New Draft Act on Pre-Contractual Information for Commercial Cooperation Agreements

In February 2014, the Belgian Parliament adopted the Draft Act as part of a legislative process consolidating all national commercial law provisions into one Belgian Economic Code. While much of the existing national legislation has simply been transposed into the Draft Act, the national legislature has taken the opportunity to make certain amendments.

On 21 February 2014, the Belgian Parliament adopted the Draft Act (titled “The Draft Act containing the insertion of Book X “Commercial agency agreements, commercial cooperation agreements and sales concessions” into the Code of Economic Law, and containing an insertion of definitions specific to Book X of Book I of the Code of Economic Law.”).

The Draft Act is part of a wider systematising process that is consolidating all Belgian commercial law provisions into one national Economic Code. The Draft Act will be inserted as Book X into the new Belgian Economic Code and will replace three existing laws:

• the Law of 13 April 1995 relating to commercial agency agreements (inserted as “Title 1”; and referred as “the Commercial Agency Law”);
• the Law of 19 December 2005 concerning pre-contractual information for commercial cooperation agreements (inserted as “Title 2”; and referred to as “the Law on Pre-Contractual Information”);
• the Law of 27 July 1961 on unilateral termination of concessions for exclusive sales granted for an indefinite period (inserted as “Title 3”; and referred to as “the Sales Concession Law”).

The Draft Act adopts all the existing provisions of the “Commercial Agency Law” and the “Sales Concession Law” without any amendments. However the “Law on Pre-Contractual Information” has been modified on several points.

The Draft Act’s Explanatory Memorandum indicates that these modifications are intended to make the Draft Act’s application “legally more effective, better adapted to the realities of economic life and simplify as much as possible”.

The first modification concerns the broadening of the scope of the law. Currently, the law applies to commercial cooperation agreements “concluded between two persons, each working in its own name and for its own interest, whereby one person grants the other the right - for which the other pays directly or indirectly a fee of any kind to the other - to use, for the sale of products or rendering a service, a certain commercial formula, in particular: a common sign, a common trade name, a transfer of know-how or commercial or technical assistance.” (emphasis added).

The Draft Act’s new definition states: “agreement concluded between multiple persons, whereby one person grants the other the right to use, for the sale of products or rendering a service, a certain commercial formula, in particular: a common sign, a common trade name, a transfer of know-how or commercial or technical assistance.”

By changing “two persons” into “multiplepersons”, the legislator has intended to end the legal debate about whether agreements between more than two persons also fall within the scope of the Act. According to the legislator, this modification was needed since the original objective of the 2005 ‘Law on Pre-Contractual Information’ was to include as many commercial agreements as possible.

The same reasoning was used when deleting the words “each working in its own name and for its own interest” from the definition. This criterion has also been the subject of past legal debate about whether that criterion had to be met during the pre-contractual phase as well as after the conclusion of the contract (a relevant issue as often commercial agents work in their own name and for their own account in the pre-contractual phase but conclude contracts in the name and for the account of their principal). The Draft Act’s Explanatory Memorandum resolves the issue by stating that this criterion should only be considered during the pre-contractual phase until the conclusion of the agreement. To ensure that the law is not circumvented through the use of various legal manoeuvres and interpretation, the legislator opted to delete that criterion.

Also the wording “for which the other pays directly or indirectly a fee of any kind to the other” has been removed from the definition as that criterion had led, in practice, to the exclusion of certain forms of commercial cooperation agreements from the definition’s scope of application.

The Draft Act explicitly excludes banking and insurance agency contracts from its scope of application. That exclusion has been justified as these contracts are governed by specific laws (in particular, the Law of 22 March 2006 on intermediation in banking and investment services and the distribution of financial instruments and the law of 27 March 1995 on insurance intermediation and distribution). Therefore, making the provisions of the “Law on Pre-Contractual Information” also applicable to these contracts would be inconsistent with numerous, sometimes even conflicting, provisions under such laws.

Besides the modifications to the scope of the law’s application, the Draft Act also modifies the current Article 3 of the “Law on Pre-Contractual Information”. That provision deals with the timeframe and specific information required and aims to ensure that the parties are informed as fully as possible about the rights and obligations arising from the proposed agreement. To avoid strict formal requirements, which would not be in the protected party’s interests, the Belgian Parliament has modified this provision. It now states that when the person to whom the right applies proposes changes during the one-month period then no extra timeframe or formalities need to be observed. In contrast, where the other party amends the draft agreement, an extra period of one month, as well as certain formalities, must be made. 

Furthermore, currently the parties are prohibited from undertaking commitments and to demand compensation before the one-month reflection period has passed. The Draft Act preserves that principle and allows, during that period, the parties “the contracting of an obligation of confidentiality” along with the possibility of “claiming damages for breach of confidentiality”. Another exception applies to those parties who are already business partners at the moment they decide to renew or modify their agreement. In such a situation they are allowed to undertake commitments during the one-month reflection period and are allowed to deliver a simplified pre-contractual document (specifications are listed in the new Article X.29).

The Draft Act leaves the existing criteria for annulment of the agreement unchanged. Nonetheless, the Draft Act also includes a sanction for the situation where significant and important elements (set out in Article X.28, §1) of the proposed agreement are incorrect or missing. In such situations, the Draft Act allows the harmed party to invoke the “absence of contractual consensus” (or so-called “quasi-delictual liability”). The protected party can waiver his/her rights, but only after the expiry of a one month period of reflection and by explicitly indicating the causes of nullity that have been waived.

The Draft Act’s date of entry into force still has to be determined by Royal Decree.

For further information on this legal development please contact Stefan Van Camp at (stefan.vancamp@timelex.eu).

This publication does not necessarily deal with every important topic or cover every aspect of the topics with which it deals and is not designed to provide legal or other advice.