Commercial law update

Written on 28 Apr 2015

Brussels Ibis Regulation: new system for jurisdiction clauses 

Regulation n° 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (“Brussels Ibis”) entered into force on 10 January 2015 and brings several significant changes in comparison to its predecessor, Regulation n° 44/2001 (“Brussels I”). 

For instance, the effect of the arbitration exclusion has been clarified, the requirement to obtain an exequatur via legal proceedings to enforce foreign judgments has been abolished, and EU consumers and EU employees can now bring any action against their non-EU counterparty (for instance seller of goods and the employer) before EU courts. Even non-EU contractual parties can bring their actions before an EU court if their contract contains an EU jurisdiction clause. 

 The most important innovation in Brussels Ibis relates to contractual jurisdiction clauses (so-called “Prorogation of jurisdiction“) and the neutralisation of so-called “Italian torpedos“. Under Brussels I, the lis pendens rule implied that a court seized by a party after a court had been seized for the same matter in another Member State had to stay the proceedings until the court seized in first instance had decided upon its competence to treat the matter. 

From a strategic point of view, parties would seize an incompetent EU court with a notable judicial backlog in order to stay the second proceedings brought before a competent EU court. Brussels Ibis has tackled this issue: if parties agreed upon a contractual exclusive jurisdiction clause in the favour of an EU court, any EU court other than the court conferred with exclusive jurisdiction has to stay proceedings until the latter has decided upon its jurisdiction.

Enforceability of illegal non-compete clauses 

Most commercial agreements contain a non-compete clause in order to protect know-how, the customer base developed by one of the parties or any other kind of commercially sensitive information. 

 As a general rule, a non-compete clause is valid if it cumulatively meets the following three conditions:

  • It is linked to the same goods and/or services which form the subject matter of the commercial agreement.
  • It is limited to a particular territory.
  • It is limited in time.

If one of these three conditions is not met, any seized court would declare the non-compete clause null and void, meaning that it could not be enforced, and leading to serious commercial damages for the party that imposed the non-compete obligation. 

The Belgian Supreme Court rendered a judgment in January 2015 which tempered the consequences of null and void non-compete clauses and has imposed a more active role on the judge when confronted with such an invalid non-compete clause: the judge can declare the clause partially null and enforceable, upon the condition that the existence of a valid non-compete clause corresponds to the will of the parties. 

This is the moment where a classic boilerplate provision comes into play: in case any of the provisions of this agreement are deemed null and void, such provisions remain valid to the extent permitted by law. Since such a provision was contained in the agreement between parties, the Supreme Court found that the Ghent Court of Appeal should have acknowledged the claim that the nullity of the non-compete clause was to be limited to the period of time exceeding the legal time limit of a non-compete clause. Indeed, it corresponds to the will of the parties that they were bound by a valid non-compete clause, as they agreed with the classic boilerplate provision.

Illegality of Dawn Raids 

In case of a (potential) competition law infringement, for example through the existence of a cartel or resale price maintenance imposed on distributors, both the European Commission and the National Competition Authority (NCA) can carry out so-called dawn raids in order to establish the existence of any competition law infringement. This allows the authorities for instance to force entry into company and private premises, search these premises, IT-systems, phones, question employees, seal computers, confiscate original company documents, …, but they are required by law to obtain the “prior authorisation of an examining magistrate” when carrying out such a dawn raid. 

The Brussels Court of Appeal issued a judgment on 18 February 2015 in relation to dawn raids carried out in 2006 under the application of the old Belgian Competition Act (now replaced by the 2013 Competition Act and enshrined in the Belgian Economic Law Code) at the premises of several travel agents in the context of an investigation regarding alleged illegal agreements on prices and terms and conditions. 

The Court of Appeal found that the dawn raids were illegal because no prior authorisation from an independent judge had been obtained. As a consequence, all data obtained through dawn raids at the homes of employees (being the issue at stake) could not have been used by the NCA’s College of Prosecutors as evidence to build its case. 

The effect of the illegality of the evidence obtained through these particular dawn raids on the case itself before the NCA is still to be seen.