MORE THAN A TICK-BOX: UNDERSTANDING COMPLIANCE OBLIGATIONS IN LUXEMBOURG
Compliance refers to the practices, rules and processes an organisation implements to ensure its activities adhere to applicable laws, regulations, norms and ethical standards. In Luxembourg, compliance spans critical areas, including data protection, anti-corruption, international sanctions and embargoes, competition law, and duties of care in health, safety, environmental protection and fundamental rights. The intersection of fundamental rights and international sanctions has become increasingly significant.
Compliance failures carry substantial legal and reputational consequences, potentially undermining a company’s financial value and public trust. The global compliance landscape has been shaped by the extraterritorial reach of US legislation such as the Foreign Corrupt Practices Act (FCPA), which compels companies worldwide, including in Europe, to adopt proactive internal compliance frameworks. This has created a ‘prophylactic effect’, encouraging even non-subject firms to develop compliance systems to mitigate liability risks.
Extraterritorial challenges. Compliance has evolved beyond a vertical relationship between companies and the law. It now emphasises a horizontal environment within organisations, designed to reduce the risk of rule breaches. Companies may be held liable not only for violating applicable rules but also for failing to implement effective mechanisms to prevent such breaches. Reconciling potentially conflicting norms, such as the FCPA and the UK Bribery Act, poses challenges for European entities. In Luxembourg, where companies often act as intermediaries in cross-border investment structures, they may fall under multiple foreign jurisdictions. Even when Luxembourg or EU law imposes no specific restrictions, banking requirements or contractual clauses tied to extraterritorial obligations may mandate compliance.
Jul-Sep 2025 Issue
TEMIME