17 September 2020
Historically, guarantees in Luxembourg law have taken either the form of an accessory suretyship (cautionnement) or an autonomous first demand guarantee (garantie autonome). Each of these has presented its own issues in commercial contexts, including synthetic securitisations, that have sometimes required complex structuring to deal with. A new law has now introduced a third type of guarantee, the "professional payment guarantee", that should avoid most of these issues and thereby permit simpler structures.
In this briefing, we review the historic issues with the use of guarantees in Luxembourg, describe how the new professional payment guarantee can be used and how it will help address those historic issues.