This new legislation introduces changes in contractual relationships between enterprises (i.e. B2B agreements). Its main objective is to ensure that certain practices between enterprises are regulated as these “arise out of aggressive behaviors abusing one enterprise’s position of power towards another”, leading to considerable contractual imbalance between parties.
Position of economic dependence
The bill introduces the notion of a “position of economic dependence” in the Code of Economic Law (CEL). This is defined as the position of subordination in which an enterprise finds itself towards another or several others, where this or these other enterprises can impose contractual terms or performance standards that cannot be obtained under normal market circumstances, due to the fact that this enterprise does not have any reasonable and available alternative, at reasonable costs and conditions.
Any practice that allows an enterprise to abuse this position of economic dependence is now forbidden, if and to the extent that it can have an impact on competition on the relevant Belgian market, or a substantial part thereof. For example, the bill states that practices such as imposition of sales prices, unequitable sales terms, applying different terms and conditions to different enterprises that deliver the same goods or services, could be deemed to constitute such abuse.
The Belgian Competition College will police compliance with these provisions and is vested with various investigatory and sanctioning powers. It can also be summoned by complaints submitted by enterprises or natural persons. Enterprises that are found to have committed such abuses can be fined to up to 5% of their annual turnover or to periodic penalty payments of 2% of their annual turnover until they cease their abusive practice(s). The annual turnover at stake is the annual turnover realised in Belgium during the accounting year preceding the College’s decision to fine.
This set of rules on abusive economic dependence is due to enter into force no later than May 2020.
The bill also lists a series of general obligations that enterprises should comply with in the frameworks of their contractual relationships.
As a principle, it is set out that any agreement in writing must be drafted in a clear and understandable manner.
The bill also prohibits abusive provisions in agreements. A clause of an agreement will be deemed abusive when – taken alone or combined with others – it creates an “manifest” contractual imbalance between the parties’ rights and obligations under the agreement. The bill expressly provides that contractual provisions in relation to the scope of performance and consideration do not fall under this rule.
Furthermore, the bill provides two lists of clauses that are deemed abusive and therefore null and void:
- Black-list – clauses deemed abusive in any case; for example: clauses giving one party a unilateral right to interpretation of the contractual clauses, waivers of claims towards the other party or clauses by which a party irrevocably accepts to be bound by clauses that it cannot effectively acknowledge prior to executing an agreement;
- Grey-list – clauses deemed abusive until proof of the contrary, such as: the unilateral right to adapt prices, tacit renewal of agreement without granting the parties’ a right to terminate it by giving reasonable notice, certain limitations of liability or restrictions of means of evidence between parties.
The government can adopt additional royal decrees in order to supplement these lists. Moreover, the special “Abusive Clauses” Commission, which is already competent to assess compliance of consumer contracts with the law, can now assess compliance of B2B agreements with the law as well. Among other things, this Commission can issue non-binding opinions regarding clauses that should be forbidden, but can also propose wording for or interpret clauses or terms and conditions used in contractual templates from specific professional sectors.
These rules are due to enter into force no later than in November 2020. They will not apply to agreements already existing at this date but only to agreements newly made, amended or renewed after this date.
Lastly, the bill provides for a wider definition of what constitutes “unfair trade practices between enterprises.”
In a nutshell, any practice by an enterprise that is misleading or aggressive (both these terms being defined in the CEL), or that leads to another enterprise breaching any provision of the CEL, is forbidden if it results in the other enterprise deciding to enter into or perform obligations under an agreement, enforce specific rights or not, proceed to payment or not, if it wouldn’t have made the same decision, or under different conditions, had the practice not taken place.
As a result of this new set of rules, Belgian companies, or companies dealing with Belgian companies should review the terms and conditions of their agreements, together with their general terms and conditions for sales or services, to ensure that these do not contain any of the forbidden clauses and are generally compliant with the principles set out under the law.
It would also be recommended for the same companies to train their commercial teams and ensure they will sign valid and binding agreements with Belgian companies.
Finally, Belgian companies could use this occasion to renegotiate their agreements with existing companies and to challenge clauses that are not compliant.
Please do not hesitate to contact our professionals should you have any questions on this new set of rules and how it could impact your business.