Over the past year the Belgian parliament has been especially busy in the field of economic law and has created a new Code of Economic Law. On 31 May 2014 some important parts of this Code entered into force.
This article briefly discusses the changes brought to Belgian consumer rights and protection legislation and to the pre-contractual information in commercial cooperation agreements legislation.
The idea of modernising Belgian Economic law began in 2006 after a so-called “round table meeting” organised by the FPS Economy, where both academics (economists as well as legal experts) and social partners were present. The modernisation movement gained momentum with the idea of codifying all existing economic law into one national Code of Economic law; rather than having a dispersed set of rules, spread over numerous laws and royal decrees.
In its 18 Books the new Economic Code now bundles a substantial amount of provisions of Belgian Economic law into one document. At the same time, the Belgian parliament has taken the opportunity to make some legislative amendments.
Although Book XI on Intellectual Property and part of Book XVI on the Extrajudicial Settlement of Consumer Disputes will enter into force later (on the 1 January 2015), the project has indeed neared completion with the entry into force on 31 May 2014 of Book VI on Market Practices and Consumer Protection, Book X on Commercial Agent Agreements, on Pre-Contractual Information in Commercial Cooperation Agreements and on Sales Concessions, Book XII on the Law of the Electronic Economy, Book XIV on Market Practices and Consumer Protection as regards Persons Exercising a Liberal Profession, some articles of Book XVI and Book XVII on Special Procedures in Law. In what follows, Book VI and Book X will be discussed concisely.
When inserting Book VI on Market Practices and Consumer Protection into the Economic Code, the Belgian parliament adapted some of the existing law on this point, thereby implementing Directive 2011/83 on consumer rights at the same time. The changes made may not be of a radical nature, but it is nonetheless worth noting in the following paragraphs (see, for the effect of these new rules on e-commerce, the following time.lex blog post).
Firstly, some definitions have been changed in Book I, which also has in impact on Book VI. Notably, the definition of “consumer” has been changed (as well as the definition of a “sales contract”, “off-premises contracts” and “distance contracts”). It seems that whereas a consumer used to be somebody who was acting exclusively for non-business purposes, it now is sufficient that the goal of concluding the contract in question lies outside the professional activity of the natural person who is buying the goods. So for example, an entrepreneur buying a shirt will wear the shirt both during business hours as well as during his/her personal time, and it will be classified as a consumer good. That was already so, which signifies that the impact of this change in practice will not be great. The same might not be true for the “off-premises” and “distance contracts”, since the substantive rules on these categories have been changed as well (the new rules can respectively be found in Articles 64-74 and 45-53 of Book VI).
Secondly, the Belgian parliament has made it more clear what information a professional seller has to provide a consumer, prior to the conclusion of the contract (see Article 2 of Book VI). Implementing the Consumer Rights’ Directive on this part might have been (or still might be) an onerous activity for some Member States, but since Belgium already has had stern information requirements for quite some time now, this obligation should also not raise a lot of problems in practice.
Thirdly, certain changes have been made concerning sales periods and the like. Sales periods are maintained as a concept, but the waiting period before those sales periods has been lengthened to one month (see Article 25 and those following it in Book VI). The prohibition of selling at a loss has been maintained as well, but from now on the reference price used can take account of reductions obtained when buying in bulk, although they have not yet been clearly defined. Conversely, obligatory notifications of clearance sales are abandoned, as well as the prohibition of announcing price reductions during the waiting period.
Another point of interest is that standard options are from now on forbidden in all contracts. This change means that when a company wants to obtain any complementary payments, next to the remuneration for the main obligation of the contract, the consumer has to agree with this term explicitly (Article 41 of Book VI). In the same spirit, it is strictly forbidden for a company to make money from the usage of a certain method of payment. A consumer contract may however provide for compensation of, but without ever exceeding, the costs the company bears itself in making those transactions possible (Article 42 of Book VI).
Lastly, it should be noted that the rules on delivery of consumer goods have been slightly updated as well. Firstly, even without any contract provision providing so, the goods must be delivered within 30 days, unless another period has been agreed upon (Article 43 of Book VI). Secondly, when the contract provides for any kind of shipment of the goods from the professional seller to the consumer, the risk of the good being lost or damaged is transferred only when the consumer takes physical possession of the good(s) in question (Article 44 of Book VI).
In conclusion, although adaption of the new rules will probably be an easy one for Belgian professional sellers, it is certainly advisable to be properly informed e.g. on all information which must be provided to consumers and on specific rules concerning some categories of contracts.
As has been previously discussed by time.lex when reviewing the draft act for this Book (here), Book X of the new Economic Code contains both the existing regulations on commercial agent agreements and sales concessions and also the recently updated rules on pre-contractual information in commercial cooperation agreements (Title 2 of Book X).
The purpose of updating these rules was to make them more effective, adapted to economic reality and to make their application in practice easier. Therefore, the field of application of the law has been made more lenient; it now includes all commercial cooperation agreements between multiple (legal) persons, whereby one person grants the other the right to use a commercial formula/method/concept when selling their products or offering their services. The law recognises the usage of a common signage, the usage of a common business name, the transfer of know-how and the provision of commercial or technical support as forms in which, either separately or freely combined, provide a commercial method.
The prime example of these types of agreements is the franchising agreement. However, commission-affiliation agreements, sales concessions and commercial agent agreements might also be covered by these rules, as long as one party grants the other the right to use their commercial method. Conversely, licensing agreements and other transfer of technology agreements are in principle not within the field of application of these rules. Determining whether an agreement falls within the field of the pre-contractual information rules is not always straightforward. It is however of great importance to know for sure, since the law prescribes some far-reaching obligations on the part of the party that grants the right to a commercial method, with quite severe sanctions for non-compliance.
Essentially the rule means the party who grants the right must provide the other party with a draft agreement, at least one month before the actual conclusion of the commercial cooperation agreement. Together with the draft agreement, a separate document must be provided. That document must contain the most important provisions of the contract, listed by subject, as well as all other information, necessary to be able to make an informed and accurate assessment of the contract as a whole. The law determines which categories of provisions and which categories of information are (at least) to be mentioned in the separate document and where they are applicable.
The one month period is meant to be a period of reflection for the party potentially receiving the right, giving that party the chance to become properly informed. During that period, no obligations can be undertaken and no compensation can be asked or granted, unless those obligations are part of a confidentiality agreement. This agreement might include an obligation for the compensation of damages, but only in the form of an agreed-upon lump sum. Although the exception for a confidentiality agreement is broader than the old exception for a confidentiality obligation, the one-month rule will still cause problems in practice. One might imagine how it is sometimes necessary to grasp an opportunity to hire a certain location when it presents itself or to acquire a certain licence or permit beforehand. Yet, even when the party receiving the right agrees, the party granting it cannot sign-off on things like this without taking on the entire risk itself. The earlier conclusion of the cooperation agreement itself is also strictly forbidden.
As indicated above, the new rules are accompanied by harsh sanctions in case of non-compliance. First, in case the essential requirement of the one month cooling-off period is not respected or in case no draft agreement or separate document (see above) is provided, the person receiving the right can declare the contract invalid within 2 years of its conclusion. This termination can happen by way of a simple written statement to that effect.
Secondly, the omission of certain obligations in the separate document, where the law requires their inclusion, will lead to the receiving party being able to declare the specific provision at hand invalid.
Thirdly, not mentioning other relevant information (for the correct assessment of the contract), might lead to the determination of an invalid consent and, as the case may be, consequent liability.
Lastly, it is also important to note that the deliberate performance of the contract does not cover any declaration of invalidity. The party receiving the right to use the commercial method can however abandon its right to declare it invalid. This abandonment can only occur after a period of one month has passed since the creation of this right to declare the right invalid, which will in general coincide with the contract’s conclusion. Relinquishing this right to invoke the nullity of the contract, or any related provision, must be accompanied by a clear statement of the grounds on which the party receiving the right to a commercial method is doing so.
In conclusion, as stated above, the revised rules on pre-contractual information in commercial cooperation agreements are intended to make the existing rules more effective and adapted to economic reality, so as to make their application in practice much easier. Broadening the field of application as well as the confidentiality exception is certainly a step forward for the easy application of these rules in practice.
However, uncertainty remains, for example on the meaning of the requirement to invoke grounds before signing away the right to declare any provision of the contract. Does this right refer to the reasons a party has to relinquish its right or does this refer to the legal basis for the right in question?
Lastly, it remains an open question whether these rules, retaining a serious administrative burden for the granting party (but also, de facto, for the receiving party who has to read and check everything), are indeed well adapted to economic reality. Time will tell.
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.