LUXEMBOURG: An Introduction to Dispute Resolution

Introduction 

The COVID-19 pandemic has clearly been an impetus for change in the Luxembourg legal landscape, as it enhanced the use of electronic communications, which became widely adopted in administrations and courts, and sometimes even mandatory. Although the Luxembourg legal landscape has been dominated in recent years by COVID-19 issues, there have also been a number of other important developments and trends.

In this context, a vast reform of Luxembourg's civil procedure was implemented, following the increasing number and complexity of cases pending before the courts. As specified in the coalition agreement signed in 2018, the reform has set itself the ambitious goal of strengthening civil and commercial justice by optimising existing procedures and creating new ones, all with the aim of making justice more accessible, rapid and efficient.

Furthermore, Luxembourg is in the process of introducing collective recourse procedures into consumer law. This will finally allow for a single action to be brought by a group of consumers against the wrongdoing of a single professional, therefore preventing individual time and cost-consuming actions.

All of this shows that in a time of rapid and tumultuous change, litigation as a practice area in Luxembourg is not static and is experiencing a number of important new patterns.

• New law to reform the procedural rules in civil and commercial matters

Major innovations have been introduced into the Luxembourg procedural landscape with the introduction of a new law on 8 June 2021 (the "Law") which aims above all to streamline civil procedure.

Thus, some of the most important changes should be highlighted.

The increase in the number of cases that can be submitted to the justice of peace

Amongst others, a major innovation is the increase in the rate of jurisdiction 'rationae valoris' of the justices of peace (“Justice de Paix” - lower courts) from 10,000 euros to 15,000 euros. This increase will undoubtedly alleviate the workload of the district courts and, consequently, speed up proceedings before them as more and more civil and commercial cases will be dealt in the future by the justices of peace in an oral procedure in which the parties will not be obliged to be represented by a lawyer.

However, many reservations were expressed about the increased amounts. Amongst them, the Luxembourg Bar Association had recommended to increase the amount to 20,000 euros. Nevertheless, the legislature seems to have feared that the volume of cases that would fall within the jurisdiction of the justices of peace would increase excessively if the rate of jurisdiction was raised above 15,000 euros, and that this would have the opposite effect to that sought.

The introduction of a simplified pre-trial procedure - prefixed time limits putting an end to any dilatory attitude

Furthermore, in order to enhance procedural efficiency, the Law undertook a major overhaul of the pre-trial procedure. This phase of the written procedure, during which the case is heard under the supervision of a judge, has proved in the past to be rather cumbersome and often slower than the oral procedure.

Consequently, the legislator introduced a simplified pre-trial procedure, which applies to cases where the amount at stake is less than EUR 100,000, where there is only one claimant and one defendant or, if the conditions are not met, upon a reasoned request from one of the parties accepted by the president of the chamber concerned.

In the context of the simplified pre-trial procedure, the exchange of written submissions and, above all, the time limits within which the lawyers must file their submissions and exhibits are now strictly regulated. In this context, a period of three months is granted to the defendant to reply to the plaintiff, followed by a period of one month for each party to file their reply.

The introduction of such a simplified pre-trial procedure should therefore make it possible to deal with certain cases more quickly and contribute to combating certain dilatory practices, even if it cannot be disputed that, as the Bar Association rightly pointed out, the financial stakes of a case do not foretell the importance of its legal issues.

Mandatory summary submissions 

Finally another major innovation is the requirement that, in written proceedings before the district courts, each lawyer must prepare summary submissions prior to the end of the pre-trial phase (“mise en état”). These summary submissions must contain all arguments and claims set out in previous submissions. This allows judges to take decisions more quickly as they will no longer have to read each set of submissions filed in the course of the proceedings and can rely on the last submissions filed by each party. Furthermore, the parties can mutually agree to waive oral arguments, which, once again, should allow for speedier judgments.

• Introduction of consumer class actions 

Luxembourg is in the process of introducing collective recourse procedures into consumer law, bringing Luxembourg law in line with Directive 2020/1828 on representative actions for the protection of the collective interests of consumers, which requires member states to adopt and publish necessary changes to their laws by 25 December 2022.

The bill will be applicable to most of the damages faced by consumers, as for instance the breach of a professional’s obligation to inform, and is therefore not limited to violation provided for in the Luxembourg consumer code.

The proceedings will take place following three different steps.

Firstly, the court must establish the liability of the professional or order the cessation or prohibition of the professional’s misconduct and validate the class action. If the proceeding is deemed admissible, the judge will then define the scope of the consumers' suffering from the alleged damage and the class membership system (either opt-in or opt-out).

A large part of the bill focuses, however, on the importance of amicable settlement. That is why, once the action is deemed admissible, the parties will necessarily have to hold a settlement meeting. One of the specificities of these Luxembourg collective recourse proceedings is that the costs of the mediator will be paid for by the State and not by the parties, facilitating greatly the use of amicable settlement.

Secondly, an appointed liquidator will guarantee the enforcement of the judgment and will issue, as a last step, a report stating whether all consumers have been compensated. If it is not the case, the disputed compensation will be analysed before the Luxembourg District Court, which will settle the remaining claim.

This bill will offer greater security to consumers who might have been discouraged from taking individual actions against big companies and will avoid most of the downfalls of class action since punitive damages are forbidden under Luxembourg law. However, certain key elements like third party funding provided for in article 20 of the 2020 Directive remain in discussion, leaving a doubt as to the definitive outcome.

Conclusion  

As alternative methods of conducting proceedings have already been tested in greater depth during the COVID-19 pandemic, the Luxembourg litigation scene has moved towards further modernisation with the adoption of the civil procedure reform. Simultaneously, there may be an increase in activity, particularly in the area of class actions.

Although the Law and the bill on class actions will certainly provide practitioners with new tools that are supposed to enhance judicial efficiency, only practice will however allow us to assess their effectiveness in legal life.

The Luxembourg legislature, while introducing the major innovations mentioned above, did not take the opportunity to put the Luxembourg judicial system on the road to digitalisation. Digitisation of exchanges between courts, lawyers and experts in particular could make it possible to gain considerable time and efficiency, as well as to reduce a certain number of costs.

Although digitalisation is not yet on everyone's agenda, it should be noted that more and more discussions in the legislative and judicial sphere are considering digitalisation. Will this topic dominate future trends and developments in Luxembourg litigation?