I think that is the same as in Belgium...
In this example, we would only add the second city name in case of there would be an other place called 'Paffendall' in the country, to prevent so called 'smudges'.

But, the primary question is probably: should ALL segments in the country have a city name?!
As we do it in Belgium and The Netherlands, and i don't see a reason why not to do it in Luxembourg, i would say yes. I do see the difference with France, and why they don't do it, but 'we' as in BeNeLux, just made an other opinion about the 'issue'.
Unless of course, there is a reason citizens of Luxembourg have a clear reason why not to do it there...

In Luxembourg for example in the City, names will be named like Paffendall without Luxembourg before or behind of it.

It's only the Luxembourg Country, then Luxembourg City is splittet in different parts (like Paffendall or Clausen etc..) but also other places.