Luxembourg Market Trends
Michael Foulkes, Europe Research Manager provides an overview and gives an analysis of recent trends of the Luxembourg legal market.
In order to gain an increased understanding of the Luxembourg legal market and find out about some of the key developments within the leading firms, I have recently spoken with Patrick Mischo of Allen & Overy, Steve Jacoby of Clifford Chance, Jean-Marc Ueberecken of Arendt & Medernach and Nicki Kayser of Linklaters.
What have been the most recent trends in the market?
The key topic that came up in all of the discussions was the importance of the investment funds market in Luxembourg, with the jurisdiction frequently described as a hub for fund structuring and formation and this has increased following the pandemic. There are now a reported EUR5.5 billion assets under management in Luxembourg in both regulated and alternative funds and to some extent investment funds are now replacing banks as a key source of direct lending. This seems likely to continue over the next 12 months and so the Investment Funds table will remain a useful resource for clients.
The news remains dominated by the ongoing conflict in Ukraine, but so far the impact on the legal market in Luxembourg has been limited. Several firms mentioned a brief slowdown, particularly in terms of M&A activity, as people were initially cautious but this seems to be picking up again, though of course this may change if there is widespread disruption to supply chains. The three international firms all announced the closure of their offices in Russia in March, while Arendt & Medernach also brought their team back from Moscow to Luxembourg. Luxembourg's position as an important jurisdiction internationally has meant that several clients have been requesting advice around the EU-imposed sanctions.
One potential future trend highlighted by Linklaters is a growing desire within the Chamber of Commerce for Luxembourg to become an important centre for arbitration, with notably a draft bill currently going through the legislative process.
What about regulatory changes?
A major regulatory change recently has been the introduction of a new law on securitisation in February 2022 (amending the 2004 securitisation law) that will facilitate the establishment of collateralised debt and loan obligations. Additionally, in common with the rest of the European Union, Luxembourg is preparing for the introduction of the EU's Markets in Crypto-Assets Regulation. These new regulations may mean additional work for lawyers currently in the Banking & Finance and Capital Markets table or in the FinTech Legal Advisors rankings.
Are there any new areas Chambers and Partners should look to cover?
All of the firms commented on the risk of growing inflation possibly leading to a recession, which may in turn cause a number of bankruptcies, particularly if governments are no longer able to continue to offer the same level of financial support that they did during the pandemic.
There is therefore a risk of a rise in restructuring and insolvency matters in the future, and so Chambers and Partners may look to introduce a Restructuring/Insolvency table at some stage, but there does not appear to be the volume of work to justify its introduction this year.
Luxembourg is an attractive jurisdiction for enforcement proceedings and, as a large number of multinational companies are often headquartered in Luxembourg, lawyers based in the Grand Duchy are involved in multi-jurisdictional restructurings.
However, it still seems rare for firms in Luxembourg to have dedicated restructuring and insolvency specialists, with the majority of lawyers who are active in this area spending most of their time handling litigation or financing mandates.