Central location, centrality of influence

Central location, centrality of influence

Joachim Cour and Virginie Lebbe, Partners, Elvinger Hoss Prussen, discuss the prime position that Luxembourg’s financial services industry holds in the European Union.


You advise banks, insurance companies, corporations and private equity funds in navigating Luxembourg’s regulatory and legal environment. Simply put, what do you believe are the country’s primary advantages for international investors? What should an investor know before deciding to invest in Luxembourg?

Joachim Cour: Luxembourg has always been and remains a stable, reliable and multicultural partner for any non-Luxembourg company, and especially for non-European companies that wish to expand their business in Europe. Again, Luxembourg has a number of competitive advantages, but stability and a multicultural reality are really the overarching advantages that this country has offered and continues to offer to its partners. When I say multicultural we have to remember that, even though Luxembourg (which is a founding member of the European Union, NATO, the United Nations, and Benelux) is at the center of Europe and has a very long and interesting history, 50 percent of the population in Luxembourg is not Luxembourgish; 50 percent of the inhabitants of this country are foreigners from almost every country in the world (more than 170 different nationalities), and each of them contributes to the development of this country and to the confirmation that we are indeed reliable, stable, but also multicultural and open to any country in the world that’s interested to expand business.


The financial sector was not immune to the effects of Covid-19. What would you say were the biggest challenges and opportunities that came out of the pandemic? How has the pandemic affected financial institutions in Luxembourg and what will be the major long-term effects?

The paradox is that Luxembourg, without necessarily knowing it, was actually well prepared to face a situation like COVID-19. What happened is that on a Sunday it was announced that we all had to go home, work from home and try to continue the business we were doing. If we turn back and we ask ourselves why we were so prepared without even knowing it, first there’s the specificity of the country and then there’s the specificity of the job.

The country is 50 percent foreigners, a very strong service sector. We are servicing clients all over the world. Mostly these are clients that are not in Luxembourg, so we are already used to working with clients who are not physically close to us and with whom we have to work by email, by phone, in any distant matter. Second: digitalization of our job was already there in a way that we maybe hadn’t even noticed. It’s only when we have a crisis situation that we say it’s incredible: actually we can connect from home with my laptop exactly the same way as if I did from the office. We don’t need to go to the office, everything is already digitalized. If I’m looking for a document, it’s already on the platform. Most of our clients were already there as well. The specificity of the country and of our job had actually prepared us for the situation. Had it occurred 20 years ago, the response would have been completely different.

Virginie Lebbe: We also saw that the CSSF was very active during the crisis, and quite quickly set up a dedicated web page with all the COVID-19 information. And our firm quite quickly published different documents, news flashes, and we also added a specific section in our newsletter dedicated to the COVID-19 publications.


Digitalization has caused a notable ripple effect across the banking sector and broader economy. How has the crisis accelerated transformations in the banking environment and what trends are here to stay? What are the most noticeable changes that have taken place in the banks in the last year? What are some of the strategic choices being made now to strengthen customer service and customer protection?

Joachim Cour: The most notable effect of COVID-19 is working from home. That’s really what has changed the most. But if you look on a day-to-day basis, obviously travel was banned. We used to travel a lot, but on a day-to-day basis we were already having Zoom meetings, conference calls and distance communication with stakeholders and clients. That just became the norm over the pandemic.

The most noticeable effect is, indeed, the fact of working from home and having the banks, the law firms and service providers needing to adapt their infrastructure to make it more robust. Infrastructure was already there, but we made it more robust, more sustainable, to actually have this generalized distant working. I think that will stay. Security remains a challenge to monitor as numerous threats are targeting IT systems of companies and puxblic authorities, and such threats have increased over the pandemic.


Luxembourg is the number one market in Europe and the second globally for investment funds, and the Duchy attracts investors from all over the world. In 2012 your firm opened an office in Hong Kong to open Luxembourg to Asian investors; in 2018 another office was opened in New York. Can you tell us about your international network and how it his fits into the firm’s longer-term strategy? What advantages does this network bring to your clients?

Virginie Lebbe: We’re one, if not the, oldest business law firms in Luxembourg. We have been around for over 55 years, providing full legal services to our clients. We have always been an independent law firm. Although we have ‘best friends’ all over the world, we’re not integrated in a network. We only provide Luxembourg legal advice. Our Hong Kong and New York offices are not just representative offices, they are run by real teams. We have partners who have worked dozens of years in Luxembourg before going there and who have a team providing services to clients in these geographical areas, mainly to suit their time zone differences. A challenge of Luxembourg is that it is global in terms of client base but needs to work around time differences. So, for Hong Kong we’re servicing clients for whom the alignment of time zone is absolutely important, and in New York it’s exactly the same thing. We are providing the same advice as we would in Luxembourg but we’re closer to our clients.

Joachim Cour: We’re independent. It doesn’t mean that we work alone. Being independent actually allows us to work with everyone. We work with numerous law firms around the world. It doesn’t necessarily need to be a firm that we picked, it can simply be our clients’ favorite firm in America or the UK, for example. And being independent means that we are not competitors of lawyers in non-Luxembourg jurisdictions. And the multiculturalism of the country reflects in our firm, so we have quite a diverse multicultural base.


It is no secret that sustainability and ESG standards are becoming increasingly important for investors. In September 2020, Luxembourg became the first European country to launch a sustainability bond framework. In addition, the country’s Green Exchange highlights the importance of issuing sustainable securities. To what extent are sustainability issues driving how investors interact with markets? What do you believe will be the biggest issues related to sustainable finance in the future?

Virginie Lebbe: The challenge is to have a global view and to understand the full picture. To date, the EU-ESG regulatory package can still be seen as a puzzle in which there are already some pieces but also where essential elements are still missing, notably in terms of reporting and availability of ESG data.

In addition, the ESG regulation is somewhat different from other investment fund regulations in that it is less prescriptive and opens the door to many options, each of which may be subject to a different set of rules.

The biggest challenge for asset managers will be choosing the right path for their ESG strategy. The implementation of the EU regulation is very complex and requires speed, agility and a good sense of anticipation. With its long experience in implementing EU asset management legislation and developing this activity, Luxembourg is certainly well placed to assess the impact of the different ESG requirements.

Joachim Cour: And there is a strong political desire in Luxembourg to turn our financial center into a green harbor. The ESG and environmental transition are taken very seriously in Luxembourg. The fact that we were the first ones to issue green bonds on the open market is an indication of a strong political desire to really put the financial sector in the center of this issue. The fact that we have strong EU financial institutions in Luxembourg, such as the European Investment Bank and the European Investment Fund, creates unique cooperation opportunities for Luxembourg. The Luxembourg Stock Exchange is also a dynamic and engaged player which enables Luxembourg to use every parameter to play this role in the climate transition mitigation.


Let’s discuss the major policies and key reforms in Luxembourg at the moment. The law of 20 May 2021 recently came into force, amending the country’s financial sector laws related to minimum capital requirements and other issues. Can you bring us up to date on the most relevant reforms and the country’s current regulatory regime? Are most of these regulatory frameworks coming from the EU level, and how are they affecting the way investors conduct their business in the country?

Virginie Lebbe: Among the upcoming reforms for the asset management industry, one can look to the development of sustainable finance legislation, the review of important pieces of legislation like the Alternative Investment Fund Directive (with the related changes to the UCITS Directive) or the European Long Term Investment Funds Regulation. It will also be necessary to keep an eye on the increasing digitalization of financial services and tools and the security and resilience needs at this level.

Most of those developments are coming from the EU level, however, Luxembourg has always been proactive in accompanying the implementation of international regulations with various actions and publications at the national level by the financial supervisory authority, the Commission de Surveillance du Secteur Financier, and by the investment fund associations (ALFI and LPEA)

Joachim Cour: It’s indeed important to understand that most of the financial sector law is driven by the EU, but Luxembourg always tries to add value where it can. For example, when we implemented the Alternative Investment Fund Managers Directive (AIFMD), we took that opportunity to introduce new tools for the financial sector in particular: a new partnership vehicle strongly inspired by Anglo-Saxon law, which is the translation of our multicultural approach. We’re trying to have a toolbox in Luxembourg that satisfies all business cultures. A national investor or asset manager will find a tool that makes sense to him, but the American asset manager will also find a tool that makes sense to him; and it’s maybe not the same tool. This introduction of the partnership was a major change in Europe in terms of the offer in our toolbox. It’s the first time that the American asset manager finds, in continental Europe, in a civil law country, an investment tool that was like what they are accustomed to in their own jurisdiction. That’s just one example of how Luxembourg adds value to regulation and one translation of Luxembourg’s positive and smart approach to implementation of EU legislation.


Moving forward, what is your strategic vision and what do you most hope to achieve in the company? What are the values that really define your company?  

Joachim Cour: We could speak for hours about that, but in a nutshell, we have a tradition of excellence and partnership as well as a very strong market share, approximately 30% of the market share in the asset management area. That’s important to note because our main competitor also has approximately 30% of the market share. The remaining 40% is divided in a very wide number of law firms and service providers. Scale matters in this business and there are only very few firms in Luxembourg that have the scale that’s necessary to absorb the volume of work and knowledge that is necessary to advise our clients in all areas of their business.

Our challenge is keeping this value of excellence, this spirit of partnership with the partners, while managing our growth. When I joined the firm 13 years ago, we were 150. Today we are over 400. We hired more than 70 associates during the pandemic year. That’s enormous for a law firm in Luxembourg. If you bring it back to our firm, it was 350 more or less at the beginning of the pandemic. So our challenges are to keep our values while managing growth and making sure that our staff and associates are trained, our trainees trained.

The fact that we function as a real partnership demonstrates a very strong solidarity among partners. A client that is with us is a client at the firm. It’s not my client; it’s not the client of my partner. We work as a team, sharing knowledge and helping each other. As partners we try very strongly to spread this culture among the attorneys. We have small teams, and we try to connect the small teams on the various topics that are relevant, which creates solidarity within the team and among the various teams. And we try to share knowledge; not only knowledge that’s relevant to the attorney but also knowledge that is on the side to develop this culture.

Managing growth is the challenge, but we’re well prepared to do that. Managing the expectations of the new generations of associates is also a challenge which we embrace proactively and happily, but obviously their expectations are not those that were mine 13 years ago. They’re strong for work-life balance, for continued remote working, or desires that we have to meet, while, at the same time, making sure that the firm is managed in a way that deals with the expectations of the clients obviously.