LUXEMBOURG Law and Practice Contributed by: Romain Tiffon and Marie Bentley, ATOZ Tax Advisers
1. Legal System 1.1 Legal System and Judicial Order
2. Restrictions on Foreign Investments 2.1 Approval of Foreign Investments Foreign investments in Luxembourg are not generally subject to prior approval. However, a foreign direct investment (FDI) screening mechanism applies to certain sensitive investments. This mechanism was introduced in 2023 and targets investments that may affect public security or public order. The screen - ing mechanism applies to foreign investments made by an investor – whether acting individually, jointly or through intermediaries – that both (i) establish or maintain lasting and direct links with a Luxembourg entity, and (ii) confer the ability to exercise meaningful influence over that entity’s management in the context of a critical activity in Luxembourg that could affect public security or public order. Critical activities include: • sectors such as energy, transport, water, aero - space, agrifood, health, communications, data pro - cessing and storage, defence, media and finance, as well as activities involving dual-use goods; • production or research connected to these sectors; and • ancillary activities that provide access to locations where such operations are carried out or where sensitive information is stored. An investor is deemed to exercise effective control over an entity in particular where it: • holds, directly or indirectly, a majority of the voting rights; • is entitled to appoint or remove most members of the management or supervisory body while being a shareholder; • controls a majority of voting rights through an agreement with other shareholders; or • directly or indirectly holds more than 25% of the voting rights, or reaches this threshold at any time. 2.2 Procedure to Obtain Approval and Sanctions for Non-Compliance Before completing a foreign direct investment in Lux - embourg, the investor must notify the Ministry of the Economy. If the investor exceeds the threshold of
Luxembourg has a civil law legal system. The judicial system of Luxembourg is organised into two main branches. The Judicial Courts This branch deals with civil and criminal matters. It is composed of three main levels. • Lower courts – (a) Justice of the Peace Courts ( Justices de paix ), which handle minor civil disputes and small claims, as well as certain tenancy and employ - ment cases. • Intermediate courts – (a) District Courts ( Tribunaux d ’ arrondissement ), which deal with more significant civil and crimi - nal cases and hear appeals from the Justice of the Peace Courts. • Higher courts – (a) Court of Appeal ( Cour d ’ appel ), which reviews judgments from District Courts. (b) Court of Cassation ( Cour de cassation ), which is the highest court in the judicial order, ensur - ing the correct application of the law (it does not retry cases but reviews legal compliance). The Administrative Courts This branch deals with disputes involving public authorities or administrative decisions. It includes: • the Administrative Tribunal ( Tribunal administratif ), which is the first instance for administrative dis - putes; and • the Administrative Court ( Cour administrative ), which hears appeals against judgments of the Administrative Tribunal. Constitutional Court Luxembourg also has a Constitutional Court ( Cour constitutionnelle ), which is separate from these two branches. It rules on the conformity of laws with the Constitution when a question is referred to it by a court.
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