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Enforcement of pledge over shares in Luxembourg, irrespective of whether secured debt due – update

Update following the decision of the Luxembourg Court of Appeal, n°42760 and n°429971, 27 January 2016 and upholding the order of the First Judge of the District Court of Luxembourg sitting in summary proceedings matters, N°356/2015, 15 July 2015.

In the November 2015 edition of the European Finance Litigation Review, we commented on a decision concerning whether a pledge governed by the Luxembourg law of 5 August 2005 on financial collateral arrangements, as amended (the Collateral Act) could be enforced even in circumstances where the secured obligation was not yet due and payable and where the creditor had not claimed the repayment of the secured debt.1

The First Judge ruled that, in light of the Collateral Act, in addition to a failure to reimburse the secured obligation, parties may agree to other triggering events for enforcement of a pledge (which is what the parties had done here). The court rejected the debtor’s application for suspension of the enforcement of the pledge.

The Luxembourg Court of Appeal agreed and took an even stronger approach: in light of the provisions of the Collateral Directive2 and of the Collateral Act which aim at ensuring that the financial collateral arrangements cannot be challenged and provide only for an a posteriori control of the conditions in which financial collateral arrangements are enforced, as a matter of principle, summary proceedings may not purport to suspend the effects of the enforcement of a financial collateral arrangement.


1. Order rendered by the First Judge of the District Court of Luxembourg sitting in summary proceedings matters (order N°356/2015, 15 July 2015).
2. Directive 2002/47/EC of 6 June 2002.

Further information

This article is part of the European Finance Litigation Review,  a quarterly publication on recent developments in the finance litigation and regulatory sector in key European jurisdictions.  For more information please contact Amy Edwards

Western Europe