembourg (2025 edition)

Introduction

Luxembourg is known to be one of the world’s leading international financial capitals: not only due to the fact that it is the second-largest investment fund centre worldwide, right after New York, with assets under management of more than €7,300 billion, ¹ but also by virtue of its strikingly strong banking sector.

This is notably due to the pragmatic approach of the legislator and the innovative minds of practitioners, allowing the legislation and practice to be rapidly adapted to the needs of the market, which makes Luxembourg attractive for international financial players. Luxembourg further has an international and multilingual workforce, making it particularly easy to welcome operators from all over the world and serve a wide range of international customers.

A prominent example of the pragmatic and innovative approach is the law of 5 August 2005 on financial collateral arrangements (the Financial Collateral Law), which allows a time-efficient enforcement of financial collateral arrangements such as pledges by the creditor or the security agent, even in case of winding-up or similar proceedings.

Another illustration is the special regime for personal guarantees granted in a professional context, introduced into Luxembourg law in 2020 as an alternative to the suretyship and the first demand guarantee.  The latter often comprises a risk of requalification into a suretyship, which is less favourable to the beneficiary of the guarantee.² As a reaction to the market’s needs, Luxembourg has thus created the professional guarantee regime, which is characterised by its contractual freedom and its reliability.

As mentioned in the previous edition, a well-developed banking sector also means that banking litigation is always in motion. Luxembourg being a small jurisdiction, case law is less abundant than in our neighbouring countries. However, due to the importance of the Luxembourg banking sector and the international profile of most of the transactions carried out in Luxembourg, Luxembourg banking litigation often has a cross-border impact and can, therefore, be particularly complex, which renders the matters brought before court all the more interesting.

Year in review

Recent cases

Enforcement of a financial collateral despite winding-up proceedings

Under the Luxembourg Financial Collateral Law, financial collateral arrangements are protected and may be executed even in the context of winding-up or similar proceedings. Article 20 (1) of the Financial Collateral Law provides to that end that

"Financial collateral arrangements as well as the enforcement events, netting agreements and the valuation and enforcement measures agreed upon by the parties in accordance with this law are valid and enforceable against third parties, commissioners, receivers, liquidators and other similar persons notwithstanding reorganisation measures, winding-up proceedings or any other similar national or foreign proceedings."

This provision makes the Financial Collateral Law particularly creditor-friendly and is highly appreciated within the industry.

In a decision dated 11 January 2024, the 9^th Chamber of the Luxembourg Court of Appeal restricted the territorial scope of the Financial Collateral Law,³ by ruling that Article 20 (1) of the Collateral Law would not apply in case of insolvency proceedings opened outside of the European Economic Area (EEA), as the Financial Collateral Law was implemented from a European Directive.

This reading of the Financial Collateral Law was criticised as the spirit of the law and the legislator’s intention initially consisted in making financial collateral arrangements governed by Luxembourg law as robust as possible.

The Luxembourg government saw a need to amend the Financial Collateral Law in order to clarify the meaning of 'foreign proceedings'.⁴ The Luxembourg Parliament adopted such amendment on 15 July 2024, specifying that

"reorganisation measure, winding-up proceedings or any other similar national or foreign proceedings’ means a reorganisation measure, winding-up proceedings or any other national or foreign proceedings of another State that is a contracting party to the European Economic Area Agreement, or of another State."

Furthermore, on 19 December 2024, the Luxembourg Supreme Court⁵ annulled the Court of Appeal’s decision by explicitly stating that the Financial Collateral Law, in its version prior to the July 2024 amendment, referred to foreign winding-up and similar proceedings without making any distinction as to whether or not the State, other than Luxembourg, in which the winding-up proceedings arise, is a member of the EEA.

Banking secrecy and communication of information between EU tax authorities

A recent ruling handed down by the Supreme Court confirmed a decision of the Court of Appeal regarding banking secrecy and communication of information between EU tax authorities.⁶

A request for administrative and tax assistance was sent by the French tax authorities to the Luxembourg authorities regarding a French resident, the claimant in the reviewed case. Following an injunction for communication of information issued by the Luxembourg authorities, a bank sent information on the financial situation of the claimant between 1995 to 2017 to the Luxembourg authorities, which was subsequently passed on to the French authorities. The claimant was then subjected to a tax reassessment by the French tax authorities. He challenged this tax reassessment, arguing that the information obtained by the French authorities from their Luxembourg counterpart via the bank was the result of a breach of banking secrecy by the bank, as it contained data from a time period prior to what had been requested by the French authorities (2007-2017).

The Court of Appeal declared the claim inadmissible on the basis that the claimant had not suffered any prejudice. Indeed, as held by previous case law, as taxpayers are obliged to provide the tax authorities with the data needed to assess their tax liability and as the payment of tax is the payment of a debt, it does not constitute a loss.

The communication by a bank to tax authorities of information protected by banking secrecy can thus not be considered as triggering a prejudice on the part of the taxpayer.

The Caritas embezzlement affair

On 19 July 2024, the news of a €61 million embezzlement at Caritas Luxembourg, a charity notably working in social service, partly funded by the Luxembourg state, hit Luxembourg.

The origin of this embezzlement is not clear yet. According to the press releases of the public prosecutor’s office, the fraudulent transfers could potentially be linked to an 'executive phishing' scam.⁷ It is alleged that the CFO of Caritas, to whom the presumption of innocence applies, made over 120 transfers of a total sum of €61 million between February and July 2024 from the Luxembourg accounts of Caritas held at two Luxembourg banks to around 15 different accounts opened in several branches of the Spanish bank BBVA.⁸ It is being reported that at times, the CFO proceeded to make up to seven transfers totalling several million euros in the course of the same day.⁹ It was further published in the local press that once the accounts of Caritas were emptied, the two Luxembourg banks granted credit lines for a total of €33 million.¹⁰

The State Prosecutor, in an official communication, stated in October 2024 that the criminal investigation had already allowed to identify more than 8,200 transactions, carried out at very short intervals, to hundreds of accounts opened in a multitude of countries around the world, reinforcing the presumption that a criminal association or organisation is involved in the fraud.¹¹ In January 2025, eight individuals subject to European arrest warrants were arrested in France and in Bulgaria.¹² The investigating judge further issued an arrest warrant against a Bulgarian national charged with forgery, fraud, money laundering, criminal conspiracy in connection with money laundering, and criminal organisation.¹³

The affair raises numerous questions on the governance of Caritas Luxembourg but also on potential compliance gaps within the banks implicated in the transfers, as well as on their liability. The Luxembourg regulator(the CSSF) has already sanctioned one of the banks by imposing a fine of almost €5 million for shortcomings under the law of 12 November 2004 on the fight against money laundering and terrorist financing (the AML/CFT Law).¹⁴ The criminal investigation has not yet been completed.

Duty of care

'Executive phishing' scams occur more and more often, and victims try to recover the lost funds by suing their bank for breach of their duty of care.

The Luxembourg first instance court recently reaffirmed a bank’s obligations in the execution of a transfer order.¹⁵

The claimant, a Luxembourg company, had made, over a period of less than a month, several transfers for a total amount of €1.25 million to a Hungarian bank account. The claimant affirmed that transfers in excess of €140,000 were ordered only twice a month and that its total monthly expenditure varied between €316,000 and €710,000. The bank’s client concluded that as part of its duty of care, the bank would have been required to detect the abnormal nature of the disputed transfer orders in regards to the transferred amounts, the transfer frequency, the fact that the beneficiary of the transfers was not a regular supplier of the claimant and that the beneficiary bank account was held at a Hungarian bank.

The judges rejected the claim as being unfounded, recalling that before executing a client's transfer order, it is the bank’s responsibility to verify the order’s regularity and, among other things, to ensure that it really originates from the client. Any anomaly likely to raise doubts about the authenticity of an order requires the bank, in principle, to postpone its execution and request confirmation from the client. The bank is further bound by a duty of non-interference and a duty of care towards the client. Regarding anomalies, those consisting of transactions that are unusual regarding the client's financial situation or habits, due to their frequency, amount or nature, should be detected by the bank. Under its duty of non-interference, the bank does not have to ask for justification to ensure that the transactions requested by the client are lawful and not potentially harmful for the latter. The bank’s obligation of due care is an obligation of means. As a result, the bank can only be held liable if the client who placed the order proves that the bank was at fault.

In the case at hand, no fault on the bank’s account could be proven by the client, as the bank had complied with its due diligence obligation by contacting the client to obtain confirmation for the first disputed transfer. The court further held that given the validation of this first transfer order by the client, neither the beneficiary nor the recipient account, nor the amount of each of the other disputed transfers should be considered as constituting an apparent anomaly.

This case law underlines the importance of the vigilance banks must apply when executing transfer orders of their clients, and at the same time confirms that banks cannot be held liable for their clients’ own mistakes.

Non-execution of a redemption request

In the previous Lexology In-Depth Banking Litigation, we had reported on a decision of interest to all management companies and alternative investment fund managers of a Luxembourg mutual fund (FCP),¹⁶ which had been handed down by the Court of Appeal in June 2024.¹⁷

In June 2020, an investor had requested, within the contractual deadline, for the net asset value (NAV) of September 2020, the redemption of its shares held in a sub-fund of the FCP. Several months later, in November 2020, the management company of the FCP informed the investors that the redemption requests for the September 2020 NAV would not be executed. The refusal was based on a provision of the private placement memorandum (PPM), allowing the management company absolute discretion in permitting redemptions. The investor challenged the non-execution of its redemption request before the Luxembourgish courts, which ruled in its favour.

The Court of Appeal, confirming the first instance judgement, held that:

1. an investor's redemption request cannot be refused after the contractual 90-day notice period prior to redemption day has elapsed; and
2. the refusal to execute the redemption requests had not been based on the provision of the PPM conditioning the payment of redemptions to the availability of funds, but on the provision regarding the absolute discretion of the management company in permitting redemptions. The management company could thus not invoke, in retrospect, a lack of liquidity to justify the non-execution of redemption requests.

On behalf of the FCP (which lacks legal personality), the management company was condemned to pay the redemption price based on the September 2020 NAV plus interests.

The management company of the FCP appealed the ruling before the Supreme Court. By decision dated 27 March 2025, the Supreme Court confirmed the Court of Appeal’s decision, which thus became final.

The management company had notably argued that the payment of the redemption request breached the rule of equal treatment of investors. The Supreme Court however held that, as the redemption request had been accepted and as the payment of the redemption should have been executed within the contractual term, the claimant, as a result of the non-payment within said term, was no longer an investor but a creditor of the FCP. The rule of equal treatment was, therefore, not violated.

Attachments on settlement accounts

After our last year’s review, a final non-appealable decision has been rendered on 20 March 2025 by the Supreme Court in the case regarding attachments on settlement accounts.¹⁸

To recall the facts, following a New York ruling in their favour against, notably, the Islamic Republic of Iran condemning the latter to the payment of damages, relatives and heirs of victims of the attacks on 11 September 2001 in the United States had proceeded to attachments for a total amount of more than US$3 billion on accounts held with a Luxembourg bank holding settlement accounts.

In its two decisions rendered on 28 September 2023 (which we reviewed in the last edition of the Banking Litigation Review),¹⁹ the Supreme Court had reaffirmed the prohibition of attachments on settlement accounts. The Court of Appeal, sitting in another composition of judges, then applied the 28 September 2023 decisions in its ruling dated 25 January 2024. The claimants appealed, once again, said ruling before the Supreme Court, which, however, dismissed their appeal by recalling that attachments on settlement accounts are prohibited by Article 111 (5) of the law of 10 November 2009 on payment services (the LSP).

Article 111 (5) of the LSP, which is a public policy provision, aims at avoiding the blocking of the operations of a systemically important securities settlement system. Without the absolute and general impossibility of seizing settlement accounts, which the Supreme Court emphasised, the international clearing and settling system would become much too vulnerable if not endangered.

This final non-appealable decision puts an end to a long litigation with a welcomed and particularly important outcome for the protection of the clearing systems operated in Luxembourg and for the stability of international transactions.

Recent legislative developments

Blockchain IV Law

We had previously reported on the Blockchain III Law, a law of 15 March 2023 introducing the possibility of using distributed ledger technology (DLT) to issue securities that can be considered as financial collateral under the Collateral Law (and thus benefit from the protection mechanisms of said law).

On 19 December 2024, a new Blockchain IV Law was passed through Luxembourg Parliament, amending the Law of 6 April 2013 on dematerialised securities on two major points:

• Banks and investment firms will be allowed to act as central account keepers for non-listed capital securities.
• Blockchain IV Law also introduces a new control agent model, which allows dematerialised securities registered in a securities issuance account held by a control agent to be maintained by account keepers in securities accounts on blockchain.²⁰

This is yet another example of Luxembourg’s innovative legal landscape, allowing parties to use recent technological innovations within a framework of legal certainty. It is indeed in this context that HSBC has chosen to set up its Orion global tokenisation platform in Luxembourg.²¹ Asset manager Franklin Templeton has also taken advantage of this framework to launch its first UCITS fund based on a public blockchain in autumn 2024.²²

Implementation of ICTr Regulation

On 2 April 2025, Luxembourg Parliament amended the Law of 10 November 2009 on payment services and implemented the EU Regulation of 13 March 2024 on instant credit transfers in euro (ICTr Regulation).

The key takeaways of this law are notably the following:

• The possibility for payment institutions and electronic money institutions to safeguard received funds with central banks.
• The participation of payment institutions and electronic money institutions in payment systems.
• The introduction of a sanctions system applicable to payment service providers that fail to fulfil their legal obligations regarding instant credit transfers as provided for by the amended SEPA Regulation.²³

Interim measures

Under Luxembourg law, a creditor can request a variety of interim measures. We will be focusing on attachments (saisie-arrêts), as they are the most commonly used seizure measure in Luxembourg and of particular interest to banks. Attachments operate as a 'freezing order' in the hands of third parties, which are most often banks. These third parties are then involved in interim measures proceedings as the third party debtor, although they have no interest in the dispute between the creditor and its debtor.

To proceed to a conservatory attachment (i.e., when the creditor does not dispose of an enforceable title), the creditor requests, within ex parte proceedings, the authorisation of the Luxembourg judge to proceed to the attachment. In the event that the judge grants the authorisation, the creditor notifies the attachment order to the third party by bailiff. In principal, Luxembourg courts only order interim measures on assets located in their jurisdiction.²⁴

The attachment immediately renders the seized assets unavailable: the entire assets owed by the bank to the debtor are seized, even if they exceed the creditor’s claim.²⁵

The creditor must inform the debtor of the attachment and bring against him an action for the validation of the attachment within eight days of its execution.

Within eight days of the service of the writ for validation to the debtor, the creditor must serve a confirmation of this writ to the bank. If the creditor fails to do so, the attachment cannot be validated and the seized assets become available again, until the bank receives the aforementioned confirmation.²⁶

Banks always comply with attachments, as the law provides that if the third party debtor does not comply with the attachment order, it will become the direct debtor and will be liable for the actual debtor’s obligations towards the creditor.

The debtor may challenge the attachment by seeking the withdrawal or limitation of the order.

Once the attachment has been validated by a first instance court, the creditor will request an affirmative declaration from the bank relating to whether the bank is or is not a debtor of the creditor’s debtor and if so, for which amount. The principle of banking secrecy does not apply to the affirmative declaration, it being noted that the bank is, however, not allowed to communicate said information before the affirmative declaration, as this would constitute a violation of banking secrecy.

Regarding case law, the Luxembourg first instance court recently confirmed a well-established jurisprudence regarding the third party debtor: the judges reasserted the impossibility of executing an attachment on an indirect debtor of the creditor’s debtor.²⁷ This notably means that an attachment cannot be executed on assets of which the creditor’s debtor is only the economic beneficiary.²⁸ In order not to violate banking secrecy, banks should, however, await a judgment on the validation and the summons for affirmative declaration before revealing whether they are a debtor or not of the creditor’s debtor.

Furthermore, the judges of the Luxembourg first instance court, in another recent decision, restated certain aspects of the affirmative declaration that the third party debtor needs to make to the court and the creditor regarding its capacity as debtor of the creditor’s debtor and the origins and amount of the debt.²⁹

First, this declaration may be made even after expiry of the time limit set by the judge and as long as no definitive decision has been rendered against the third party debtor, which would hold him liable for the actual debtor’s obligations towards the creditor.

Second, in the event that the third party debtor states not being and never having been a debtor of the creditor’s debtor, it is up to the creditor to provide evidence that could cast doubts on the accuracy of the third party debtor’s declaration. It is only then that the third party debtor needs to prove the rightness of their declaration. If the third party does not provide any proof, they will be condemned to pay the creditor as if they were the actual debtor. This would also be the case for false declarations.

Privilege and professional secrecy

A lawyer’s professional secrecy applies in Luxembourg to all information about the client and the client's affairs of which the lawyer is informed by their client or of which the lawyer becomes aware, regardless of the source of the information (e.g., advice, correspondence, notes and name of clients) and the area of practice (e.g., litigation, corporate and tax).³⁰ The professional secrecy applies to qualified lawyers registered at the Luxembourg Bar, as opposed to in-house counsel.

A limit to professional secrecy stems from the AML/CFT Law under which a lawyer who knows, suspects or has reasonable grounds to suspect that money laundering or terrorist financing is taking place, has taken place or has been attempted, is obliged to inform the President of the Bar. Under the AML/CFT Law and in the limited cases provided for by this law, a lawyer is also obliged to provide information to the financial intelligence unit, at its request.³¹ The AML/CFT Law, however, only applies to legal services in scope of said law, which is not the case for litigation cases.

Given the role of Luxembourg as a financial centre in international transactions, attempts have been made by national and foreign authorities to get access to such information by targeting not only financial services providers but also other actors, such as lawyers. A number of the targeted lawyers have, however, successfully questioned these attempts and convinced national courts to request a preliminary ruling from the Court of Justice of the European Union (CJEU). The recent ruling of the CJEU in case No. C-432/23,³² regarding a request for the exchange of information addressed to a Luxembourg law firm by the Spanish tax authorities,³³ further comforted privilege and professional secrecy in Luxembourg. The CJEU held that the protection of professional secrecy also covers legal advice and necessarily guarantees the secrecy of that advice, both as regards its content and its existence. In addition, the Court stated that the special protection of professional secrecy extends without distinction to all areas of law. This is a landmark decision for lawyers and the protection of their professional secrecy.

Banks may also oppose professional secrecy to disclosure orders. As regards disclosure proceedings in general, the Luxembourg approach is fundamentally different to common law procedures, insofar as disclosure proceedings are subject to very strict conditions. Their scope is limited to the production of documents that need to be precisely determined.³⁴ The disclosure proceedings can thus not be used as means for a 'private raid' or 'fishing expedition'.

Luxembourg law distinguishes between:

1. the disclosure order of documents requested in the context of proceedings on the merits pending before a court; and
2. the disclosure order arising from an autonomous procedure before the summary judge, the sole aim of which is to have the documents released, in view of initiating a dispute on the merits.

Disclosure orders can be obtained against the person or entity that the claimant considers to be in possession of information or documents that are relevant to the outcome of the pending or future dispute, whether it is a party or a third party (notably banks and trustees).

However, as stated above, the obligation of professional secrecy, including the legal professional secrecy, can constitute a lawful impediment or a legitimate obstacle to the disclosure of evidence. Specifically, Luxembourg case law requires that the requested measure does not allow the claimant to infringe any legal requirement or violate any fundamental freedom or ethical rule such as professional secrecy. When assessing a request aimed at the production of documents, the judge must perform a balancing test and take into account the consequences that the requested measure will have on both the claimant’s and respondent’s interests. It must not be a way of interfering in matters that the claimant is normally not supposed to know about.³⁵

Furthermore, the professional secrecy of banks and financial institutions does not apply when they are requested to comply with Luxembourg authorities requests, such as those related to money laundering and terrorist financing investigations as well as criminal investigations in general. Banks and financial institutions also have a duty to inform the Financial Intelligence Unit (FIU) when they know, suspect or have reasonable grounds to suspect that money laundering, an associated predicate offence or terrorist financing is being committed, or has been committed or attempted.

In a case where the former client of a bank requested the production of a declaration of suspicion allegedly reported to the FIU, the judge held that the 'no tipping off' rule anchored in the AML/CFT Law is a serious challenge preventing the admissibility of the request.³⁶

Jurisdiction and conflicts of law

As banking litigation mainly relates to contractual liability, jurisdiction and conflicts of law are often governed by clauses on the choices of forum and law. However, this does not mean that Luxembourg courts and practitioners are not confronted with complex questions relating to these legal issues, notably in the context of cross-border transactions, international financing and enforcement measures.

By way of an example, as regards the law applicable to tort liability of the corporate bodies of a company or a bank towards third parties, it appears that Luxembourg judges apply the lex loci delicti (as opposed to the lex societatis). The Court of Appeal has ruled that the liability of the directors of a foreign company, who were accused of having provided false information on the basis of which the claimants had subscribed shares in the company, was subject to Luxembourg tort law, as the shares had been offered for subscription in Luxembourg.³⁷

Sources of litigation

Luxembourg is the largest investment fund centre in Europe and the second largest worldwide after New York, and as such, a frequent source of litigation by and against banks or other financial service providers related to investment funds. The liability of professionals, such as custodian banks, fund managers or portfolio managers, and the liability of their directors are some of the banking litigation matters brought before the courts of Luxembourg.

Furthermore, clients unsatisfied by the outcome of their investment regularly try to hold their bank liable by invoking a breach of its duty to inform and advise. The question of the existence and scope of an ancillary obligation to provide information and advice to a client without having concluded an investment advice contract or a management mandate is in particular often raised.

By way of illustration, in a decision of 7 March 2024, the Luxembourg Court of Appeal confirmed that an ancillary obligation to provide information and advice on stock market orders exists for banks, even in the event of an 'execution only' instruction by the client (i.e., even in the absence of an investment advice contract or a portfolio management mandate).³⁸ The information to be provided to the client relates to the financial terms of the transaction and to the risks of stock market trading in general. It does however, in principle, not cover the particular risks associated with a given transaction, the advisability of acquiring or not acquiring a given security, events and circumstances likely to have an influence on stock market prices, the quality of securities or the economy in general.

The scope of the obligation to provide information on risks varies nonetheless with the client’s knowledge and investment habits, as the Court of Appeal had already confirmed in 2022.³⁹ Therefore, a more detailed risk warning needs to be provided to a non-specialised, non­professional client than to a sophisticated client. In its decision of 7 March 2024, the Court of Appeal, however, specified that being a non-professional client does not automatically mean that the client is not a sophisticated investor.⁴⁰ Investors can become sophisticated over time but the bank has the burden of proof to demonstrate the experience acquired by the client and the fact that the information provided on risks was adequate.

Banks must thus be diligent in establishing the investor profiles of their clients, even in the absence of a management mandate or advice contract, and must provide all necessary information accordingly, in order to avoid liability for breach of duty to inform.

Finally, due to the assets (whether securities or cash) that banks hold on behalf of their clients, they are often involved in proceedings for interim measures as third party debtor to which an attachment order has been served.

Exclusion of liability

Under Luxembourg law, provisions excluding or limiting liability are in principle valid, in accordance with the principle of contractual freedom.

However, they become invalid in cases of fraud, serious misconduct or when they affect an essential obligation of the contract, rendering the latter void of substance.⁴¹ For serious misconduct to be characterised, a reprehensible behaviour needs to be proven, going beyond the simple fact of having failed to comply with the contractual obligations.⁴² Abusive clauses are also prohibited.⁴³

Regarding not the exclusion or limitation of liability but the adjustment of the period during which a bank’s liability can be sought, the Luxembourg first instance court recently reaffirmed the possibility for banks to reduce the limitation period.⁴⁴

In this case, the limitation period was reduced contractually to two years (it being noted that under Luxembourg general law, the limitation period in commercial matters is 10 years).

Regulatory impact

Under Luxembourgish law, the liability of banks is a matter of common civil liability law.⁴⁵ It is predominantly a contractual liability and only exceptionally a liability in tort.

Regarding the regulatory impact on these civil liabilities, Luxembourg case law has known a new development in the past decade. Since two decisions of the Court of Appeal of 25 February 2015 and of the Supreme Court of 26 March 2015, claimants may support their claim for damage by proving the bank’s failure to comply with a professional standard.⁴⁶

However, a breach by a bank of a professional standard does not automatically lead to compensation. The claimants need to prove the following:

1. the breach of the professional standard constitutes a contractual fault or a fault in tort; and
2. there is a causal link between this fault and the alleged damage.⁴⁷

This is not an easy task and the above-mentioned turnaround in case law has ultimately not led to a major increase in the number of decisions that find a bank liable.

As regards regulatory developments, other than the Luxembourg legislator, the CSSF is very active and regularly publishes and updates its guidelines and regulations on matters regarding the banking and financial sectors. Compliance with laws and regulations is assessed during on-site visits carried out by the CSSF, which also has sanctioning powers. A recent example is the revocation of Banque Havilland’s licence by the European Central Bank following a request for withdrawal by the CSSF.⁴⁸ The CSSF had fined that same bank in 2018 for €4 million for compliance failings with the AML/CFT Law.⁴⁹

Furthermore, clients of professionals subject to the supervision of the CSSF may file complaints with the latter under CSSF Regulation No. 16-07 relating to out-of-court complaint resolution. According to the CSSF, the complaints that it receives often relate to the following:

1. transactions executed on behalf of the bank clients by a proxy, the client not having been aware of the extent of powers given to the proxy;
2. clients who were victims of fraud;
3. payment obligations under a guarantee contract; or
4. the non-execution of market orders.⁵⁰

In one such case, the client criticised his bank for not having executed a sale order on the stock exchange, which had been given via the secured messaging of the bank, requesting the sale of some securities as soon as their market value would fall below a certain predefined price.⁵¹

The bank argued that the messaging system is a secured communication service between the bank and its customer and not a tool for processing market orders. The bank further noted that in any case, it could not have executed the market order at the time when it was given as the market price of the security was at that moment already below the limit set by the complainant. The CSSF agreed with the bank’s position and dismissed the complainant’s claim.

Outlook and conclusions

Luxembourg is expected to continue to grow as an international financial centre in the coming years and maintain the high legal certainty and political stability. The legislative and regulatory landscape will hopefully continue to contribute to this development, notably in the Fintech and the green finance sectors.

A challenge Luxembourg will be facing in the coming years is to continue to attract more and more innovative and specialised talents in the financial and legal sector, to support this steady development of the financial sector.

It is furthermore to be expected that Luxembourg remains creditor friendly, an attribute essential to the Luxembourg market.

This article was written by Partner Elisabeth Omes and Senior Associate Lena Hoss and was reproduced with permission from Law Business Research Ltd. This content was first published in Lexology In-Depth: Banking Litigation - Edition 9 (Banking Litigation: Luxembourg - Lexology). For further information, please visit In-Depth - Lexology.