The Belgian Code of Economic Law requires disclosing specific information before concluding, amending, or renewing a commercial partnership agreement defined as an agreement:
(i)entered between two independent parties, each acting in his own name and on his own behalf,
(ii) whereunder the right to use a commercial concept that implies either (a) the use of a joint trade name or of a joint sign, (b) a transfer of know-how or (c) commercial or technical assistance, is granted,
(iii) in respect of the sale of products or the performance of services,
(iv) in consideration for any compensation whatsoever, either direct or indirect.
The information that must be provided includes
1 – on the one hand, the draft agreement itself (or, if relevant, the new or amended draft) and
2 – on the other hand, a specific document, the so-called the pre-contractual information document (below PID), including the data considered essential for the future partner to make an informed decision. That document is twofold:
(i) part 1 must list the major contractual provisions (or, if relevant, the proposed amendments thereto);
(ii) part 2 aims at providing the candidate partner all information that will allow him to make a knowledgeable decision.
If the PID is not complete, the co-contracting party will be in a position to claim the nullification of non-disclosed provisions or even of the entire partnership agreement.
On June 10, 2022, the Arbitration Commission (which is set up to issue opinions on the interpretation and application of the law), published an opinion on the major contractual provisions and obligations to be mentioned in the pre-contractual information document (below, the “PID”).
The Commission first emphasized that the law requires the PID to disclose most major contractual provisions including all obligations imposed on the (prospective) co-contracting party. Due to the sanctions attached to non-compliance, the PID in most cases includes a nearly verbatim quotation of the contractual provisions, thereby frequently missing its intended objective. Consequently, the Commission recommended some changes.
The legislator has endorsed the Arbitration Commission’s recommendations, and the initial wording included in the Code of Economic law was amended by Parliament on 8 February 2024. Publication in the Belgian State Gazette is expected shortly. The new provision shall come into force on the first day of the sixth month following its publication in Belgium’ Official Journal.
It will be applicable to pre-contractual information documents relating to new commercial partnership agreements concluded after the entry into force of this law, and to amendments and renewals of existing commercial agreements entered after this law comes into force.
This probably is not the last change that will be made to the initial text to provide the (prospective) partner with a complete and precise information. The Arbitration Commission, in effect, recently issued an opinion at the request of the minister in charge, on a draft Royal Decree complementing the data included in the PID. If the recommendations of the Arbitration Commission are followed, the proposed changes are likely to affect the disclosure of the exclusivities reserved to the principal, and several items included in the second part of the PID.
As from the entry into force of the changes decided on 8 February 2024, the section of the PID dedicated to the material contractual provisions of the partnership agreement will need to include :
a) a statement that the commercial partnership agreement has been concluded, or
not in consideration of the person;
b) the duration of the partnership agreement, the conditions for its renewal and termination, as well as the financial consequences of such termination, in particular about expenses and investments;
c) the direct remuneration to be paid by the person receiving the right to the person granting the right, and the method for calculating the indirect remuneration to be received by the person granting the right and, where applicable, the method for revising it during the term of the contract and when it is renewed;
d) the start-up or recurring costs, such as marketing, IT, transport and training costs, to be borne, and the conditions under which these can be modified.
In other words, the list of all starting charges and investments (assessment of the starting and fitting-up costs own to the commercial formula) as well as recurring costs (such as transport or marketing costs), whether paid to the principal or to (approved) suppliers, must be included. Changes must be objectively grounded and justified.
e) exclusivity reserved for the principal;
f) non-competition clauses, their duration, conditions, as already currently required, but also the consequences in case of non-compliance;
g) obligations relating to the application of maximum prices.
Of course, only authorized price fixing provisions are allowed. Where the principal reserves the right to limit the other party to fix the prices, the latter’s attention must be drawn to the provisions on maximum prices.
h) minimum sales and purchasing requirements, and the consequences of failure to meet them.
That information is justified by the significant impact any such obligation may have on the operation of a business, and by the significant contractual consequences, such as the right to terminate the partnership agreement, failure to meet these obligations can have.
i) limitations on the use of intellectual property rights ;
A list of the intellectual property rights which may be used is insufficient. It is important for the (prospective) partner to know if there are any limitations in their use when operating the business and performing the contract.
The limitations in question include
1° limitations on the licensing of intellectual rights ;
2° limitations on the use of intellectual property rights in an online context (internet, social networks)
3° limitations on the possibility of advertising and promoting with the intellectual rights.
j) limitations on access to rights to use customer data during and after the contract;
it must be clarified whether the (prospective) partner is entitled to use or process customer data himself, and whether he obtains a view of the consumption behavior of his customers for, for example, to conduct promotional campaigns and adapt his store and product range to his customers. A description of the possible limitations to the use of, or access to, personal or other data or both.
Reference is made to article 9 of Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation service.
k) limitations on online sales and promotion;
l) the right of pre-emption or option to purchase in favor of the principal, and the rules for determining the value of the business when this right or option is exercised;
m) clauses relating to the relationship and dependency between the partnership agreement and the lease or other contract relating to the place of business;
Of course, existing regulations on commercial leases must be considered.
n) the reasons for expressly terminating the contract, as well as the financial consequences, particularly with regard to expenses and investments;
The information must cover all financial consequences of the termination (such as
contractual indemnity), without limitations on expenses and investments.
o) jurisdiction, choice of law and language of proceedings
The (prospective) partner must be informed in advance of the court or arbitration institution that would have jurisdiction over disputes, and of the language to be used for settling disputes, as these provisions may impact the ability or ease of asserting contractual rights, or increase costs.
N.B. The sections in italics are extracted from the Parliament’s preparatory works.
Nicole Van Crombrugghe, IDI Country Expert for agency in Belgium.
