On 21 March 2019, the Belgian Parliament approved a new Act which adds three sets of new rules for relationships between businesses to the Economic Law Code. These concern unfair contract terms, abuse of the "economic dependence" of a business, and unfair market practices between businesses. This Act will have a significant impact on contracting and business practices. Below, we briefly outline the main aspects of the new Act, with a focus on the new rules on unfair terms in B2B contracts.
Unfair contract terms
When entering into contracts with consumers, businesses are familiar with the prohibition on including clauses that create a significant imbalance between the rights and obligations of the parties to the detriment of the consumer. A similar restriction on freedom of contract has now also been introduced for contracts between businesses.
A contractual term will also be unfair and prohibited in B2B contracts if it creates a significant imbalance between the rights and obligations of the parties. The aggrieved business (regardless of its size) may apply to have such an unfair clause annulled.
This general prohibition of unfair contract terms is accompanied by two lists of specific categories of terms. The terms included on the "black list" are unfair and are prohibited without further assessment. The Act also contains a "grey list" of terms for contracts between businesses. The terms included on the grey list are presumed to be unfair and prohibited, unless there is proof to the contrary. Given the importance of these lists, their content is set out below.
The black list includes terms that aim to:
- create an irrevocable obligation for the other party while the performance of the obligations of the business is subject to a condition which depends for its realisation solely on the will of the business;
- give the business the unilateral right to interpret any term in the contract;
- in the event of a dispute, oblige the other party to waive any remedy against the business; or
- irrefutably establish the other party's knowledge or acceptance of terms which that party had not been able to become acquainted with prior to the formation of the contract.
The grey list contains terms that aim to:
- give the business the right to unilaterally modify, without a valid reason, the price, characteristics or terms of the contract;
- tacitly extend or renew a fixed-term contract, without providing a reasonable notice period;
- place, without counter-performance, the economic risk on a party if that risk would normally be borne by the other business or by another party to the contract;
- inappropriately exclude or limit the legal rights of one party in the event of total or shared non-performance or defective performance by the other business of any of its contractual obligations;
- without prejudice to article 1184 of the Civil Code, bind the parties without providing a reasonable notice period;
- discharge the business from its liability for its wilful misconduct, its gross negligence or that of its employees or, except in cases of force majeure, for the non-performance of essential obligations that are the subject matter of the contract;
- limit the means of evidence that the other party may rely on; or
- in the event of non-performance or delay in the performance of the other party's obligations, fix damages amounts that are manifestly disproportionate to the harm that may be suffered by the business.
These lists will undoubtedly give rise to considerable debate between contracting parties. For example, many terms can be said to place the economic risk on a contracting party whereas that risk "normally" rests with the other party, but this will seldom occur without (direct or indirect) counter-performance (category 3 on the grey list).
If a business claims to have been harmed by a grey list clause, it is up to its co-contracting party to provide evidence to the contrary, hence proving that the clause is not unfair in the specific case and therefore does not create a manifest imbalance between the rights and obligations of the parties. According to the explanations given during the parliamentary process, the concrete effects of the clauses on the parties should be examined in particular for this purpose. This analysis should take into account the following elements: the specific nature of the goods or service, the sector concerned and its commercial practices, as well as the overall context and commercial relations. It is also explained that the presumption of unfairness can be rebutted insofar as it can be shown that both parties really intended to reach such an agreement.
These new rules on unfair terms do not apply to financial services or public procurement contracts, but certain legal provisions may be made applicable to them by Royal Decree.
The new rules on unfair terms will enter into force on the first day of the nineteenth month following the month in which the Act is published in the Belgian Official Gazette, but only for contracts concluded, renewed or modified after that date of entry into force. Consequently, the new provisions will not apply to agreements still running on the date of entry into force of the new rules.
Abuse of economic dependence
The legislator has also created an additional category of restrictive competition practices, besides restrictive agreements and the abuse of a dominant position. Businesses will also be prohibited from abusing a position of economic dependence of another business, by which competition on the Belgian market concerned or a substantial part of it can be affected.
A "position of economic dependence" is defined in the Act as a "position of subjection of a business towards one or more other businesses characterised by the absence of a reasonable equivalent alternative, available within a reasonable period of time, and under reasonable conditions and costs, allowing this or each of these businesses to impose obligations or conditions that cannot be obtained under normal market circumstances".
According to the new Act, the economic dependence of a business may be abused in the following situations:
- refusing a sale, a purchase or other transaction terms;
- directly or indirectly imposing unfair purchase or sales prices or other unfair contract terms;
- limiting production, markets or technical development to the detriment of users;
- applying dissimilar conditions to equivalent obligations towards economic partners, thereby putting them at a disadvantage in competition; or
- making the conclusion of contracts dependent on the acceptance by the economic partners of additional obligations which, by their nature or according to commercial usage, have no connection with the subject matter of such contracts.
An abuse of a position of economic dependence can be sanctioned by the Belgian Competition Authority, either on its own motion or following a complaint, with fines of up to 2% of the turnover of the business concerned. Penalty payments ("dwangsommen"/"astreintes") may also be levied in the event of non-compliance with a decision of the Belgian Competition Authority.
Apart from that, an abuse of a position of economic dependence may possibly also give rise to private law claims, e.g. for damages, for a cessation order or for the annulment of the entire contract or part of it.
The new rules on abuse of economic dependence will enter into force on the first day of the thirteenth month following the month of publication of the Act in the Belgian Official Gazette.
Unfair market practices
With regard to unfair commercial practices towards consumers, a distinction had already been made between "misleading" and "aggressive" commercial practices. The Act now introduces a distinction between misleading and aggressive market practices for unfair market practices between businesses (for more details, see articles VI.105-105/1 and VI.109/1-VI.109/2 of the Economic Law Code). These practices can occur at all stages in the life of a contract: during negotiations, during the performance of contractual obligations, and upon the termination of a contract.
The new rules on unfair market practices will enter into force on the first day of the fourth month following the month of publication of the Act in the Belgian Official Gazette.
For more information: see the parliamentary documents relating to the new Act (in Dutch or in French)