Luxembourg’s decision to approve a sovereign bond prospectus for the state of Israel has triggered political backlash, with opposition MPs accusing the financial regulator of ignoring international law and warning the country could be seen as complicit in war crimes and genocide.
“It is a decision of extreme gravity. It will expose Luxembourg and it can be considered complicit in the ongoing genocide in Gaza. Further, it will also be considered complicit in war crimes and disrespect of international law,” déi Lénk MP David Wagner told the Luxembourg Times.
United Nations experts, scholars, human rights groups (including Israeli organisations) have concluded that Israel’s actions in Gaza meet the legal definitions of genocide.
The Commission de Surveillance du Secteur Financier (CSSF) approved the Israeli government’s base prospectus, enabling the sale of sovereign bonds to investors across the EU. The decision came after Israel formally requested a transfer of approval responsibility from the Central Bank of Ireland, which had overseen the prospectus in previous years.
That shift followed months of political and public pressure in Ireland, where activists labelled the securities “war bonds” and demanded an end to financial facilitation of Israel’s military campaign in Gaza.
Now, MPs from Luxembourg’s opposition parties say Luxembourg is stepping into a role that Ireland deliberately abandoned.
Decision challenged
“With these government bonds, the Israeli government collects money from private donors in the EU for its state budget. This money flows directly into the financing of military operations in the Gaza Strip,” déi Lénk said in an official statement on Tuesday.
The party pointed to the International Court of Justice’s (ICJ) ruling in January 2024, which found a “plausible risk of genocide” against the Palestinian population in Gaza.
“Luxembourg is obliged by international conventions to do everything possible to prevent genocide and to actively contribute to compliance with international law. This obligation also applies to state institutions such as the CSSF,” it said.
Franz Fayot of the LSAP said that the party will “challenge this decision by whatever means at our disposal.”
“It is mind-boggling that Luxembourg has accepted to serve as the jurisdiction from which Israel taps European financial markets to support its war crimes and pursue its illegal colonisation of Palestine,” Fayot said.
He added that the CSSF’s decision raises several ethical and legal questions for Luxembourg including the “European Convention on Human Rights, the Convention on the Prevention of Genocide and many other international laws protecting human rights to which Luxembourg is a party.”
CSSF defends decision
In a written response to the Luxembourg Times, the CSSF said its review of the Israeli bond prospectus was limited to “determining the completeness, consistency and comprehensibility of the information contained.”
“The approval of a prospectus is not to be considered an endorsement by the CSSF of the economic or financial opportunity of the transaction or of the creditworthiness of the issuer,” the regulator said.
The CSSF also clarified – and the Central Bank of Ireland confirmed – that Ireland remains the designated “home member state” for the approval of Israel’s non-equity securities within the EU.
Under EU law, a home member state is the primary national authority responsible for approving prospectuses that allow companies or governments to raise money across the bloc. While Ireland remains Israel’s home member state for such issuances, the latest base prospectus was approved by Luxembourg’s CSSF after Israel requested a transfer of the file.
According to Article 20(8) of the EU Prospectus Regulation, such a transfer is permitted if the original authority notifies ESMA and the receiving country’s regulator – in this case, the CSSF – agrees.
Wagner however said the CSSF cannot treat the matter as merely procedural.
“The CSSF should not hide behind technical issues,” Wagner said. “There is genocide. The CSSF cannot just ignore reality. Luxembourg has an obligation under the prevention of genocide convention. The state is obliged to act when there is a probability of genocide.”
Wagner added that Luxembourg’s decision now enables EU-wide trading of Israeli bonds.“This exposes Luxembourg on the international stage. In the future this could have serious consequences.”
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NGOs say real problem is political silence
The Collective for Palestine, a civil society alliance in Luxembourg, said the real problem lies not with the financial regulator, but with the government’s failure to act.
“Let’s be clear about one key aspect: the actions of the CSSF are the result of a political vacuum that has characterised the Luxembourgish government regarding the ongoing genocide against the Palestinians,” it said in a statement.
The group said its not surprised that the CSSF approved the bond issuance. “In the absence of any clear instruction from the Luxembourg government, the CSSF simply assessed that the documentation provided by the state of Israel is compliant with regulation.”
The group called this a violation of Luxembourg’s obligations under the genocide convention, saying: “Nothing has been done in the past two years. What we want to highlight here is the complete lack of action of the Luxembourg government.”
In its own response, the Ministry of Finance declined to comment beyond pointing to the CSSF’s explanation. It emphasised only that the CSSF is “an independent supervisory authority.”
