The Central Bank of the Islamic Republic of Iran offers the opportunity to Luxembourg courts to reaffirm their national sovereignty

The team led by Fabio Trevisan, Partner and Head of the Dispute Resolution department at BSP, and composed of Laure-Helene Gaicio-Fievez, Partner, together with Audrey Risser, Counsel, acting as Luxembourg counsel for the Central Bank of the Islamic Republic of Iran obtained a decision directly impacting the assets held by Clearstream and which will have important repercussions.

Any foreign judgment, before being enforced on the national territory, must be recognised and declared enforceable by the Luxembourg courts. The procedure, known as exequatur of a judgment rendered by a foreign court, requires the Luxembourg courts to verify that this judgment is compliant with its public policy.

The case which gave rise to judgment 2021TALCH02/00649 takes place in the context of recent legislative changes in the United States, allowing American courts to order the transfer to the United States of certain assets belonging directly or indirectly to Iranian entities (including the Central Bank of the Islamic Republic of Iran), regardless of where these assets are located worldwide. This legislation goes as far as to expressly provide that international comity, which obliges sovereign states to respect each other’s national sovereignty, is to be plainly disregarded.

In this context, the Second Chamber of the District Court addressed the notion of enforcement in Luxembourg of a foreign decision on assets deposited with a local financial institution. More precisely, the foreign decision would order the Luxembourg entity to transfer the assets abroad, while the latter are located in Luxembourg.

The Luxembourg entity alleged that Luxembourg law would not require it to obtain an exequatur in order to transfer assets registered in its accounts in Luxembourg, on the basis of a foreign judgment (possibly accompanied by coercive measures), whereas no enforcement measures would be necessary, as the entity would voluntarily execute the decision, without having to wait for its exequatur.

The Court recalls that under Luxembourg law, any enforcement of a foreign decision on Luxembourg territory must first be subjected to an exequatur procedure, which is a rule of public policy.

Thus, the Luxembourg entity cannot voluntarily comply with the foreign decision without a prior final exequatur in Luxembourg of this decision, since the enforcement of this decision implies it produces legal effects in Luxembourg (by a material act of enforcement).

The existence of a possible constraint aimed at the Luxembourg based entity attached to the foreign decision does not change the outcome. Luxembourg’s sovereignty cannot be violated by the existence of coercive measures enacted abroad by a foreign court. Thus, such coercive measures potentially decided by a foreign court, cannot justify the enforcement in Luxembourg of a foreign decision without a prior exequatur

The Luxembourg courts have therefore reaffirmed Luxembourg’s sovereignty by recalling that it is up to the national exequatur judge to verify that the foreign decision meets the conditions for entering the national judicial system before any material acts of enforcement are carried out on national soil, this principle being of public policy.

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