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Q&A on Distribution Agreements

Part 1: Legislative framework

Q1. Please specify the legislative framework generally applicable to the conclusion and execution of distribution agreements (a)? Please include a link to the official publication of the applicable rules (e.g., relevant link to the Official Gazette) (b) and, if available, to the English translation of the legislative framework (c).

a.  Legislative framework:

Book IV comprising the Belgian Competition Act 
Book VI comprising the rules on market practices and consumer protection
Book X, titles 1 to 3 Belgian Code for Economic Law, comprising the following rules:

  • Title 1: Agency Agreements
  • Title 2: Pre-contractual Information in the context of commercial collaboration agreements
  • Title 3: Unilateral termination of exclusive concession agreements with an indefinite duration

Art. I.6, I.8, I.11 Belgian Code for Economic Law, which holds the definitions relevant to, respectively, Book IV, Book VI and Book X Belgian Code for Economic Law.

b. Link(s) to official publication:

The Dutch version of the CEL is accessible via this link.

The French version of the CEL is accessible via this link.

c. Link(s) to English translation:

Not available.

Q2. Other than for agency agreements pursuant to Directive 86/653 (EEC) on the coordination of the laws of the Member States relating to self-employed commercial agents, are there specific rules depending on the distribution format (e.g. franchising, exclusive distribution)?

No.

Q3. Other than general contract law and competition law, are there other rules which may generally restrict the parties when drafting and concluding distribution agreements (e.g., rules in relation to unfair contract terms in B2B contracts, specific requirements in the context of a prohibition of abuse of economic dependence)?

Yes.

If yes, which general rules apply (a)? Where available, please also include a link to the official publication of the applicable rules (b) and to the English translation of the regulatory framework (c).

a. General rules

By means of the Law of 4 April 2019, the Belgian legislator introduced new rules in relation to B2B relationships. These rules consist of 3 parts: (1) unfair contract terms in B2B contracts, (2) unfair B2B market practices, and (3) abuse of economic dependence. The new rules have been incorporated in Book VI Belgian Code of Economic Law (“CEL”).

On the basis of these rules, the following should be taken into account in all B2B contracts, including distribution agreements:

1. Unfair contract terms in B2B contracts (Art. VI.91/1-VI.91/10 CEL)

The new B2B rules have a broad scope, as they apply to virtually all B2B contracts concluded, renewed or amended after 1 December 2020, except for (i) agreements relating to financial services and (ii) public procurement agreements or agreements executed in the framework thereof (Art. VI.91/1 CEL).

First, all written contract provisions must be drafted in a clear and comprehensible way (Art. VI.91/2 CEL). Second, as a general principle, any clause that creates a manifest imbalance between the rights and duties of professionals is prohibited (Art. VI.91/3 CEL). The so-called ‘core clauses’ – i.e. clauses determining the actual object of an agreement and the balance between a price and the corresponding goods/services – are exempted from this general principle, provided they are sufficiently transparent. More specifically, this prohibition is translated into a black and grey list of clauses.

The black list contains four types of clauses that are always unlawful and thus prohibited (Art. VI.91/4 CEL):

  • Clauses that provide for an irrevocable obligation on the part of one company, while the performance of the other party’s obligations is subject to a condition that depends exclusively on the latter’s will (irrevocable versus potestative obligations);
  • Clauses that give a company the unilateral right to interpret a contract (unilateral interpretation clauses);
  • Clauses that require one company to waive any recourse against the other company as soon as the latter contests such recourse (self-administered justice clauses);
  • Clauses that irrefutably establish the knowledge or acceptance of certain clauses, even though a company was not made aware of them prior to the conclusion of the contract (irrefutable knowledge or acceptance clauses).

The grey list contains eight clauses that carry a presumption of unlawfulness. They are prohibited unless proof to the contrary is provided (Art. VI.91/5 CEL):

  • Clauses that give a company the right to unilaterally amend the terms of a contract without a valid reason (unilateral amendment clauses);
  • Clauses that tacitly extend or renew a limited-term contract without providing for a reasonable notice period (tacit renewal);
  • Clauses that, without consideration, impose the economic risk on one company, although that risk would not customarily rest upon it (shifting of the risk);
  • Clauses that inappropriately limit or exclude the legal rights of one company if the other company does not fulfil its contractual obligations (inappropriate limitation or exclusion of legal rights);
  • Clauses that bind the parties without specification of a reasonable notice period (no reasonable notice period);
  • Clauses that release a company from its liability for its wilful misconduct or serious fault or for its failure to fulfil the essential obligations of the contract (certain exoneration clauses);
  • Clauses that limit the evidence on which the other party may rely (limitation of evidence);
  • Clauses that establish damage amounts that are manifestly disproportionate to the harm suffered (manifestly disproportionate damages clauses).

The nullity of a clause on the black list cannot be disputed, but that of a clause on the grey list can. A grey clause can be salvaged if the party wishing to enforce the clause can demonstrate that it does not lead to a manifest imbalance. Thus, a grey clause can be lawful due to the nature of the product or service, the specific circumstances concerning the conclusion of the contract, the commercial customs and relations, the sector involved or the coherence with other clauses.

2. Unfair B2B market practices (Art. VI.105 – VI.109/3 CEL)

The prohibition of unfair market practices includes misleading (Art. VI.105 and 105/1 CEL) and aggressive (Art. VI.109/1-109/2 CEL) market practices.

A misleading market practice is a practice involving false information which is therefore untruthful, or, even if the information is factually correct, deceives or is likely to deceive a professional counterparty in any way, and causes or is likely to cause it to take a transactional decision that it would not have taken otherwise.

This includes possible deception with regard to the existence or nature of the product, the main characteristics of the product, the scope of the company’s obligations, the price or the way in which the price is calculated, etc.

According to Art. VI.105/1 CEL, a market practice is also misleading if essential information is omitted which the other company requires to take an informed decision, and which causes or may cause it to take a decision that it would not otherwise have taken.

An aggressive market practice is a market practice which, in its factual context, taking account of all its characteristics and circumstances, by means of harassment, coercion, including the use of physical force, or inappropriate influence, significantly limits or may significantly limit a company's freedom of choice or conduct with regard to a product and thereby causes or may cause it to take a transactional decision that it would not have taken otherwise.

According to Art. 109/1 CEL, the notion of “inappropriate influence” is interpreted as the exploitation by one company of its dominant position in relation to the other company in order to exercise pressure, even without using or threatening to use physical force, in a manner which significantly limits its ability to take an informed decision.

Art. 109/2 CEL provides a list of circumstances that should be taken into account to assess whether a market practice includes harassment, coercion (including the use of physical force) or inappropriate influence.

3. Abuse of economic dependence (Art. IV.2/1 and IV.70 CEL)

Art. VI.2/1 CEL prohibits the abuse of economic dependence. This is a new form of so-called “relative” abuse between trading partners.

Every supplier or purchaser holding a position of power vis-à-vis a trading partner must be vigilant in the light of the new prohibition of abuse of economic dependence, as any company in a position of economic dependence may rely on the protection of Art. IV.2/1 CEL.

Within the framework of distribution agreements, some distributors might be regarded as being in a situation of economic dependence vis-à-vis their supplier. That is particularly the case in franchising, subcontracting and exclusive dealership relations.

There is economic dependence in the case of « relative domination » of one company vis-à-vis another. This requirement is distinct from that of a dominant position on the relevant market, which only arises if the company holds a market share greater than 40%. The prohibition of abuse of economic dependence applies irrespective of the size and market share of the trading partners, as long as the abuse is capable of affecting competition on the Belgian market (or a substantial part thereof).

Therefore, three cumulative conditions must be fulfilled:

  • there must be a position of economic dependence (which is not prohibited per se);
  • there must be an abuse thereof; and  
  • the abuse must be capable of affecting competition on the Belgian market (or a substantial part thereof).

The list of practices that qualify as abusive in a situation of economic dependence includes all of those that the law foresees in the event of dominant position, to which are added the refusal of a sale, a purchase or other transaction terms.

The Belgian Competition Authority monitors compliance with the prohibition and, in the event of violation of the prohibition, will be able to impose fines of up to 2% of the company’s turnover, and periodic penalty payments up to 2% of the average daily turnover per day of delay in bringing the infringement to an end.

b. Link(s) to official publication:

The Dutch version of CEL is accessible via this link.

The French version of the CEL is accessible via this link.

c. Link(s) to English translation:

Not available.

Part 2: Pre-contractual phase

Q4. Are there mandatory provisions in relation to the disclosure of pre-contractual information prior to concluding and/or executing distribution agreements?

Yes. 

If yes, which mandatory provisions apply (a) and which information must be disclosed (b)? Where available, please also include a link to the official publication of the applicable rules (c) and, if available, to the English translation of the regulatory framework (d).

a. Mandatory provisions:

(i) Art. 1382-1383 Belgian Civil Code; (ii) Art. 1134, paragraph 3 Belgian Civil Code; (iii) Art. X.26-X.34 CEL.

b. Information to be disclosed:

Art. 1382 and 1383 Belgian Civil Code sets out the general principles of extra-contractual liability and duty of care. Case law confirms that damages claims resulting from a violation in the conclusion of an agreement is based on the extra-contractual legal regime.

Art. 1134, paragraph 3 Belgian Civil Code requires that all agreements are executed in good faith. This principle also applies to the pre-contractual phase and requires each party to inform the other party of the elements that should allow the future partner to make an assessment that is as objective as possible of the commercial risk that the commercial cooperation entails.

Art. X.26-X34 CEL impose additional pre-contractual information requirements prior to concluding ‘commercial cooperation agreements’. A commercial cooperation agreement is an agreement concluded between two or more parties whereby one grants the other the right to use a commercial formula for the sale of products or delivering services. A commercial formula can consist of either the use of a trade name or logo, a transfer of know-how or providing technical or commercial assistance (Art. I.11, 2° CEL).

Excluded from the scope of Art. X.26-X.34 are insurance agency agreements and banking agency agreements (Art. X.26 CEL).

The pre-contractual information must include (i) a copy of the draft commercial cooperation agreement and (ii) a separate pre-contractual information document or “PID”. The PID must contain 2 parts. Part 1 of the PID must set out all the important contractual provisions of the commercial cooperation agreement. Part 2 of the PID concerns a series of socio-economic data necessary for the correct assessment of the proposed commercial cooperation.

Reference is made to the English translation of Art. X.28 CEL for a complete list of the pre-contractual information that must be included in the PID.

c. Link(s) to official publication:

(i) Art. 1134 Civil Code
The Dutch version is accessible via this link.

The French version is accessible via this link.

(ii) Art. X.26-X34 CEL
The Dutch version is accessible via this link.

The French version is accessible via thislink.

d. Link(s) to English translation:

Not available.

Q5. Is there a standstill obligation linked to the requirements imposed for the pre-contractual phase?

Yes.

If yes, what does this standstill obligation entail (how long, specific procedural requirements, etc.)?

The pre-contractual information must be provided one month before the execution of the commercial cooperation agreement together with an execution copy of the cooperation agreement. With the exception of the conclusion of a non-disclosure agreement, no commitments may be entered into and no other compensation, amount or security may be requested or paid before the expiry of the standstill period (Art. X.27 CEL).

In the event of the renewal of a commercial cooperation agreement concluded for a fixed period, in the event of the conclusion of a new commercial cooperation agreement between the same parties or in the event of the amendment of a commercial cooperation agreement that is being executed and has been concluded since at least 2 years, the party granting the right shall provide the other party with a draft agreement and a simplified PID at least one month before the renewal or conclusion of a new agreement or the amendment of the current commercial cooperation agreement. Reference is made to the English translation of Art. X.29 CEL for a complete list of the pre-contractual information that must be included in the simplified PID.

However, if a commercial agency agreement concluded since at least 2 years is amended during its execution at the request of the party acquiring the right, the party granting the right shall not be required to provide a draft agreement or a simplified PID.

Q6. Does the relevant regulatory framework impose sanctions if the pre-contractual obligations are not (fully) respected?

Yes.

If yes, which sanctions apply (e.g., nullity of contract, penalty payment)?

Agreements executed in disrespect of this obligation can be declared null and void upon request of the party that is granted the right to use the commercial formula. The nullity of the agreement must be invoked within a period of 2 years after the conclusion, renewal or amendment of the commercial cooperation agreement (Art. X.30, paragraph 1 CEL).

If Part 1 of the PID does not contain the required information with respect to important clauses of the commercial cooperation agreement (see, Q7.b) above), the nullity of said clauses may be invoked without limitation in time (Art. X.30, paragraph 2 CEL).

If any information of Part 2 of the PID is missing, incomplete or incorrect of if any information of Part 1 of the PID is incomplete or incorrect, the party acquiring the right may invoke the ordinary law provisions relating to defects of will or quasi-delictual (tort) liability and such without prejudice to the right to invoke the nullity of said clauses (Art. X.30, paragraph 3 CEL).

The party acquiring the right may only validly waive the right to claim the nullity of the commercial cooperation agreement or of one of its provisions after the expiry of a period of one month after the conclusion of this agreement. Such waiver shall expressly state the reasons for waiving the nullity (Art.X.30, paragraph 4 CEL).

Q7. Can a party be held liable if it terminates the pre-contractual negotiations?

Yes.

If yes, on what grounds (a); under what conditions (b); and what consequences are generally linked to such liability (c)?

a. Grounds for pre-contractual liability:

- Art. 1134, paragraph 3 Belgian Civil Code.

- Art. 1382-1383 Belgian Civil Code.

b. Conditions for pre-contractual liability:

Any party is in principle free to terminate pre-contractual negotiations, but it is required to negotiate in good faith. According to Belgian case law, terminating pre-contractual negotiations in itself is not wrong, unless the party terminating the pre-contractual negotations is acting in bad faith and terminated the negotiations wrongly (e.g. on the basis of deceptive behaviour, by means of very limited motivation or demonstrably untimely).  

c. Consequences of pre-contractual liability:

The damaged party may be entitled to damages by the party that is held liable for the improper termination of the pre-contractual negotiations.

Belgian case law quantifies such damages as the costs incurred, damages for the loss of the opportunity to negotiate agreements with other parties or reputational damage , if the termination goes against the principles of reasonableness and fairness. This means that the party that is held liable must restore the other party’s financial situation as if no negotiations have taken place.

Other case law quantifies  such damages as the loss of revenue, if the damaged party had legitimate expectations that an agreement would be concluded. In such case the party that is held liable must restore the other party’s financial situation as if the pre-contractual obligations had been respected and an agreement had been concluded.

The court shall assess each case on a case-by-case basis, taking into account the obligation to negotiate in good faith and the freedom of each party to terminate pre-contractual negotiations on the basis of justified reasons.

Q8. Are there other relevant rules and/or restrictions that apply during pre-contractual negotiations between supplier and distributor?  

No.

Part 3: Contractual phase

A. Form of distribution agreements

Q9. Must a distribution agreement be executed in writing to be valid and enforceable?

Only in certain instances.

If only in certain instances, please explain when a written agreement is required.

When concluding commercial cooperation agreements (see, Q7.b) above).

Q10. Are there any (other) requirements as to the form of the distribution agreement for it to be valid and enforceable?

No.

B. Content of distribution agreements

Q.11 Other than restrictions imposed by EU competition law (including Regulation (EU) 330/2010), do specific rules and/or restrictions apply in distribution agreements with respect to

  • the territory in which or the customers to whom the goods/services will be sold;
  • an exclusivity granted to the distributor;
  • (exclusive) sourcing/purchasing obligations;
  • resale prices;
  • non-compete clauses

Yes specific rules apply to (i) the territory in which or the customers to whom the goods/services will be sold, (ii) an exclusivity granted to the distributor and (ii) (exclusive) sourcing/purchasing obligations.

With respect to territory, exclusivities and exclusive sourcing/purchasing obligations, the mandatory provisions of Book X, Title 3 CEL apply to certain types distribution agreements. As the protection offered by the provisions of Book X, Title 3 CEL cover the termination of such distribution agreements, reference is made to Part III.C below.

Q12. Do specific rules and/or restrictions apply in distribution agreements with respect to

  • obligations of the supplier vis-à-vis the distributor, including in relation to the remuneration of the distributor;
  • obligations of the distributor vis-à-vis the supplier or vice versa;
  • a non-solicitation clause during and/or after the term of the distribution agreement;
  • minimum sales quota imposed on the distributor;
  • specific sector rules?

No specific rules apply.

C. Term and termination

Q13. Are there particular rules and/or restrictions in relation to the term (incl. renewal) of distribution agreements?

No.

Q14. Are there any specific rules and/or restrictions with respect to the termination of distribution agreements (e.g. minimum notice period, statutory right to compensation (goodwill or other))?

Yes.

If yes, what do these specific rules and/or restrictions entail (a)? Please include whether these specific rules and/or restrictions differ depending on whether the distribution agreement is of definite or indefinite duration (b) or whether the distribution agreement is terminated by one party for convenience or for breach by the other party (c).

a. What do these specific rules and/or restrictions entail:

Specific rules apply to certain types of distribution agreements of indefinite duration.

These mandatory rules are included in Book X, Title 3 CEL and apply to the following 3 types of distribution agreements of indefinite duration (or of definite duration as of a third renewal, see, b)) (Art. X.35 CEL):

  • Exclusive distribution agreements, i.e. agreements where the distributor is the only seller of the supplier’s products in a defined territory.
  • Quasi-exclusive distribution agreements, i.e. agreements where, according to the Belgian case law, the distributor sells 80 % or more of the supplier’s products in the territory.
  • Distribution agreements where the supplier imposes important obligations on the distributor, which are strictly and specifically linked to the distribution agreement and the burden of which is so heavy that the distributor would suffer a significant disadvantage in the event of termination of the distribution agreement.

Distributors that enjoy legal protection may only be terminated on the basis of a reasonable notice period, except in the event of material breach (Art. X.36 CEL). According to Belgian case law, a reasonable notice period is the period that is reasonably necessary for the distributor to re-orient his activities and to find an equivalent source of income. This must be assessed on a case-by-case basis. If the supplier has not given a reasonable notice period, the distributor has the right to a compensation in lieu of advance notice.

According to Art. X.37, distributors may also be entitled to a “fair additional compensation” for (i) clientele built up by the distributor (“goodwill”), (ii) specific costs that the distributor incurred within the framework of the distribution agreement, and (iii) personnel termination costs .

The law provides three cumulative conditions for the right to a clientele (goodwill) indemnity: (i) significant added value has been created by means of the acquisition of new clients or growth of business with existing ones; (ii) such added value has been generated through the efforts of the distributor; and (iii) the supplier will continue to enjoy such benefits after the end of the agreement.

b. If applicable, differences dependent on whether the distribution agreement is of definite or indefinite duration:

If the distribution agreement is of indefinite duration (and the legal criteria of Art. X.35 CEL apply) the special protection shall apply. Distribution agreements with a fixed term are, for the specific purposes of the relevant protection, considered distribution agreements of indefinite duration (and hence covered by the law) if the distributor was not terminated by registered letter between 6 and 3 months prior to the expiry of the fixed term (Art. X.38, first paragraph CEL). Fixed term distribution agreements that, irrespective of whether they were slightly modified, are renewed for a third time also enjoy legal protection as if they were distribution agreements of indefinite duration (Art. X.38, second paragraph CEL).

c. If applicable, differences dependent on whether the distribution agreement is terminated by one party for convenience or for breach by the other party:

In the event that the distributor is terminated for material breach, the legal protection of Book X CEL does not apply.

The interpretation of the concept of “material breach” is strict. In order to qualify as a material breach, it is required that such breach is of such a serious nature that any further cooperation between the parties is rendered  impossible. A party is required to terminate the agreement immediately when discovering the material breach of the other party. As a result, in the event that a party has been aware of a breach during a certain period of time and has not acted, this is taken to mean that the breach is not a material breach in the sense of Art. X.36 and X. 37 CEL.

In the event that the distributor is terminated for convenience, the legal protection of Book X CEL applies.

Q15. Is it possible to terminate the distribution agreement based on certain grounds for termination (breach or other) included in the distribution agreement?

Yes.

If yes, is prior judicial intervention required in order for the termination of the agreement to take effect?

No.

Part 4: Post-contractual phase

Q16. Is the supplier required to repurchase the stock that is still at the distributor’s disposal when the distribution agreement ends?

Yes.

Q17. Are there other post-contractual obligations that generally apply to either of the parties in the context of the termination of the distribution agreement?

No.

Part 5: Dispute resolution

Q18. Do specific rules and/or restrictions apply as regards the choice of forum and/or jurisdiction?

No

Q19. Can the parties opt for arbitration?

Yes.

If yes, are there any rules and/or restrictions as regards the enforceability of arbitration clauses in distribution agreements?

No.

Q20. What is the statute of limitations applicable to claims regarding the performance of a distribution agreement?

Any damages claim for breach of performance of a distribution agreement is limited to 10 years (Art. 2262bis, §1 Belgian Civil Law Code).

Part 6: Additional comments

Belgian competition law adheres to the principles established under EU competition law so that there are no specific deviations in the law or the case law to be reported.

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