AGEFI Luxembourg - septembre 2025

AGEFI Luxembourg 36 Septembre 2025 Droit / Emploi By Alain GREC, Co-founding partner of Profile Investment* and Board member of regulated funds in Luxembourg T his article addresseswhy an “external legal and financial eva- luation” of amatter under litiga- tion is so valuable to any party, whether claimant or respondent. Introduction Anybusinessactivityissub- ject to at least two distinct governing systems: law and accounting. Any disruption or irregularity in the execu- tion of business development will manifest in legal remedi- ationor reconstructionprocesses, aswell as in theac- counting representation of the emerging issue (1) . These frameworks prove necessary within our soci- eties for interpreting andmonitoring commercial in- teractions: we observe that the entire economic interactions grid refers to this dual backbone of first, contractual symmetrical legal duties and second, a balance of assets and liabilities associated with in- come and costs. When any inconsistency or incident impacts the in- tegrity or the matching with the contractual provi- sions, it has de facto a consequence in the accounting translation of the underlyingmatter. Direct consequences and induced computations As amatter of fact, anydamage created toabusiness entity by a breach of contract clause from another party, materializes in a partial or full destruction of value on the asset side of the balance sheet of the jeopardized party, which can be reflected into a right for compensation. These rights are not always substantiated in the accountswhen theyare lacking objective and supported grounds for a translation into accounting. Factually, these rights for equitable compensation needthedescriptionandsubstantiationofanenforce- able judgment, arbitration award, or settlement agreement to be associated with figures that can be consideredascertainand“opposableautiers” (i.e.ef - fective against third parties) for the sake of financial statements and audit process. The other way round, for the party considered to have caused the damage, the principle of prudence will lead the party’s accounting to assess conserva- tively the amount of a compensation tobe owedand paid, as soon as a proceeding is officiallyfiledby the claimant with a detailed demand. This amount can be adjusted down in the accounting based only on substantiated inputs. In both situations (claimant or respondent side), the auditors and financial informa- tion receiverswill need reliable information in order to better assess the future impact and materiality of the matter at stake. The notion of “Fair value” cannot strictly apply here if defined as the estimated price at which an asset/matter would be sold or a liability transferred inanorderly, arm’s-length transaction between willing market participants at the measurement date. This crystal- lizes the specificity of the objective litigation assessment with a view to determining its present value, enabling it to re-align with the concept of Fair value. Depending on howmaterial the matter is, the chain reaction incurred can be more or less of concern, for the different bodies involved, directly or indirectly. Insummary, the implications of damages imputable to a breach of a contractual clause or to a wrongdo- ing/illegal behavior of a party to an upcoming litiga- tionwill impact directly or indirectly: - The management of the entities at stake (which traceabledecisionsaretobetaken,decisionguidance basedonwhichobjectiveparameters, choiceof strat- egy andmonitoring); - The business operations and development, subject to re-allocation of capital andmeans; - Themarket or strategic value of the entities at stake if the underlying incident is sizeable (this highly de- pendsontheadequacyofthetranslationofthe“inci- dent” into legal and economic figures), typically in the context of M&A transactions, preparation for fund raising or sizeable financing negotiations; - The accounting and audited picture reflecting the incidence of thematter at stake; -Thevaluationandinformationissuedfortheappro- priate information of the external stake holders: shareholders,administrativeandtaxauthorities,reg- ulating bodies, etc… The clearer the understanding of these points by the decisionmakers, the better the monitoring accuracy and the target driven conduct of the dispute resolu- tion phase. Obtaining an external objective assessment of the multipleaspectsofthelitigation,togetherwithitsval- uation,addressesfundamentalissueswhichareoften not clearly identified. Owing to its DNA of cross disciplinary expertise (legal, quantum, enforcement/debt collection) and their long experience (more than 16 years) of assess- ing and valuing claims all over theworld, Profile In- vestment is well suited to put these skills at work to provide a complete and objective picture of themat- terunderlitigationtothatpurpose,actingasexternal consultant. While the aim is to estimate on a dynamicmode the legalanalysisandcorrespondingpresentvalueofthe litigation at stake to possibly define the matter’s fu- ture implications, this can however in no way be taken as crystal ball anticipation.Also it is not meant to be a legal opinion, which is the domain of the lawyer counsels. Under this consideration, the sub- stance of the external assessment and valuation ap- plies, without any bias, the fundamental rationality of both Legal and accounting systems to help the stakeholders takewell discerned steps. The required stringentmethodologyprovidesaconservative,com- prehensive assessment supportedbyasmanyobjec- tive and rational parameters as possible, in order to address accurately each critical area (jurisdiction ac- curacyandreliability,legalmerits,quantum,enforce- ability and recoverability, duration, among others). Because both legal and accounting are constructed strictlyon rationality andverifiability, there is a suf- ficient degree of predictability and such exercise is sensical and useful, even if at the end of the day a human decision or interpretation is made (by the judge, the arbitrator, the auditor, the chief account- ant for example). Let’s first elaborate in detail how to proceedwith an objective assessment of a litigation, for either a claimant or a respondent. In essence, the key information necessary for an ac- curate analysis of the dispute consistsmainly of: - A good understanding of the context and of the emergence of the dispute, and the identity of the parties. - A case theory from each party - A contractual base, possible breaches and/or a penal basis for the procedure - Contested issues - Jurisdiction(s) chosen under which type of pro- cedure - Damage and/or prejudice reported; compensation sought and/or possibly sanctions -Anoutlookoftheeffectivepaymentorrecoverypost judgmentorarbitrationaward,incasethepartyseek- ing the assessment is the claimant. Theabovedependstoalargeextentonthecomplete- ness and adequacy of the documents and informa- tionmade available to the external evaluator (Profile Investmentinthepresentexample)bytheappointing party or/and its lawyer counsel. It naturally remains thecasethatitcannotaddressthepotentialsubjectiv- ity inherent in the nature of justice procedures (the judge, the parties and parties’ lawyer counsels’ be- havior for example) The methodology elaborated by Profile Investment computesthesedifferentsubstantiatedelements,and adjusts to each stage of the dispute resolution: deci- sionon jurisdiction / first procedural stage at the end ofwhich theparties learnnewinformationoften im- pacting the critical questions; second, the procedural stage leading to a verdict; a potentially third stage to challenge or seek annulment of the first verdict, en- forcement phase. Each end of stage constitutes a po- tentialdecisionknotorcrossroadwherethefollowing step can be reconsidered (settlement negotiation, choice of a different type of procedure, mediation etc…).Themethodologyisdesignedtoupdate,effec- tively andpractically, the analysis, evaluationandfi- nancial valuation of thematter Fromthe objective evaluation to the realistic valuation Thegoal is toprovide anobjective anddynamic val- uation based on the analysis of (1) the critical points of the legal side of the matter, (2) the conservative and substantiated expected value of the final out- come of the resolution procedure (lawsuit, arbitra- tion, mediation), and (3) the realistic prospect of recovery (when for the use of the claimant) based on accurate parameters and corroborated by suffi- cient back-testing. Thisallrequiresthedeterminationofdiscountingfac- tors,theirscalingandtheirpossiblecombination,de- pending on whether they are sequential, parallel, or combined in in chain reaction. However this requires first and foremost a realistic and conservative assessment of the full duration of the matter including foreseeable challenging proce- dures (appeal/revision/processes, supreme court, dilatory maneuvers), and the enforcement foresee- able milestones, within a global metrics concerning the reliability of the judicial system at stake: in other words, the judicial procedure is not expected to pro- ceedatthesamemomentumandwiththesametime- limit compliance when the forum is as different as Brazil or England&Wales, for example. In the next parts of this article, to follow monthly, we propose to guide the reader into (1) the legal analysis and assessment of the dispute resolution process, (2) the calculationmethodology for the fair present value and (3) the feedback of entities/board members who effectively used these tools. 1)Thesetwosystems,lawandaccountancy,wereestablishedmillennia ago(duringthefourthmilleniumBeforeChristinSumer(Mesopotamia) and shortly after in Egypt for accounting - https://lc.cx/5siyiM -, and about 2100 BC in Persia for legal frameworks governing justice as es- sentialtoolsfortheorganizationofcivilizationsinvolvingalargepopu- lation needing standardized and predictable whereas complex interactions. *ProfileInvestment(Paris,London)standsoutforitsintegratedexper- tise(litigation,damagevaluation,recovery),enablingcross-disciplinary assessmentofdisputes.Wehavebeenworkingsince2009forspecialized litigation funds regulated in Luxembourg, with a stamped internal model valuationmethodology supported by a long track-record. The content and purpose of an external litigation assessment and valuation A la 2 e position sur 69 pays au classement général de l’International Institute for Management Development (IMD), le Luxembourg améliore son résultat au classement général. Si la Suisse reste le leader incontesté du classement, Singapour, 2 e au classement en 2024, rétrograde au 7 e rang. Comme les années précé- dentes, le Grand-Duché affiche ses meilleurs résultats sur les volets des investissements (2 e ) et de l’attractivité (4 e ). En revanche, la disponibilité de lamain-d’œuvre reste le défi majeur (25 e ). LeLuxembourgsepositionneàla2 e place duclassementgénéral,renouantainsiavec son classement de 2023. Derrière l’indé- trônable Suisse, il devance l’Islande (3 e ). Hong Kong fait son entrée dans le top 4. Singapour qui, pour la première fois depuis le lancement du classement en 2014, figurait dans le peloton de tête dans le classement 2024, recule au 7 e rang. Depuis 2019, les évolutions du Grand- Duché dans les trois piliers qui consti- tuent le classement général varient peu d’une année à l’autre. Comme les années précédentes, le Luxembourg domine le classement sur le pilier des investisse- ments et développement des talents locaux (2 e en2025). Lepays garde sapre- mière place sur le niveau de dépenses publiques d’éducation par élève et afficheun ratioélèves-enseignant tant au niveau primaire que secondaire parmi les plus faibles au monde. Toutefois, les résultats du pays sur plusieurs indica- teurs doivent être surveillés de près. S’agissant de la priorité donnée à la for- mationdes employés, lesdirigeantsd’en- treprises maintiennent le pays aumême rang en 2024 et 2025 (30 e position), après l’avoir fait reculer de la 16 e à la 30 e posi- tion entre 2023 et 2024. En outre, ceux-ci rétrogradent le pays de la 10 e à la 15 e place pour la qualité des infrastructures de santé. Ils pointent éga- lement du doigt la place insuffisante de l’apprentissage dans les parcours de for- mation (28 e rang) ; une situation qui n’est pas nouvelle, mais qui souligne la diffi- culté du pays à faire de l’apprentissage une partie intégrante et valorisée du sys- tème de formation. Le Luxembourg se distingue également par sa capacité à attirer de lamain-d’œu- vre étrangère, figurant dans le top 5 de manièrecontinuesurcepilierdepuis2015 (4 e en 2025). Toutefois, ses performances sont inégales suivant les indicateurs. Le Luxembourg reculede la 40 e à la 49 e place sur l’indice du coût de la vie en un an et perd 13 places depuis 2021. Cette évolu- tion s’accompagne d’une dégradation de la qualité de vie, aux yeux des entrepre- neurs interrogés (recul du 8 e au 11 e rang). Attribuableenpartieaucontre-coupdela crisedulogement,ceglissementdoitaler- ter. Sur une note plus positive, le salaire minimum légal luxembourgeois reste parmi les plus élevés au monde (3 e ). De plus, la capacité du Luxembourg à attirer lestalentsetnotammentlamain-d’œuvre étrangère hautement qualifiée reprend des couleurs. Après un léger déclin en 2024, leLuxembourgaméliore sonclasse- mentde2022ensehissantàla4eposition. Conscient de l’importance de renforcer son attractivité auprès des étrangers hau- tement qualifiés, lepays a adopté ces der- nières années plusieurs mesures dans le but de renforcer son attractivité. Enrevanche, la disponibilitéde lamain- d’œuvre reste le problème majeur du Luxembourg (25 e en 2025). La concur- renceque se livrent lespays et régionsdu monde pour attirer certains profils, tout comme les contraintes liées au coût de la vie au Grand-Duché qui réduisent son attractivité peuvent expliquer en partie cettesituation.Surcevolet,lepaysaccuse un écart conséquent avec le peloton de tête constitué par les Émirats Arabes Unis, Singapour etHongKong, respecti- vement 1 er , 2 e et 3 e . Malgré sonexcellente capacité à attirer les talents étrangers hautement qualifiés – notamment grâce à un environnement international et multilingue (6 e ) – le Luxembourgglisseàla57 e placemondiale concernantlamain-d’œuvrequalifiéedis- ponible (-4 places). Ce dernier indicateur représente leplusmauvais classement du pays dans le pilier « disponibilité de la main-d’œuvre », et il n’a connu aucune amélioration significative depuis une dizaine d’années. Ce recul s’explique en partie par les diffi- cultés à recruter des profils spécialisés nécessaire à la double transition écolo- giqueetdigitale.Ladisponibilitédeprofils scientifiques, bienqu’enprogression si on remonte plusieurs années en arrière, ne suit pas le rythme des économies les plus dynamiques : avec 22,88% de diplômés dans les STEM(35 e position), lepays reste loin derrière ses voisins français (30,53%), allemands(35,93%)ouleleaderhong-kon- gais(42,39%).Enrevanche,ladisponibilité desmanagersseniorsexpérimentéss’amé- liore(+6places),debonaugurepourvenir soutenir la reprise de la croissance dans les années à venir. Source : Chambre de Commerce IMD World Talent Ranking 2025 : Le Luxembourg retrouve sa position de 2023