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Luxembourg: What happened in 2021 and significant events in 2022

While the pandemic continued to impact legal developments throughout 2021, sustainable finance is set to disseminate across sectors throughout 2022, becoming ever more relevant for all market players.

Melinda Perera, K&L Partner and Capital Markets & Banking Partner 

Melinda Perera

Luxembourg law highlights in 2022

Sustainable finance

As part of its key priorities, Luxembourg remains committed to building a sustainable finance ecosystem.

ATAD 2

2022 will see the entry into force of the reverse hybrid mismatch rule introduced by ATAD2.

Teleworking in the financial working

Supervised entities will need to abide by the new rules regarding teleworking once the Covid-19 pandemic comes to an end.

Foreign direct investments: Draft law 7885 has been introduced to implement Regulation (EU) 2019/452 which establishes a framework for the screening of foreign direct investments likely to affect security or public order into the Union, other than portfolio investments. Additionally, draft law 7578 also seeks to introduce a scrutiny regime on foreign direct investments whereby prior approval from the Ministry of Economy would be required, under certain circumstances, for investors outside the EU wishing to gain a significant influence in a Luxembourg undertaking, in part of a Luxembourg undertaking or in a group of undertakings.

Benchmarks law: Draft law 7861 amending the law of 17 April 2018 on benchmarks is pending before the Luxembourg Parliament to take into consideration Regulations (EU) 2021/168, (EU) 2019/2175 and (EU) 2019/2089 which amend the Regulation (EU) 2016/1011 (BMR) and, in particular, address the cessation of LIBOR.

Central Securities Depositories Regulation (CSDR): Only part of the EU CSDR settlement discipline regime will apply from 1 February 2022, following the announcement that implementation of the mandatory buy-in regime will be delayed pending expected reforms to the rules. 

Dormant accounts and inactive insurance contracts: Following the Belgium and French examples, Luxembourg is considering introducing a new law in relation to dormant accounts (including insurance contracts) which comprises (i) a series of measures to prevent account inactivity as well as the withdrawal of inactive insurance contracts to restore contact through information and research procedures, (ii) the obligation to consign assets after inactivity, and (iii) provisions for the return of consigned assets.

EMIR: Changes to clearing obligations (and related derivatives trading obligations) in view of interest rate reform are expected to take effect from early 2022. Pursuant to EMIR REFIT, the delegated regulation specifying the conditions under which commercial terms offered for clearing services are considered to be fair, reasonable, non-discriminatory and transparent (FRANDT) will apply from 9 March 2022. Read more… The phase-in of initial margins for uncleared derivatives will be completed with phase 6 counterparties coming into scope from 1 September 2022. It is anticipated that draft technical standards in respect of initial margin model validation and reporting will move through the legislative process.

Modernisation of the Luxembourg securitisation law: Draft law 7825 contains targeted adaptations to the securitisation regime under the law of 22 March 2004 on securitisation. These clarify certain aspects to enhance legal certainty and to ensure the Luxembourg securitisation regime remains flexible to the market’s needs.

Read more...

Anti-money laundering/Counter terrorist financing (AML/CTF): The legislative package published by the European Commission (EC) will go through the EU legislative process in 2022. It involves: (a) a proposal for a Regulation establishing an EU AML/CTF authority; and (b) the establishment of an EU single rulebook on AML/CTF which includes (i) a new proposal for a Regulation on AML/CTF containing directly-applicable rules; (ii) a new proposal for a 6th Directive on AML/CTF; and (iii) a recast of Regulation (EU) 2015/847 on information accompanying transfers of funds. Read more…

The FATF onsite visit in Luxembourg initially planned for June/July 2020 and delayed due to Covid-19 may take place in 2022, with plenary discussions to follow.

Benchmarks law: Draft law 7861 amending the law of 17 April 2018 on benchmarks is pending before the Luxembourg Parliament to take into consideration Regulations (EU) 2021/168, (EU) 2019/2175 and (EU) 2019/2089 which amend the Regulation (EU) 2016/1011 (BMR) and, in particular, address the cessation of LIBOR.

Central Securities Depositories Regulation (CSDR): Only part of the EU CSDR settlement discipline regime will apply from 1 February 2022, following the announcement that implementation of the mandatory buy-in regime will be delayed pending expected reforms to the rules. 

EMIR: Changes to clearing obligations (and related derivatives trading obligations) in view of interest rate reform are expected to take effect from early 2022. Pursuant to EMIR REFIT, the delegated regulation specifying the conditions under which commercial terms offered for clearing services are considered to be fair, reasonable, non-discriminatory and transparent (FRANDT) will apply from 9 March 2022. Read more… The phase-in of initial margins for uncleared derivatives will be completed with phase 6 counterparties coming into scope from 1 September 2022. It is anticipated that draft technical standards in respect of initial margin model validation and reporting will move through the legislative process.

EU green bond standard: As part of its new Sustainable Finance Strategy, the EC published a legislative proposal for a European Green Bonds Regulation in July 2021. The so-called European Green Bond Standard (EU GBS) creates a framework for bonds which use the designation European Green Bond (EUGB). Such bonds will need to be taxonomy-compliant: namely, that the issue proceeds are to be exclusively and fully allocated to economic activities that meet the requirements of the Taxonomy Regulation. Read more here, here and here…

MiFID II and MiFIR: The EC published its long-awaited legislative proposals following the detailed review of EU MiFID II/MiFIR.

Read more…

Company law package: Directives (EU) 2019/1151 and (EU) 2019/2121 amended Directive (EU) 2017/1132 to increase respectively: (i) the use of digital tools and processes in company law; and (ii) the protection of employees, shareholders and creditors in cross-border conversions, mergers and divisions and prevent these procedures being used to set up artificial arrangements. Their transposition has not yet taken place in Luxembourg.

Non-profit associations and foundations: Draft law 6054 on non-profit associations and foundations aims to modernise the current legal framework, which dates back to 1928.

Patrimonial foundations: Draft law 6595 intends to introduce a new wealth management vehicle in the form of a private foundation with an attractive tax regime.

Corporate Sustainability Reporting Directive: The EC has adopted a proposal for a Corporate Sustainability Reporting Directive. This extends the scope of Directive 2014/05/EU (Non-financial Reporting Directive) as regards disclosure of non-financial information by certain large undertakings and groups to all large companies and those listed on regulated markets (with the exception of listed micro-enterprises). It also introduces more detailed reporting requirements along with the requirement to report according to mandatory EU sustainability reporting standards.

Implementation of the EU Collective Redress Directive: After highly controversial discussions, the draft EU Collective Redress Directive was approved by the EU Parliament on 24 November 2020. Effective on 25 June 2023, it aims to ensure that consumers in Luxembourg have access to at least one effective and efficient representative action for obtaining injunctive relief and remedies for violations of consumer protection rules, such as the rules on unfair terms in consumer contracts, unfair B2C practices and misleading advertising. The transposition of the Directive into national law, due by 25 December 2022, is planned to be done concomitantly with the adoption of draft law 7650, which was introduced on 14 August 2020 in anticipation of the Directive.

Insolvency: The transposition of Directive (EU) 2019/1023, amending Directive (EU) 2017/1132 to ensure access to effective national preventive restructuring frameworks and to improve the effectiveness of procedures concerning restructuring, insolvency and discharge of debt, has not yet taken place in Luxembourg.

Protection of enterprises and modernisation of bankruptcy law: The Luxembourg Parliament is discussing draft law 6539A and draft law 6539B. Draft law 6539A seeks to reform the legal framework by providing conservatory measures and legal instruments to prevent financially distressed companies from being declared bankrupt should their financial problems be detected at an early stage. It would also favour other turnaround options rather than liquidation of distressed companies. Draft law 6539B aims to introduce a new procedure of administrative winding-up without liquidation.

Moral harassment: Draft law 7864 aims to provide a definition of moral harassment in the context of labour relations pursuant to which the employer is obliged to stop any moral harassment of which they are aware and to take appropriate measures.

Right to disconnect: Draft law 7890 aims to oblige employers to implement rules ensuring employees have a right to disconnect.

EU single access point: The EU Commission has introduced a new proposal for a Regulation aiming to establish a European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability.

Review of EU Solvency II: The EC has proposed a series of targeted amendments to the Solvency II regime, alongside a new framework for the recovery and resolution of insurers. The EU’s legislative bodies will now negotiate final texts based on the EC’s proposals.

Read more…

Enhancement of the copyright regime in Luxembourg: Luxembourg tabled a draft law 7846 transposing Directive (EU) 2019/789 on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes. The main focus of this directive is to enhance the EU copyright regime in light of the digital age.

Transposition of the Copyright Digital Single Market (DSM) Directive 2019/790: Luxembourg is still in the process of transposing the Directive on Copyright in the Digital Single Market (Directive 2019/790/EU) into national law (draft law n°7847). The main focus of this Directive is to further harmonise EU law applicable to copyright and related rights in the context of the internal market, taking into account the digital and cross-border uses of protected content. As the Directive was due to be transposed by 7 June 2021, the EU Commission has issued letters of formal notice to Luxembourg and to other defaulting Member States.

Fit for 55: At EU level we will see discussions on a suite of legislative initiatives (Fit for 55 package) across various sectors, including energy, transport and buildings. The initiatives are intended to fundamentally overhaul the EU’s climate policy framework and put the EU on track to deliver on its 2030 climate target of 55%. Read more… Likewise, the EU gas package proposing inter alia new rules for hydrogen will go through the legislative process.

Corporate Sustainability Reporting Directive: The EC has adopted a proposal for a Corporate Sustainability Reporting Directive. This extends the scope of Directive 2014/05/EU (Non-financial Reporting Directive) as regards disclosure of non-financial information by certain large undertakings and groups to all large companies and those listed on regulated markets (with the exception of listed micro-enterprises). It also introduces more detailed reporting requirements along with the requirement to report according to mandatory EU sustainability reporting standards.

Amendments to Part II fund, SIF and SICAR laws: Draft law 6936 remains in the pipeline and aims to (i) allow the CSSF to issue a regulation restricting the eligible assets of a SIF which offers its units/shares to investors not qualifying as professionals under MiFID II, (ii) allow Part II funds, under certain conditions, to issue units/shares at a different price than their net asset value, and (iii) update the SICAR law to align it with the SIF law provisions.

Benchmarks law: Draft law 7861 amending the law of 17 April 2018 on benchmarks is pending before the Luxembourg Parliament to take into consideration Regulations (EU) 2021/168, (EU) 2019/2175 and (EU) 2019/2089 which amend the Regulation (EU) 2016/1011 (BMR) and, in particular, address the cessation of LIBOR.

Competent authorities: Draft law 7774 amends the law of 16 July 2019 regarding the implementation of the EuVECA, EuSEF, MMF, ELTIF and STS securitisation regulations to give the supervisory and investigatory powers to the CSSF and the CAA that are necessary for the exercise of their functions in relation to the implementation of the PEPP Regulation, Taxonomy Regulation and SFDR.

Cross-border distribution of investment funds: In February 2022, ESMA guidelines for funds’ communications under article 4 of Regulation (EU) 2019/1156 on the cross-border distribution of collective investment undertakings will start to apply.

Read more…

EMIR: Changes to clearing obligations (and related derivatives trading obligations) in view of interest rate reform are expected to take effect from early 2022. Pursuant to EMIR REFIT, the delegated regulation specifying the conditions under which commercial terms offered for clearing services are considered to be fair, reasonable, non-discriminatory and transparent (FRANDT) will apply from 9 March 2022. Read more… The phase-in of initial margins for uncleared derivatives will be completed with phase 6 counterparties coming into scope from 1 September 2022. It is anticipated that draft technical standards in respect of initial margin model validation and reporting will move through the legislative process.

MiFID II and MiFIR: The EC published its long-awaited legislative proposals following the detailed review of EU MiFID II/MiFIR.

Read more…

New retail investor strategy: The EC is preparing a new strategy which should be published in the first half of 2022. This will potentially trigger amendments to the current EU rules regarding retail investors (e.g. MiFID, IDD, PRIIPS and UCITS).

Proposal to amend AIFMD and UCITS Directive: This proposal originates from the EC’s review of AIFMD in which certain issues were considered that are of relevance to both directives. The EC concluded, however, that AIFMD is mostly effective and so the proposed changes are relatively limited in scope.

 

Lease agreements: Draft law 7642 aims at facilitating access to housing for lessees by introducing: (i) measures to oversee agency fees; as well as (ii) a legal regime for apartment-sharing.

Insolvency: The transposition of Directive (EU) 2019/1023, amending Directive (EU) 2017/1132 to ensure access to effective national preventive restructuring frameworks and to improve the effectiveness of procedures concerning restructuring, insolvency and discharge of debt, has not yet taken place in Luxembourg.

Protection of enterprises and modernisation of bankruptcy law: The Luxembourg Parliament is discussing draft law 6539A and draft law 6539B. Draft law 6539A seeks to reform the legal framework by providing conservatory measures and legal instruments to prevent financially distressed companies from being declared bankrupt should their financial problems be detected at an early stage. It would also favour other turnaround options rather than liquidation of distressed companies. Draft law 6539B aims to introduce a new procedure of administrative winding-up without liquidation.

Budget law: On 13 October 2021, the Luxembourg Government filed budget draft law 7878 with the Luxembourg Parliament. This proposes several amendments to the Luxembourg tax laws for tax year 2022, however, will have limited impact on corporate taxpayers.

Reverse hybrid rule: From 1 January 2022, the reverse hybrid mismatch rule, introduced by Directive (EU) 2017/952 (ATAD 2), will eliminate tax mismatch outcomes. The rule will treat reverse hybrids as resident taxpayers, subject to corporate income tax (for the relevant part of their income), as opposed to refusing deductions one level below.

Interest deduction limitation rule: On 8 January, the Luxembourg tax authorities published a circular clarifying certain aspects of the interest deduction limitation rules introduced by Directive (EU) 2016/1164 (ATAD), in particular the meaning of borrowing costs, fiscal EBIDTA and the grand-fathering rule.

Read more...

New regulation for Artificial Intelligence (AI): The EU will press ahead with its proposal to create a new regulatory superstructure for AI, including prohibiting some uses entirely and imposing significant and extensive compliance obligations on providers of “high risk” AI.

Read more...

 
Digital reforms: The EU aims to reach an agreement on the Digital Markets Act in 2022, which will reshape how digital businesses operate in the EU and regulate online “gatekeepers”, such as Amazon and Facebook. Read more… Negotiations between the EC, the EU Parliament and the Council are expected to begin on the legislative text of the Markets in Cryptoassets Regulation (MiCAR) and Digital Operational Resilience Act (DORA), originally proposed by the EC as part of its Digital Finance Strategy. This legislation envisages significant extensions to the regulatory perimeter and has attracted broad market interest.

Luxembourg law highlights in 2021

Covid-19

The Covid-19 pandemic continued to unfold in 2021, requiring to take new initiatives (eg CovidCheck) as well as to extend some of the measures already implemented in 2020 (eg measures regarding the holding of meetings in companies) in various areas.

SPACs

The number of SPACs transactions boomed in 2021, leading to the adoption of guidelines by ESMA and the Luxembourg Stock Exchange to help financial sponsors in the structuring of SPACs.

Sustainable finance

In 2021, Luxembourg’s unwavering commitment to sustainable finance has been an increasingly important driver in helping the financial services sector meet the soaring demand from investors seeking to build a better, cleaner and brighter world.

Amendments to BMR: The BMR has been amended to grant powers to the EC to designate statutory replacement benchmarks in place of certain critical benchmarks. Designations have already been made in respect of CHF LIBOR and EONIA effective in January 2022.

Covered bonds: Draft law 7822 was adopted to transpose Directive (EU) 2019/2162 on the issue of covered bonds and their public supervision and implement Regulation (EU) 2019/2160 as regards exposures in the form of covered bonds. It introduces a new regulatory framework applicable to EU covered bonds (labelled “European Covered Bond” and “European Covered Bond (premium)”) which will coexist with the national covered bonds regime. Its publication is expected in the coming weeks.

CRD V /BRRD II / CRR II: The law of 20 May 2021 transposing Directive (EU) 2019/878 (CRD V) and Directive (EU) 2019 879 (BRRD II), implementing Regulation (EU) 2019/876 (CRR II) and amending inter alia the amended law of 5 April 1993 on the financial sector was adopted. The CSSF issued a communiqué addressing developments regarding the new law, including a new approval process for financial holding companies and mixed financial holding companies. Other key aspects relate to proportionality, the definition of material risk takers, de minimis exemption, deferral periods and gender neutrality with respect to remuneration policies. Read more… At EU level, regulatory technical standards setting out the mandatory content of the contractual recognition of stay language required by Article 71a(1) of the BRRD applied from 5 September 2021.

Read more…

Crowdfunding Regulation: A new EU-wide regime for crowdfunding service providers will apply from 10 November 2021, although existing providers may benefit from a transition period.

Directive on non-performing loans and credit servicers: The final text of the directive on non-performing loans and credit servicers is about to be adopted. The Directive standardises the rules for credit servicers and credit purchasers across the EU and facilitates the sales of non-performing loans while ensuring that borrowers’ rights are not hampered in the process.

EMIR: Amendments to the margin rules for uncleared derivatives came into force in February 2021 and phase 5 counterparties came into scope for initial margin on uncleared derivatives from 1 September 2021. Equivalence decisions covering certain aspects of the margin rules in respect of several countries came into force on 26 July 2021. Read more…. Pursuant to EMIR REFIT, ESMA consulted on technical standards on reporting and the EBA published draft regulatory technical standards for consultation on initial margin model validation. ESMA also published its final report and draft changes to clearing obligation (and the related derivatives trading obligation) as a result of the interest rate reform.

NGEU: The EU set up an unprecedented EUR 750 billion recovery instrument, “Next Generation EU”, supporting the Member States to repair and recover from the pandemic through funds raised on the financial markets.The EU set up an unprecedented EUR 750 billion recovery instrument, “Next Generation EU”, supporting the Member States to repair and recover from the pandemic through funds raised on the financial markets.

Anti-money laundering/Counter terrorist financing (AML/CTF): The law of 25 February 2021 completed the transposition into Luxembourg law of Directive (EU) 2015/849 (AMLD IV) and notably clarified certain provisions of the law of 12 November 2004 on the fight against money laundering and terrorist financing in light of the related FATF recommendations. The law also authorised UK UCITS funds which were registered for the marketing of their units in Luxembourg by 31 January 2021 to continue such marketing until 31 July 2021.

Amendments to BMR: The BMR has been amended to grant powers to the EC to designate statutory replacement benchmarks in place of certain critical benchmarks. Designations have already been made in respect of CHF LIBOR and EONIA effective in January 2022.

Covered bonds: Draft law 7822 was adopted to transpose Directive (EU) 2019/2162 on the issue of covered bonds and their public supervision and implement Regulation (EU) 2019/2160 as regards exposures in the form of covered bonds. It introduces a new regulatory framework applicable to EU covered bonds (labelled “European Covered Bond” and “European Covered Bond (premium)”) which will coexist with the national covered bonds regime. Its publication is expected in the coming weeks.

Central Securities Depositories Regulation (CSDR): Only part of the EU CSDR settlement discipline regime will apply from 1 February 2022, following the announcement that implementation of the mandatory buy-in regime will be delayed pending expected reforms to the rules. 

EMIR: Amendments to the margin rules for uncleared derivatives came into force in February 2021 and phase 5 counterparties came into scope for initial margin on uncleared derivatives from 1 September 2021. Equivalence decisions covering certain aspects of the margin rules in respect of several countries came into force on 26 July 2021. Read more…. Pursuant to EMIR REFIT, ESMA consulted on technical standards on reporting and the EBA published draft regulatory technical standards for consultation on initial margin model validation. ESMA also published its final report and draft changes to clearing obligation (and the related derivatives trading obligation) as a result of the interest rate reform.

Issuance of dematerialised securities: The law of 22 January 2021 introduced two changes, namely: (i) recognising the issuance of dematerialised securities using distributed ledger technology (including blockchain); and (ii) including any EU credit institution or investment firm, under certain conditions in the scope of entities allowed to act as account keeper for unlisted debt securities.

Read more…

MiFID II “QuickFix”: After a lengthy legislative process, the so-called “quick fix” amendments to MiFID II came into force in February 2021.

Read more…

NGEU: The EU set up an unprecedented EUR 750 billion recovery instrument, “Next Generation EU”, supporting the Member States to repair and recover from the pandemic through funds raised on the financial markets.

SFTR: The phase-in of the reporting obligation under EU SFTR was completed, with non-financial counterparties (NFCs) coming into scope from 11 January 2021.

Special Purpose Acquisition Companies (SPACs): ESMA has issued a public statement on the prospectus disclosure and investor protection considerations raised by SPACs. It lays down certain disclosure requirements for prospectuses on which national competent authorities should focus with SPACs. The Luxembourg Stock Exchange (LuxSE) has also published guidelines pursuant to which sponsors of SPACs must consider a number of recommendations as part of the structuring process of SPACs.

Read more here, here and here…

Financial assistance: The law of 6 August 2021 clarified that penalties set forth by the amended law of 10 August 1915 on commercial companies in case of financial assistance do not apply to the managers of a Luxembourg SARL. Financial assistance is therefore not prohibited for SARLs but is still to be cautiously considered in light of the corporate interest of the company.

Read more…

Societal impact companies: A law of 16 July 2021 has been adopted to reduce the obligations applicable to societal impact companies regarding the audit of their accounts.

Covid-19 measures: As a result of Covid-19, some of the measures implemented by the Luxembourg authorities include the extension of the measures facilitating the holding of meetings in companies until 31 December 2021 (read more...); and enabling employers to use the CovidCheck system to access work premises or certain areas or work events (read more...). Several draft laws have recently been introduced in Parliament to further extend Covid-19 related measures (including those in relation to the holding of meetings in companies).

First GDPR decisions and fines in Luxembourg: In 2021, the CNPD published its first decisions and imposed its first fines since the coming into force of GDPR. The fines ranged from EUR 1,000 to a record fine of EUR 746m. Most of the decisions are the result of onsite investigations. 

Read more...

New guidelines on the use of cookies: The CNPD has published updated guidelines on cookies and other trackers, including “fingerprinting", "web beacons" or "shared objects. 

Read more...

New Standard Contractual Clauses for the international transfer of data: The EU Commission issued new Standard Contractual Clauses for international personal data transfers and the European Data Protection Board issued strict new guidance on when these transfers can take place. 

Read more here and here...

Procedural law reform: The law dated 15 July 2021 “to strengthen the efficiency of civil and commercial justice” entered into force on 16 September 2021. Amongst the numerous amendments, the major ones are (i) the extension of the Magistrate courts’ jurisdiction (Tribunal de paix) to include disputes up to EUR 15,000 and (ii) the ability to pursue enforcement measures on the basis of a temporary payment order.

CRD V /BRRD II / CRR II: The law of 20 May 2021 transposing Directive (EU) 2019/878 (CRD V) and Directive (EU) 2019 879 (BRRD II), implementing Regulation (EU) 2019/876 (CRR II) and amending inter alia the amended law of 5 April 1993 on the financial sector was adopted. The CSSF issued a communiqué addressing developments regarding the new law, including a new approval process for financial holding companies and mixed financial holding companies. Other key aspects relate to proportionality, the definition of material risk takers, de minimis exemption, deferral periods and gender neutrality with respect to remuneration policies. Read more… At EU level, regulatory technical standards setting out the mandatory content of the contractual recognition of stay language required by Article 71a(1) of the BRRD applied from 5 September 2021.

Read more…

Investment firms (IFs): A law of 21 July 2021 transposed Directive (EU) 2019/2034 and implemented Regulation (EU) 2019/2033. The law set up a new prudential regime for IFs and provisions on remuneration policies, especially in relation to proportionality, variable remuneration (deferral period, clawback, assessment of performance, etc.) and governance. Read more here and here... The law also implemented measures under Directive (EU) 2021/338 (known as the MiFID II Quick Fix) adopted in response to Covid-19. Read more here and here...

Minimum wage: An increase in the minimum wage and a new salary index for skilled and unskilled employees was decided as of 1 October 2021.

Secondment: The law of 15 December 2020, effective 22 December 2020, implemented Directive (EU) 2018/957 concerning the posting of workers. It adds clarity on working conditions, the duration of the posting and the range of information to be provided to the Labour Inspection upon notification of the secondment.

ESG: ESG continues to account for a significant part of EU and Luxembourg legal developments. For a more in-depth analysis, please look out for our Global ESG Outlook publication, available  in January. 

Read more…

EU corporate due diligence and accountability initiative: The EU Commission is expected to publish a “sustainable corporate governance initiative” by the end of Q1 2022 aiming to impose on companies of a certain status/size or risk category operating in the EU internal market due diligence and reporting obligations covering the human rights, environmental and good governance impact of their value chain. It would also impose on directors a legal duty to consider, and to balance the interests of, a wide range of stakeholders (employees, consumers, local communities etc.) in their decision-making. This could extend to an obligation to implement procedures that address any adverse ESG and human rights impact on stakeholders.

Competent authorities: A law of 21 July 2021 entitled the CSSF and the CAA the power to grant or withdraw authorisations to certain entities under their supervision, instead of the Ministry of Finance.

Central Securities Depositories Regulation (CSDR): Only part of the EU CSDR settlement discipline regime will apply from 1 February 2022, following the announcement that implementation of the mandatory buy-in regime will be delayed pending expected reforms to the rules. 

Teleworking in the financial sector: In April 2021, the CSSF released Circular 21/769 which contains guidance on teleworking in supervised entities. This will apply as soon as the pandemic ends, to ensure confidentiality, security and business continuity when teleworking.

Read more…

Amendments to BMR: The BMR has been amended to grant powers to the EC to designate statutory replacement benchmarks in place of certain critical benchmarks. Designations have already been made in respect of CHF LIBOR and EONIA effective in January 2022.

Cross-border distribution of investment funds: The law of 21 July 2021 implemented Directive 2019/1160 regarding cross-border distribution of collective investment undertakings. It also clarified that, for alternative investment funds in the form of special limited partnerships (SCSp), and falling outside the scope of application of chapter II of the law of 19 December 2002 on the register of commerce and companies as amended, the accounting information given in the annual report, can be prepared using either Luxembourg standards (LUX GAAP), the IFRS, or the equivalent accounting standards of certain third countries, which include, in particular, the US GAAP.

Read more…

Crowdfunding Regulation: A new EU-wide regime for crowdfunding service providers will apply from 10 November 2021, although existing providers may benefit from a transition period.

EMIR: Amendments to the margin rules for uncleared derivatives came into force in February 2021 and phase 5 counterparties came into scope for initial margin on uncleared derivatives from 1 September 2021. Equivalence decisions covering certain aspects of the margin rules in respect of several countries came into force on 26 July 2021. Read more…. Pursuant to EMIR REFIT, ESMA consulted on technical standards on reporting and the EBA published draft regulatory technical standards for consultation on initial margin model validation. ESMA also published its final report and draft changes to clearing obligation (and the related derivatives trading obligation) as a result of the interest rate reform.

EU long-term investment fund (ELTIF) review: The EC published a proposal on the review of the ELTIF regulatory framework to enhance its attractiveness. 

Read more…

Interest rate reform: The EC, European Central Bank, European Banking Authority and ESMA published a joint statement to emphasise the measures that LIBOR users should take before the reference rate is no longer published. After 31 December 2021, LIBOR will cease to be published and banks, asset managers and corporates are preparing for the transition to new risk-free rates. There are no current plans to cease using EURIBOR, as it is the most widely used benchmark in the bond market. EONIA, by contrast, is due to be replaced by €STR from 3 January 2022.

Read more…

MiFID II “QuickFix”: After a lengthy legislative process, the so-called “quick fix” amendments to MiFID II came into force in February 2021.

Read more…

PRIIPs: The quick fixes texts (draft regulation and draft directive revising the PRIIPs Regulation and the UCITS Directive respectively) should be adopted by the end of 2021.This means that UCITS management companies will only have to produce PRIIPs KIDs for their investors from 31 December 2022. From the same date, UCITS management companies should have the choice to give either a UCITS KIID or a PRIIPs KID to non-retail investors. The EC is expected to find a way to align the application date of the revised level 2 rules accordingly.

SFTR: The phase-in of the reporting obligation under EU SFTR was completed, with non-financial counterparties (NFCs) coming into scope from 11 January 2021.

Special Purpose Acquisition Companies (SPACs): ESMA has issued a public statement on the prospectus disclosure and investor protection considerations raised by SPACs. It lays down certain disclosure requirements for prospectuses on which national competent authorities should focus with SPACs. The Luxembourg Stock Exchange (LuxSE) has also published guidelines pursuant to which sponsors of SPACs must consider a number of recommendations as part of the structuring process of SPACs. Read more here, here and here…

Introduction of CO2 tax: Last year’s budget law introduced a carbon tax of EUR 20 per tonne applying from 2021. The tax will increase to EUR 25 per tonne in 2022 and EUR 30 per tonne in 2023.

Non-deduction of interest and royalty payments to non-cooperative jurisdictions: As from 1 March, the deduction for interest and royalties due or paid to related enterprises established in non-cooperative jurisdictions (for tax purposes) has been denied unless the transaction to which the interest or royalties relate has been carried out for valid commercial reasons reflecting economic reality.

OECD opinion on interpretation and implementation of the Multilateral Instrument (MLI): The Conference of the Parties to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) has approved a series of six guiding principles for addressing questions about the interpretation and implementation of the MLI.

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Profit participation bonus scheme: On 11 February, the Luxembourg tax authorities published a circular clarifying the tax treatment of the profit participation bonus scheme. The circular sets out the employer’s reporting obligations and how to work out the employee’s annual remuneration of which the bonus under the scheme may not exceed 25%.

The EC announces measures for “Business Taxation for the 21st century”: On 18 May, the EC announced an ambitious package of measures for “Business Taxation in the 21st century” to create a fair, revenue-generating, investment-friendly and stable EU tax system. Of particular relevance for Luxembourg is the discussion on the use of shell entities.

Read more...

BEPS 2.0: OECD’s Pillar One & Pillar Two On 1 July, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) approved the key terms for reforming international tax rules with a “Two-Pillar Solution”. Pillar One aims at ensuring that profits are taxed where goods or services are used and consumed. Pillar Two establishes a global minimum taxation regime by introducing an income inclusion rule, an undertaxed payment rule and a subject to tax rule. The OECD aims to implement these rules gradually from 2023.

New Luxembourg Space law entered into force: On 1 January 2021, the new law on Space activities entered into force, aiming to providing a safe and attractive environment for operators, investors and entrepreneurs. The law includes a tax exemption of insurance contracts covering the space objects registered by Luxembourg and an adaptation of the rules regarding the tax credit for investments for operators of space objects.

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