Luxembourg law on professional payment guarantees published

Yesterday, the law of 10 July 2020 regarding professional payment guarantees was published (the “Law”).

This Law introduces a new personal guarantee regime for guarantees granted within a professional context and aims to provide a flexible alternative to the existing suretyship (cautionnement) and first demand guarantee (garantie à première demande) regimes.

This new guarantee regime aims at reinforcing the attractiveness of Luxembourg as place of choice for international financial transactions.

The professional payment guarantee will be for sure a useful tool in the scope of structuring (i) security packages for financial transactions and (ii) joint-venture deals as it offers contractual freedoms and legal certainty (no risk of requalification into suretyship).