Drafting Limited Partnership Agreements Under Luxembourg Law

As international clients from common law jurisdictions expand their businesses in a civil law jurisdiction such as Luxembourg, the question of the enforceability of the liquidated damages and penalty clause may arise in relation to limited partnership agreements.

Limited partnerships are cash-in/cash-out vehicles and it is critical commercially that each limited partner contributes its share of partnership funds when required to do so. If a limited partner defaults on its commitment then, save in very limited circumstances, it may be placed in default and the general partner may take one of a broad range of possible remedies to ensure that the other partners are not prejudiced. These default provisions are universally accepted in industry as a proportional and sensible safeguard against limited partner default.