BELGIUM: The new law of 19 December 2005 on pre-contractual information relating to commercial co-operation agreements.

Ingrid MEEUSSEN | BELGIUM | 2006-03-16


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Entering into force

The Law initially approved by the Chamber and the Senate provided for a retroactive entry into effect on 1 September 2005. A later amendment, introduced through a separate legislative act on 27 December 2005, amended the date of entry into force of the Law and empowered the King to determine the date of its entry into force. This date is the 1st of February 2006.

Scope of application

The Law does not govern the rights and obligations of the parties of a commercial co-operation agreement, neither during the agreement nor at its end.
It only rules the pre-contractual phase of this type of agreement.
In fact, the legislator considered that the rights and obligations of both the parties be it during the agreement or at the ending thereof were already enough regulated by the civil code and other legislation. Moreover, it appeared that in other European countries only the pre-contractual phase is organized and it was important not to isolate the Belgian law in this European context.
In France, Spain and Italy, this type of initiative has already been taken. Moreover “Unidroit”, an independent intergovernmental organization, has also adopted a Law, in order to serve as an example for the European countries.

Contents of the Law

According to article 2 of the Law, it applies to:

  • all commercial co-operation agreements,
  • concluded between two parties, each acting in their own name and for their own account,
  • whereby one party grants to the other the right to use a commercial formula relating to the sale of products or the supply of services,
  • and whereby the first party directly or indirectly receives a remuneration with respect thereto.

According to the same article 2, the commercial formula may take the form of a joint trade name, the transfer of know-how or the mere provision of commercial or technical assistance.
As for the meaning of the concept “commercial co-operation agreement”, it concerns only those agreements that involve a real organization.
Initially, the legislator wanted to limitate the application of the Law to franchise agreements but it decided afterwards to extend it to a wider range of commercial co-operation agreements. The types of contract that are mostly envisaged by the Law are of course franchise agreements but certain types of distribution and license agreements may also fall within its scope.
Another important element is that the technical or commercial co-operation between the contracting parties is focused on the sale of products or services.
As to the remuneration, there is no limitation: it can be direct or indirect.

Obligation to inform

According to article 3 of the Law, at the latest one month before the execution of a commercial co-operation agreement, a copy of the draft agreement, together with a separate information document, must be delivered to the party to which the right to use the commercial formula is granted. The Law further provides that no obligations or payments may be imposed on that party (except confidentiality obligations) between the delivery of the information and the execution of the agreement (“cooling off period”).
Art. 4 of the Law specifies the information that has to be delivered. It has to be delivered in writing or on an accessible support.
The information to be given includes on the one hand some important contractual provisions such as the intuitu personae character of the agreement, the obligations, the consequences of non fulfillment of the obligations, the mode of calculation of the remuneration due by the party that receives the right as well as the possible modifications, specifications as to a non-competition clause, the duration of the agreement and its renewal, the conditions for termination, specifications of a possible preemption right on the business for the party that gives the right and specifications regarding the exclusivity rights for the person that gives the right (art. 4 §1.1°). On the other hand it has to include all the elements necessary for the party that receives the right to use the commercial formula, to make an in-depth assessment of the co-operation agreement before committing itself (such as detailed information regarding the identity of the party that grants the right, regarding its activities, regarding its financial position, regarding its experience, regarding the market, regarding the number of other existing parties within the network, regarding the number of executed, terminated and non-renewed agreements and regarding the required investments) (art. 4 § 1.2°).
The list of the information to be provided for as indicated in article 4 of the Belgian Law does not entirely correspond to the elements indicated in the Law Unidroit. This latter requires also the transmitting of information regarding :

  • the identity of any person who has management responsibilities related to the commercial activities of the franchisor within the franchise agreement;
  • the address of the franchisees and of the franchisees of each party affiliated to the franchisor that provides for franchises with a very much similar trade name and that act within proximity of the candidate franchisee;
  • civil and penal court decisions against the franchisor and its affiliates during the last five years;
  • any bankruptcy or insolvency procedure, or every comparable procedure involving the franchisor or his affiliates during the past five years;
  • categories of goods and/or services that the franchisee has to buy or to rent, from the franchisor or from his affiliates.

Contrary to the Spanish or French law which provide for a delay of 20 days, the Belgian Law provides that the obligation to inform must be met at least one month before the execution of the co-operation agreement (article 3 of the Law).
As the Law does not precise what is intended by “pre-contractual phase”, the obligation to inform will most probably not apply during the contract and in case of the renewal of the same.

Consequence of the failure to comply with the obligation to inform

In case the draft of the agreement or the information document have not been delivered, or have not been delivered within the required time or according to the required forms or is incomplete, the beneficiary may request the nullity of the agreement at the latest within two years after its execution (article 5 of the Law).
According to the same article 5 of the Law, the beneficiary can also ask without any limitation in time for the nullity of certain important contractual dispositions of the agreement when the information document does not contain all the elements as mentioned in article 4,§1.1°.

Imperative law and competent jurisdiction

According to article 8 of the Law, it applies notwithstanding any contrary contractual disposition.
According to article 9 of the Law, the Belgian courts are competent for the pre-contractual phase of a commercial co-operation agreement and they shall apply the Belgian law, whenever the beneficiary of the right, exercises the activity for which the agreement was executed, principally in Belgium.

Ingrid Meeussen, IDI country expert for Belgium

The text of the mentioned Law can be found in the Legislation Section of the IDI website.

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