On 1 July 2020, the Luxembourg Parliament (Chambre des
Députés) adopted a new law relating to
professional payment guarantees (the
"Law").
The Law introduces a special regime for personal guarantees
granted in a professional context (the "Professional
Guarantee") among parties who wish to benefit from
greater contractual freedom in determining the features and the
legal consequences of a guarantee.
The Professional Guarantee will be a useful alternative to the
traditional regimes of personal guarantees existing under
Luxembourg law:
- i. the suretyship
(cautionnement) which is governed by a long-standing
statutory regime in the Luxembourg Civil Code. The defining feature
of a guarantee under the form of a suretyship is that the guarantee
obligation is accessory to the underlying guaranteed obligation in
the sense that the obligation to pay under the guarantee exists
only insofar, and on the same terms, as the underlying guaranteed
obligation; and
