Many economic operators, in particular international groups and craft businesses operating in several neighbouring countries, complained about the introduction by the Luxembourg law of 26 July 2023 into the law of 2 September 2011 regulating the access to the professions of craftsman, merchant, manufacturer and certain liberal professions (the "2011 Law") of the requirement for the person responsible for the day-to-day management of the business to be physically present at all times on the premises. This condition had been criticized as unrealistic and preventing businesses from organizing themselves effectively.
This condition of physical presence had been included in the draft law in response to the formal opposition of the Council of State (Conseil d'Etat) to the conditions of residence and presence of the director initially envisaged.
The Chamber of Trade (Chambre des Métiers) had already noted[1] that the draft law should provide for a relaxation of the requirement for the manager to effectively and permanently ensure the day-to-day management of the business insofar as the manager should be able to reside anywhere in the European Economic Area provided that he or she demonstrates a regular presence in the establishment in Luxembourg. The Chamber of Trade pointed out, however, that the proposed amendment seemed to adopt a diametrically opposed position, by making it more difficult for the manager to be effectively and permanently responsible for the day-to-day management of the business by requiring his or her physical presence. The Chamber of Trade also regretted that the scope of the accumulation of the terms effectively, permanently and by physical presence had not been more fully explained by the authors of the amendment.
Similarly, the Chamber of Commerce (Chambre de Commerce) strongly opposed the addition of the condition of permanent physical presence in the establishment, which according to them unduly burdens the right of establishment, would not go in the direction of modernization, and would be neither realistic nor necessary.[2]
However, when examining this amendment[3] , the Council of State chose to lift its formal opposition to the initial text and did not criticize the amendment.
The Minister for Small and Medium-sized Businesses, for his part, stressed the importance of such a physical presence criterion "in order to prevent the director from being merely fictitious".[4]
So it was with this addition that the law of 26 July 2023 was passed, apparently without questioning its compliance with European law. And yet it should have been questioned.
This legal provision is now the subject of an infringement procedure that has been opened by the European Commission, for non-conformity of the Luxembourg legislation with Directive 2006/123/EC of 12 December 2006 on services in the internal market.[5]
The European Commission is of the opinion that this requirement of permanent physical presence, together with the need for a general authorization for the establishment of any natural or legal person exercising independent occupations in craft, trade or industry or certain liberal professions, constitute unjustified obstacles to the freedom of establishment, which is one of the fundamental principles of European Union law. The European Commission is therefore sending an informal letter of formal notice to Luxembourg, which has two months to respond and remedy the shortcomings identified by the European Commission. In the absence of a satisfactory response, the European Commission may decide to issue a reasoned opinion. If the Commission subsequently still finds that Luxembourg law does not comply with European law, it may bring the matter before the Court of Justice of the European Union as part of an action for failure to fulfil obligations.
We can therefore hope that this provision, which seems to have been introduced without any real thought being given to its application in practice and its compliance with European law, will be remodeled so as to provide flexible conditions in line with the mobility of managers, which is a reality today.
By Mario DI STEFANO, Managing Partner – Avocat à la Cour.
[1] Bill No. 7989; opinion of the Chamber of Trade (Chambre des Métiers) of 6 June 2023, p.2
[2] Bill No. 7989; opinion of the Chamber of Commerce (Chambre de Commerce) of 10 July 2023, p.2 and 5
[3] Bill No. 7989; supplementary opinion of the Council of State (Conseil d’Etat) of 26 June 2023, p. 2
[4] Bill No. 7989; minutes of the meeting of 8 May 2023 of the Committee on Middle Classes and Tourism, p.7
[5] INFR(2024)2216