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Trends and climate

Trends

Have there been any recent changes in the enforcement of anti-corruption regulations?

The main legislative changes regarding anti-corruption and bribery date back to the introduction of the legal framework established by the Law of February 13 2011, which significantly broadened the scope of the Criminal Code’s relevant articles.

The Law of February 13 2011 not only implemented the recommendations of the Organisation for Economic Cooperation and Development and the Council of Europe’s Group of States against Corruption, but also introduced valuable provisions regarding whistleblowing.

The term ‘whistleblowing’ recently gained importance in Luxembourg due to the so-called ‘Lux Leaks trial’, in which employees from one of the Big Four accounting firms leaked confidential information about Luxembourg’s tax rulings to the public, which was then reported by a journalist. The confidential information revealed the specific tax arrangements of major global companies.

The former employees and the journalist were prosecuted for theft, disclosure of confidential information and trade secrets, money laundering and fraud. One of the accounting firm’s employees was found guilty of theft and violating professional secrecy laws. He received a 12-month suspended sentence and was fined €1,500. Another former employee received a nine-month suspended sentence and was fined €1,000. The former employees were also ordered to pay a symbolic fine to their former employer. However, the journalist who brought the events to light was acquitted.

The consequences of this verdict are still unclear, but the trial’s outcome is likely to have major national – and possibly international – consequences for Luxembourg businesses and businesses registered in Luxembourg more generally. The accounting firm immediately issued a press release which stated that it will continue to protect the confidentiality of its documents and files.

The first-instance decision is subject to an appeal by the two former employees.

Legislative activity

Are there plans for any changes to the law in this area?

At present, it appears that there are no government or parliamentary initiatives to amend existing anti-corruption legislation.

Considering the events linked to the Lux Leaks trial, further measures regarding whistleblowing could be introduced in the near future. However, there are no signs of immediate legislative changes.

Legal framework

Authorities

Which authorities are responsible for investigating bribery and corruption in your jurisdiction?

Depending on the stage of the proceedings and the nature of the possible offence, there are different competent authorities in Luxembourg.

The Luxembourg financial sector regulator (CSSF) is responsible for the prudential supervision of:

  • credit institutions;
  • financial sector professionals;
  • alternative investment fund managers;
  • collective investment undertakings;
  • pension funds;
  • collective venture capital investment companies;
  • authorised securitisation undertakings;
  • fiduciary-representatives dealing with securitisation undertakings; 
  • regulated markets and their operators;
  • multilateral trading facilities;
  • payment institutions; and
  • electronic money institutions.

The CSSF must ensure compliance with professional obligations regarding the fight against money laundering and terrorist financing by parties that are subject to its supervision and can issue sanctions depending on the nature and gravity of the offence.

Article 2(1) of the Law of December 23 1998 establishing a financial sector supervisory commission, as amended, states that the CSSF can penalise parties that fail to comply with the law.

The CSSF can issue (ranked in order of seriousness):

  • a warning;
  • a reprimand;
  • an administrative fine of between €250 and €250,000; and
  • a temporary or definitive ban on performing one or several operations or activities and any other restriction on the activity of the persons or entity.

The decision to impose a penalty may be referred to the administrative court which will deal with the substance of the case.

The prosecutor’s office can also conduct investigations if serious allegations are brought to its attention. Specifically, the financial intelligence unit is part of the prosecutor’s office and deals with anti-money laundering matters and the fight against terrorism.

The Corruption Prevention Committee is a consulting body entrusted with specific powers which assists the government in fighting corruption. The Corruption Prevention Committee is mainly involved in determining the overall national policy in fighting corruption and bribery, rather than being an investigative body.

Domestic law

What are the key legislative and regulatory provisions relating to bribery and corruption in your jurisdiction?

Luxembourg

The Criminal Code contains the main legislative and regulatory provisions regarding bribery and corruption. Articles 246 to 259 of the code are dedicated to:

  • corruption and influence peddling;
  • the corruption and bribery of judges;
  • the intimidation of persons in charge of a public service or administration; and
  • the abuse of authority.

Other Criminal Code provisions concern money laundering or other offences which are primarily associated with corruption or bribery.

Further, Article 271(1) of the Labour Code aims to protect potential whistleblowers. According to this article, an employee who has alerted his or her superiors or colleagues or third parties in good faith, cannot be subject to reprisals and his or her labour agreement cannot be terminated due to this action.

International conventions

What international anti-corruption conventions apply in your jurisdiction?

The most relevant international conventions and treaties to which Luxembourg is party are:

  • the Organisation for Economic Cooperation Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1997, which was transposed into Luxembourg law by the Law of January 15 2001;
  • the United Nations Convention against Transnational Organised Crime and the Protocols Thereto 2000, which was transposed into Luxembourg law by the Law of December 18 2007; and
  • the United Nations Convention against Corruption 2003, which was transposed into Luxembourg law by the Law of August 1 2007.

Specific offences and restrictions

Offences

What are the key corruption and bribery offences in your jurisdiction?

Articles 246 to 249 of the Criminal Code concern active and passive bribery. The instigating party is considered to have committed active bribery, whereas the receiving party is considered to have committed passive bribery.

Corruption and bribery provisions apply not only to public offices and persons holding public authority, but also persons who manage or work in the private sector.

The following persons and offices are explicitly targeted by the Law of February 13 2011:

  • persons holding public authority; 
  • public officials or agents entrusted with an elective public mandate (ie, politically exposed persons) or public service mission, including from another state;
  • EU officials and institution staff; and
  • international organisations and magistrates, such as individuals managing or working in a private sector entity.

Article 247 of the Criminal Code defines ‘active bribery’ as follows:

Any person unlawfully proposing or giving directly or indirectly an offer, a promise, a donation, a gift or an advantage of any kind to persons holding public authority, or public officials, or persons entrusted with a mission of public service, or agents entrusted with an elective public mandate, with the objective of getting this person to:

1° carry out or abstain from carrying out an act relating to their office, duty, or mandate or facilitated by their office, duty or mandate,

2° abuse their real or alleged influence in order to obtain from a public entity or public administration any distinction, employment, contract (public procurement), or any other favourable decision, is subject to a prison sentence of five to ten years and a fine of 500.- Euro to 187.500.- Euro.”

Thus, according to Article 247, a bribe consists of an offer, promise, donation or gift or an advantage of any kind, directly or indirectly given to (active bribery) or received by (passive bribery) the persons described in the article.

Article 248 of the Criminal Code deals with influence peddling, which entails soliciting or receiving a bribe to abuse real or alleged influence in order to obtain an advantage from a public entity or administration. The key components of this offence are similar to those regarding bribery defined in Article 247.

Under Article 249 of the Criminal Code, any person holding public authority or carrying out a service mission, or any person holding a public electoral mandate, who unlawfully solicits or receives a bribe from a person who benefits from the improper act will be punished by imprisonment for five to 10 years and a fine of between €500 and €187,500. The same provision applies to persons offering or giving a bribe.

Article 250 of the Criminal Code applies bribery provisions to judges, arbitrators, experts and, in general, any person sitting in judicial matters appointed by a court or the parties.

Hospitality restrictions

Are specific restrictions in place regarding the provision of hospitality (eg, gifts, travel expenses, meals and entertainment)? If so, what are the details?

Article 10(3) of the Law of April 16 1979 concerning the general status of public officers and employees states that public employees cannot solicit, accept or be promised by any source – directly or indirectly – any material advantages which are likely to put them in conflict with the obligations imposed on them by law. The Law of April 16 1979 explicitly refers to Articles 240 onwards of the Criminal Code.

On February 28 2014 a code of ethics for government members came into force and was later abolished by the Decree-Law of December 28 2015. This decree-law provides a coordinated behavioural code for government members.

Section 8 of the decree-law deals with gifts, offers of hospitality and honours and distinctions given to government employees. In this respect, the decree-law makes a clear distinction between gifts and donations received by public nationals or foreign entities and gifts and donations received by private entities.

Article 15 of the decree-law provides that gifts and offers of hospitality addressed to members of the government can be accepted when they:

  • originate from public, national or foreign entities – except for persons or public entities whose activity is mainly based in a competitive sector according to private law regulations; and
  • are consistent with the common practice and general rules of diplomatic courtesy.

This authorisation does not account for gifts and offers of hospitality which are likely to influence government members or their decision making.

Article 16 provides that gifts or offers of hospitality addressed to members of the government can be accepted when they:

  • originate from persons, private entities or public entities active in a competitive sector according to private law regulations; 
  • are consistent with the general rules of courtesy; and
  • have an approximate value that does not exceed €150.

This authorisation does not include gifts and offers of hospitality which are likely to influence government members or their decision making.

The decree-law further indicates that, if a gift or offer of hospitality which does not fulfil the abovementioned criteria has been accepted or is to be accepted, the prime minister must be notified of the donor’s name and the date of the occasion on which the government member received the gift.

Further, the decree-law specifies that government members are free to accept gifts or offers of hospitality in the scope of their private relations and from their usual close entourage which have no connection with their public function.

As far as is known, no similar provisions concerning behavioural rules regarding corruption and bribery in the private sector exist, so Articles 240 and following of the Criminal Code must be observed. 

Facilitation payments

What are the rules relating to facilitation payments?

Luxembourg is a signatory of the Organisation for Economic Cooperation Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 1997. As opposed to many other states (eg, Switzerland and the United States), Luxembourg has not adopted the facilitation payments exception, which would allow for certain payments to be permitted if they fall under this exception.

Liability

Scope of liability

Can both individuals and companies be held liable under anti-corruption rules in your jurisdiction?

Legal entities can be held criminally liable for the offences committed by their corporate bodies, such as directors, managers and statutory auditors.

The criminal liability of legal persons extends to natural persons who are perpetrators of or accomplices to the same act.

Can agents or facilitating parties be held liable for bribery offences and if so, under what circumstances?

Agents or facilitators can also be held liable under Luxembourg criminal law if they assumed a role in committing the offence and can therefore be considered co-authors or accomplices.

Agents or facilitators are considered to be:

  • co-authors if their role in the offence was such that it could not have been committed without their help; or
  • accomplices if they provided material or assisted the author while he or she committed the offence.

Foreign companies

Can foreign companies be prosecuted for corruption in your jurisdiction?

Foreign companies can be prosecuted for corruption in Luxembourg if there is an element which connects the offence to Luxembourg – for example, if the offence was committed on Luxembourg territory.

Whistleblowing and self-reporting

Whistleblowing

Are whistleblowers protected in your jurisdiction?

Whistleblowers are protected under Luxembourg law. The Law of February 13 2011 introduced specific provisions to the Labour Code designed to protect employees in both the private and public sector who highlight corruption or abuse of influence in their workplace. They are invited to report relevant information to their superiors or the proper authorities and are protected under the law.

Article L 271(1) of the Labour Code provides that an employee who, in good faith, has alerted his or her superiors or colleagues or any third party cannot be subject to reprisals and his or her employment agreement cannot be terminated due to whistleblowing.

However, whistleblowing remains a challenging issue. The Article 29 working group’s most recent provisions and recommendations are almost 10 years old. Further, the scope of this working group is limited to banking, accounting and internal and external auditing.

There is no precise definition of the term ‘whistleblowing’ in Luxembourg law. Thus, the law is reliant on the Council of Europe conditions in that regard which concern:

  • the seriousness of the reported actions or omissions (the actions that the whistleblower reported need to present a serious threat or prejudice to public interest); and
  • the whistleblower’s good faith.

These measures have been adopted in soft law. The credit institution, investment firm and loan agreement sector professionals are guaranteed the right to highlight serious and legitimate concerns regarding internal governance.

Confidentiality must be guaranteed and reports given in good faith will not result in responsibility for the whistleblower.

Further, persons working in sectors that are subject to anti-money laundering legislation must – on their own initiative – report any doubts or uncertainty concerning money-laundering offences or terrorist financing within their company.

Whistleblowing has recently become an important topic in Luxembourg due to the Lux Leaks trial, in which employees of one of the Big Four accounting firms leaked confidential information about Luxembourg’s tax rulings to the public. The final outcome of this process will help to define the boundaries and scope of Luxembourg’s whistleblowing legislation.

Self-reporting

Is it common for leniency to be shown to organisations that self-report and/or cooperate with authorities? If so, what process must be followed?

As far as is known, self-reporting is not a common practice in Luxembourg and there are no provisions in that regard. However, under Luxembourg law it is possible to negotiate a plea agreement.

Dispute resolution and risk management

Pre-court settlements

Is it possible for anti-corruption cases to be settled before trial by means of plea bargaining or settlement agreements?

Criminal cases in Luxembourg can be settled out of court by way of jugement sur accord, which is similar to a plea agreement. The practice is relatively new and therefore not as common as in common law countries.

Defences

Are any types of payment procedure exempt from liability under the corruption regulations in your jurisdiction?

There are no exceptions to the liability principle under corruption regulations, except regarding hospitality payments to government officials.

What other defences are available and who can qualify?

Since there are no actual exceptions to the liability principle under corruption regulations, no other defence is available to defendants. However, they can argue mitigating circumstances depending on the case at hand.

Risk management

What compliance procedures and policies can a company put in place to assist in the creation of safe harbours?

Companies must provide clear structures and provisions to guarantee employees their rights to report possible offences. A clear compliance policy must be established at the permanent and discrete disposal of employees who want to report an offence or fault internally.

Luxembourg soft law provides clear rules regarding compliance and internal audits, especially in the credit institution, investment firm and loan agreement sectors.

Depending on the size of the company, there should be one or more persons in charge of compliance, or a specific group or service dedicated to the subject.

Record keeping and reporting

Record keeping and accounting

What legislation governs the requirements for record keeping and accounting in your jurisdiction?

For transparency reasons and in order to protect third parties, companies must submit their annual accounts to the Companies Register.

Article 15 of the Commercial Code provides that once a year every company must draw up a complete inventory of their assets and entitlements of whatever nature and of their debts, obligations and commitments of any kind.

In Article 16 of the code provides that documents pertaining to a company’s accounting must kept for 10 years.

Further, as a protection mechanism, it is common practice for Luxembourg companies active in the financial sector to record and archive calls and emails. 

Moreover, the law of November 12 on the fight against money laundering and the financing of terrorism transposing Directive 2001/97/EC of the European Parliament and the Council of December 4 2001, as amended, imposes certain obligations on lawyers. Among these is the obligation to keep copies or references of the documents relating to a client’s identity and transactions executed for a five-year period. However, this provision is specific to the fight against money laundering and terrorism. 

What are the requirements for record keeping?

The law of November 12 2004 imposes specific obligations regarding know-your-customer policy on certain professions relating to the financial sector and lawyers.

However, there are no similar requirements specifically aimed at preventing of combatting corruption and bribery.

Reporting

What are the requirements for companies regarding disclosure of potential violations of anti-corruption regulations?

According to Article 140 of the Criminal Code, any person who has knowledge of a crime that could be averted must inform the judicial authorities or risks imprisonment for one to three years and a fine of between €251 and €45,000. Persons held to professional secrecy are exempt from this rule.

However, in view of the ever-increasing regulation on anti-money laundering, employees who suspect possible corruption at their company must report it to the proper authorities.

Considering that corruption constitutes the initial offence, any profit gained through corruption falls under the anti-money laundering regulation’s reporting obligation.

Penalties

Individuals

What penalties are available to the courts for violations of corruption laws by individuals?

According to Articles 246 and 247 of the Criminal Code, active and passive bribery can result in five to ten years’ imprisonment and a fine of between €500 and €187,000.

Influence peddling can result in five to ten years’ imprisonment and a fine of between €500 and €187,5000.

Companies or organisations

What penalties are available to the courts for violations of corruption laws by companies or organisations?

These penalties apply to natural persons and must be transferred to legal entities under the conditions provided by Luxembourg law.

Thus, legal persons that have committed a misdemeanour or an offence, including extortion, bribery, influence-peddling and corruption offences, may be subject to one or more of the following penalties in addition to the payment of damages to the party that suffered due to the fraudulent act:

  • a fine under Article 36 of the Criminal Code;
  • confiscation;
  • disqualification from public tenders; and
  • dissolution under the condition provided for by Article 38 of the Criminal Code.

Law stated date

Correct as of

Please state the date as of which the law stated here is accurate.

September 30 2016.