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Direct distribution

Ownership structures

May a foreign supplier establish its own entity to import and distribute its products in your jurisdiction?

A foreign supplier is entitled to establish its own entity to import and distribute its products in Belgium, as the freedom to perform economic activities is one of the basic freedoms established in Belgian law.

Belgian authorities can in principle impose restrictions, but European legislation (specifically the freedom of establishment as laid down in articles 49 to 55 of the Treaty on the Functioning of the European Union) always has to be respected.

For some specific sectors (eg, credit agents, insurance agents), prior approval or permission by the authorities is required.

May a foreign supplier be a partial owner with a local company of the importer of its products?

Insofar as such ownership would not infringe Belgian and or European competition law (which would depend on the specific circumstances of the case), a foreign supplier may indeed incorporate a local Belgian company together with its supplier.

What types of business entities are best suited for an importer owned by a foreign supplier? How are they formed? What laws govern them?

The most important distinction to be made is the one between business entities without limited liability and those with limited liability. As the importer would engage in economic activities, which would inherently involve a certain amount of risk, a limited liability entity is preferable. Such a limited liability entity would limit its shareholders’ liability to the equity investment in case of bankruptcy.

The most common types of limited liability business entities in Belgium currently are:

  • private limited liability company (BVBA/SPRL); and
  • public limited liability company (NV/SA).

The BVBA/SPRL and the NV/SA are governed by the Belgian Company Code. Both types of entities must be incorporated by way of a notarial deed and require the filing of an extract of such deed, consisting of, among others, the articles of association and details of the incorporators, with the clerk’s office of the competent commercial court (to be determined based on the location of the registered seat).

It should, however, be noted that important changes to Belgian company law are expected to enter into force in 2019.

Restrictions

Does your jurisdiction restrict foreign businesses from operating in the jurisdiction, or limit foreign investment in or ownership of domestic business entities?

Safe from specific requirements for certain regulated sectors (eg, banking), Belgian law does not include a general principle restricting the economic freedom of foreign businesses. Within the framework of the European Union, the free movement of persons, services and capital, and the freedom of establishment are basic principles.

Equity interests

May the foreign supplier own an equity interest in the local entity that distributes its products?

A foreign supplier is entitled to own an equity interest in the local Belgian entity distributing its products.

Tax considerations

What are the tax considerations for foreign suppliers and for the formation of an importer owned by a foreign supplier? What taxes are applicable to foreign businesses and individuals that operate in your jurisdiction or own interests in local businesses?

Non-residents, whether natural persons or corporations, are taxed only on Belgian source income; that is, income produced or collected. Certain types of income are subject to withholding tax that may either be credited against the global tax liability or constitute the final tax liability.

A foreign corporation is subject to non-resident income tax in Belgium if it has an ‘establishment’ in Belgium. However, even without an establishment, a foreign company may be taxed on its Belgian-source income. Branches of foreign companies are taxed at the same rate as resident companies (29.58 per cent for income sourced in 2018 and 2019, and 25 per cent for income sourced as from 2020 - subject to changes made by future government decisions). The taxable profit is determined as for Belgian corporations.

However, national rules of Belgian tax legislation might be subject to prevailing international law (eg, double taxation treaties). Typically, under such treaties (if any), Belgian branch income is exempt in the resident state and Belgian withholding tax levied on dividends, interests and royalties is limited.

Aside from income tax, the provision of goods and services in Belgium is in principle subject to VAT (general tariff of 21 per cent, by exception 6 per cent or 12 per cent). Moreover, European legislation provides for customs duties levied on the importation of products from outside the European Union. Finally, there is a wide variety of taxes imposed by local governments (provinces, municipalities, etc) or applicable to specific sectors (eg, banking and insurance, fuel, tobacco and alcohol, etc).

Local distributors and commercial agents

Distribution structures

What distribution structures are available to a supplier?

The most common distribution structures under Belgian law are the following:

  • commercial agency: the supplier can charge a commercial agent with the negotiation and possibly even the conclusion of business deals on behalf of and in the name of the supplier. Commercial agency is regulated by articles X.1 to X.25 of the Belgian Code of Economic Law, which provide for a quite strict regime;
  • distributorship: the supplier can grant a distributor the right to sell, in the distributor’s own name and for its own account, goods manufactured or sold by the supplier. The Belgian legislator has provided for quite strict legislation regarding the termination without cause of exclusive distribution agreements of indefinite term (articles X.35 to X.40 of the Belgian Code of Economic Law). The supplier can also opt for a non-exclusive distribution or a selective distribution network in the EEA;
  • franchising: a franchisor is an independent intermediary offering goods or services in its own name and for its own account according to a (long-term) right (and obligation) to use the commercial concept of the franchisor or supplier; and
  • commission brokerage is a less frequented distribution structure, whereby the supplier appoints a ‘commission broker’ to act in its own name but on behalf of the supplier. Most frequently, the commission broker’s activity as an intermediary is of a logistic and operational nature.

The Belgian legislator has provided for specific rules regarding pre-contractual information within the framework of commercial cooperation agreements (articles X.26 to X.34 of the Belgian Code of Economic Law), that apply to franchising and possibly to commercial agency, distributorship and, although quite unlikely, to commission brokerage. It is crucial to seek legal counsel before establishing a distribution network in Belgium.

Legislation and regulators

What laws and government agencies regulate the relationship between a supplier and its distributor, agent or other representative? Are there industry self-regulatory constraints or other restrictions that may govern the distribution relationship?

Regarding the precise legal qualification of the relationship between a supplier and its distributor, the legislation mentioned in question 7 will be applicable.

Both Belgian and European competition law also have to be abided by and are enforced by the Belgian Competition Authority and the European Commission (mainly prohibition of restrictive practices and the abuse of a dominant market position).

Contract termination

Are there any restrictions on a supplier’s right to terminate a distribution relationship without cause if permitted by contract? Is any specific cause required to terminate a distribution relationship? Do the answers differ for a decision not to renew the distribution relationship when the contract term expires?

If the distribution relationship is not regulated by mandatory commercial agency legislation (articles X.1 to X.25 of the Belgian Code of Economic Law, see question 7) or by mandatory distribution legislation (articles X.35 to X.40 of the Belgian Code of Economic Law, see question 7) the possibility of termination depends on the term of the relationship:

  • contractual relationships of indefinite term can always be terminated by giving a ‘reasonable’ termination notice or indemnity in lieu of notice, which would depend on the practical circumstances of the relationship. In practice, the contract will often provide for a well-defined notice period or termination formalities;
  • contractual relationships of definite term can in principle not be terminated before the expiry of said term, unless the parties have provided for a contractual early termination clause. A decision not to renew a contractual relationship would, under general Belgian contract law, not be a termination decision; and
  • both contractual relationships of determined and indefinite term can be terminated for cause by any party in case of gross negligence. In theory, the termination should be claimed before a court but, in practice, the parties generally contractually provide for a possibility to terminate for cause without prior intervention from a court.

Belgian legislation on termination without cause of exclusive distribution agreements of indefinite term provides that contracts falling within its scope cannot be terminated without cause otherwise than with a ‘reasonable notice period’ or a ‘fair indemnity’ in lieu of notice. The length of the notice period or the amount of the indemnity in lieu of notice can be agreed upon between the parties only after termination of the agreement. If the parties fail to reach an agreement, the courts decide according to the principles of ‘equity’. One must, however, be cautious as said mandatory legislation provides for specific conditions under which agreement of definite term will be assimilated to agreement of indefinite term.

Belgian mandatory commercial agency legislation provides for a minimum notice period of one month per started year, with a maximum of six months. This mandatory period of notice is applicable to commercial agency agreements of indefinite term. It does not apply to agreements of definite term, except when a clause allows termination without cause prior to the expiry date. The party terminating the commercial agency agreement without granting the minimum period of notice must pay a legally defined termination indemnity.

Any commercial agency agreement can be terminated for cause when exceptional circumstances render any further cooperation between the parties definitively impossible or in case of a material breach by the other contracting party. The terminating party would have to abide by very short and strictly defined delays, as well as formal requirements.

Is any mandatory compensation or indemnity required to be paid in the event of a termination without cause or otherwise?

In case of valid termination for cause, no mandatory compensation or indemnity would be due by the terminating party. However, in practice, a termination for cause will often be disputed and lead to discussion between the parties.

The party terminating without cause a commercial agency agreement falling within the scope of mandatory legislation (see questions 7 and 9) without granting the minimum period of notice must pay a termination indemnity, which will be equal to the agent’s remuneration, calculated on the basis of the average amount of commissions earned during the 12 months prior to termination, which would have been due if the notice period had been granted. Moreover, a goodwill indemnity might be due if certain conditions are met. The amount of the goodwill indemnity is limited to a maximum of one year of commission calculated on the basis of the average amount of commission earned during the five years prior to the termination.

The party terminating without cause an exclusive distribution agreement falling within the scope of mandatory legislation (see questions 7 and 9) without granting a ‘reasonable notice period’ must pay an indemnity in lieu of notice, which is usually computed on the basis of the ‘average semi-gross profits’ made by the distributor during the last two or three years of the relationship. Moreover, an ‘equitable complementary indemnity’ might be due if certain conditions are met. The amount of the indemnity is fixed rather arbitrarily in Belgian case law.

Transfer of rights or ownership

Will your jurisdiction enforce a distribution contract provision prohibiting the transfer of the distribution rights to the supplier’s products, all or part of the ownership of the distributor or agent, or the distributor or agent’s business to a third party?

A clause prohibiting the transfer of the distribution rights, the ownership or business to a third party are in principle valid and enforceable under Belgian law. As distribution relationships are often intuitu personae (meaning that the counterparty’s identity is crucial to the agreement), such clauses are common.

Regulation of the distribution relationship

Confidentiality agreements

Are there limitations on the extent to which your jurisdiction will enforce confidentiality provisions in distribution agreements?

In practice, it is recommended to draft confidentiality clauses as wide as possible, as business secrets are not protected ‘as such’. If the information concerned has been made public prior to entering the agreement or if the information concerned is considered to be of ‘general knowledge’, it cannot be considered as confidential.

Competing products

Are restrictions on the distribution of competing products in distribution agreements enforceable, either during the term of the relationship or afterwards?

A commercial agency agreement can contain a non-compete clause, which will only be valid, however, if and to the extent that:

  • it is made in writing;
  • it relates to the specific types of transactions assigned to the agent;
  • it is limited to the geographical area or to the group of customers and the geographical area entrusted to the agent; and
  • its application is limited to a term not exceeding six months after termination or expiry of the agreement. Furthermore, the representation of competing products by the agent could also be perceived as a violation of his or her obligation to act in the best interests of the principal and to be loyal and of good faith.

Distribution agreements very often comprise restrictions on the distribution of competing products, which are admitted to a certain extent. In this regard, it is important to highlight that the Commission Regulation (EU) No. 330/2010 excludes certain non-compete arrangements from the ‘block exemption’ (eg, any direct or indirect obligation causing the buyer, after termination of the agreement, not to manufacture, purchase, sell or resell goods or services). Under said regulation, a supplier can impose a non-compete obligation on its distributor, insofar as it is imposed for a fixed term of no more than five years.

Prices

May a supplier control the prices at which its distribution partner resells its products? If not, how are these restrictions enforced?

Suppliers may not restrict the buyer’s ability to determine its sale price, without prejudice to the possibility of a supplier to impose a maximum sale price or recommend a sale price, provided that they do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, any of the parties.

These restrictions are enforced by the competition authorities, national or European, which can impose substantial fines to perpetrators.

The supplier may determine the price offered by a commercial agent to the customers, since the commercial agent acts in the name and for the account of the supplier.

May a supplier influence resale prices in other ways, such as suggesting resale prices, establishing a minimum advertised price policy, announcing it will not deal with customers who do not follow its pricing policy, or otherwise?

As a general rule, the supplier may not, directly or indirectly, in isolation or in combination with other factors under its control, restrict the distributor’s ability to determine its sale price. However, it is possible for the supplier to impose a maximum sale price or suggest a sale price, provided that they do not amount to a fixed or minimum sale price as a result of pressure from, or incentives offered by, any of the parties. Where a minimum advertised price policy would be valid in principle, the refusal to deal with customers who do not follow its pricing policy would in principle not be valid.

May a distribution contract specify that the supplier’s price to the distributor will be no higher than its lowest price to other customers?

A distribution agreement may in principle include a clause stipulating that the supplier’s price to the distributor will be no higher than its lowest price to other customers (a ‘most favoured customer’ clause).

Are there restrictions on a seller’s ability to charge different prices to different customers, based on location, type of customer, quantities purchased, or otherwise?

Considering that contractual freedom is a cornerstone of the Belgian legal order, the seller can in principle differentiate its prices, insofar as such differences are not in violation of competition law, consumer legislation and possible regulatory provisions that might be applicable, and it does not constitute an abuse of rights.

To avoid being dragged into a discussion or even litigation based on an alleged violation of the anti-discrimination regulation, it is recommended to underpin differentiated prices with objective reasons (eg, transport costs, marketing, volumes, etc).

Geographic and customer restrictions

May a supplier restrict the geographic areas or categories of customers to which its distribution partner resells? Are exclusive territories permitted? May a supplier reserve certain customers to itself? If not, how are the limitations on such conduct enforced? Is there a distinction between active sales efforts and passive sales that are not actively solicited, and how are those terms defined?

The answer to this question depends on the type of distribution used by the supplier.

It is possible to impose restrictions on the activities of the exclusive distributors outside their territory: active sales outside the territory may be prohibited insofar as the conditions of EU Regulation No. 330/2010 are abided by, whereas passive sales outside the territory must at all times be allowed. The supplier can prevent its exclusive wholesale distributors from selling to end users and consumers (both active and passive selling). However, if a supplier allocates a particular customer group exclusively to a specific distributor active at the retail level, the supplier cannot impose a restriction on passive sales towards such a customer group by the other distributors.

Non-exclusive distributors can, in principle, not be prevented from engaging in passive sales, but they may be subjected to territorial restrictions concerning their active sales outside their territory, insofar as the conditions of EU Regulation No. 330/2010 are abided by. The same rules applicable to customer allocation (wholesale and retail) with exclusive distribution apply to non-exclusive distribution.

If a supplier operates an EEA-wide selective distribution network, the supplier may not impose territorial restrictions, apart from a location clause. The active and passive sales to consumers by members of such a network may not be restricted. The same rules applicable to customer allocation (wholesale and retail) with exclusive distribution apply to selective distribution.

Online sales

May a supplier restrict or prohibit e-commerce sales by its distribution partners?

The answer depends on the type of distribution used by the supplier.

In exclusive distribution, it is not possible to prevent the exclusive distributor from having passive sales (eg, e-commerce sales) outside its contract territory. However, the supplier can restrict the exclusive wholesale distributor to refrain from selling to end users and consumers. This is also true for e-commerce (passive sales). However, if a supplier exclusively allocates a specific customer group to a retail distributor, passive sales by other distributors cannot be restricted by the supplier.

E-commerce sales by non-exclusive distributors can not in principle be restricted by the supplier. However, the same rules applicable to customer allocation (wholesale and retail) with exclusive distribution apply to non-exclusive distribution.

The supplier must restrict the ability of a distribution partner that is part of a selective distribution network to engage in active or passive sales to resellers that are not part of said network. A supplier may prohibit its distribution partners that are part of a selective distribution network from using, in a discernible manner, third-party platforms for internet sales of the goods in question, provided that:

  • such prohibition has the objective of preserving the luxury image of the goods in question;
  • it is laid down uniformly and not applied in discriminatory fashion; and
  • it is proportionate in the light of the objective pursued (European Court of Justice case of 6 December 2017, C-230/16).

Refusal to deal

Under what circumstances may a supplier refuse to deal with particular customers? May a supplier restrict its distributor’s ability to deal with particular customers?

A supplier wishing to refuse to deal with particular customers must make sure that such refusal cannot be considered as a restrictive practice, an abuse of a dominant market position or an abuse of the right to contractual freedom (see question 17). To avoid being dragged into a discussion or even litigation, it is recommended to underpin a refusal with objective reasons.

A supplier may restrict:

  • the active sales to an exclusive customer group reserved to the supplier or allocated by the supplier to another distributor where such a restriction does not limit sales by the customers of the distributor;
  • the sales to end users by a distributor operating at the wholesale level of trade;
  • the sales by the members of a selective distribution system to unauthorised distributors; and
  • the distributor’s ability to sell components supplied for the purposes of incorporation, to customers who would use them to manufacture the same types of goods as those produced by the supplier (see question 18).

Competition concerns

Under which circumstances might a distribution or agency agreement be deemed a reportable transaction under merger control rules and require clearance by the competition authority? What standards would be used to evaluate such a transaction?

Any merger of a certain scope requires prior approval of the national competition authority or the European Commission.

A distribution or agency agreement might only be reportable if it qualifies as a ‘merger’ operation under Belgian law; that is, a lasting change of control of an undertaking, which can particularly occur when two independent undertakings decide to integrate; when one undertaking or one person having control of an undertaking purchases another undertaking or part of its activities; or when two undertakings create a lasting common undertaking between them (article IV.6 of the Belgian Code of Economic Law).

Notification to the competition authorities would only be required for mergers that meet certain turnover thresholds. For the relatively small mergers, the Belgian Competition Authority will deal with the case (articles IV.7 to IV.10 of the Belgian Code of Economic Law). For larger mergers (generally having effects that extend beyond national borders), the notification will have to be made to the European Commission (Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentration between undertakings).

In practice, the parties to sizeable transactions will often stipulate that the operation is subject to such prior approval.

In short, the procedure comprises a notification to be made to the competent competition authority (usually following informal pre-notification communication with said authority). It is then up to the authority to define the market concerned and to examine the merger’s likely effects on that market. A first decision will be made, which can be followed by a second phase procedure where there are serious doubts as to the merger’s eligibility.

Do your jurisdiction’s antitrust or competition laws constrain the relationship between suppliers and their distribution partners in any other ways? How are any such laws enforced and by which agencies? Can private parties bring actions under antitrust or competition laws? What remedies are available?

In general, anticompetitive behaviour is sanctioned both by national and EU legislation. Regarding the impact of such behaviour on intra-community trade, the matter will be dealt with by the national or the European competition authorities (see question 21), which can impose fines.

On 26 November 2014, the European Parliament and the European Council adopted Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the member states and of the European Union. This Directive has been transmitted in national law through the Act of 6 June 2017 allowing any natural or legal person who has suffered harm caused by an infringement of competition law to claim and to obtain full compensation for that harm through damages actions before national courts.

Parallel imports

Are there ways in which a distributor or agent can prevent parallel or ‘grey market’ imports into its territory of the supplier’s products?

First, if a distributor sells the supplier’s products in the exclusive territory or to the exclusive group of customers awarded to another distributor, the latter would in practice address the supplier that has granted the exclusivity rights to notice the infringing distributor to refrain from encroaching on said exclusivity. If the supplier refuses to assist the exclusive distributor in defending its exclusivity rights, this will often lead to discussion and even litigation.

Second, an authorised distributor that is part of a selective distribution system will also address the issue of unauthorised sales to the supplier, which is responsible for safeguarding the network’s identity. Most often, the issue will involve an authorised distributor that does not respect the prohibition of sales outside the selective distribution network. Both the supplier and other prejudiced authorised distributors can claim compensation from the infringing distributor.

Advertising

What restrictions exist on the ability of a supplier or distributor to advertise and market the products it sells? May a supplier pass all or part of its cost of advertising on to its distribution partners or share in its cost of advertising?

The answer depends on the type of distribution used by the supplier.

The supplier can, in principle and within certain legal boundaries, restrict the exclusive distributor’s activities outside its territory. For example, active sales outside the territory may be restricted if it concerns sales to territories that the supplier has reserved for itself or which it has allocated to an exclusive distributor, if the conditions provided by EU Regulation No. 330/2010 are abided by. Moreover, the supplier may prevent its exclusive distributor from changing its primary place of establishment, or from opening additional outlets, showrooms and warehouses and the supplier may restrict the exclusive wholesale distributor’s ability to actively and passively sell to end users or consumers (see question 19).

Non-exclusive distributors may be subjected to territorial or customer restrictions insofar as the conditions of EU Regulation No. 330/2010 are abided by.

If the supplier operates a selective distribution network in the EEA, no territorial restrictions may be imposed by the supplier, other than a location clause. A selective distributor may not be prevented from active or passive sales towards end users in the EEA, unless the selective distributor solely operates on the wholesale level.

Intellectual property

How may a supplier safeguard its intellectual property from infringement by its distribution partners and by third parties? Are technology-transfer agreements common?

One must distinguish industrial property rights from literary or artistic property rights.

Industrial property rights concern creations that play an economic role in production and distribution processes, and may be protected by patents, plant variety rights or design rights. Moreover, industrial property rights can also apply to distinctive signs such as trademarks or geographical indications. Even though trade names and legal names are not intellectual property rights as such, they also benefit from certain kinds of protection. Most industrial property rights are obtained through a formal procedure, most often comprising registration requirements.

Literary and artistic property comprises copyrights and related rights (eg, photographs, music, literary works, etc). Furthermore, literary and artistic property rights also protect rather technical creations, such as software, databases and topographies and electronic chips. Copyrights and related rights automatically come into effect at the time of creation.

It must be noted that know-how as such is not covered by specific legal protections and, as simple ideas, may generally be protected by confidentially clauses or non-disclosure agreements (see question 12).

Infringement of one’s intellectual property rights can be countered through various ways: a complaint can be filed with the Federal Department of Economy or summary proceedings can be initiated to stop such infringement, among others.

In Belgian distribution and agency practice, technology-transfer agreements and, more specifically, the licensing of know-how, is common. Such agreements are regulated by, among others, the Commission Regulation (EU) No. 316/2014 of 21 March 2014 on the application of article 101(3) TFEU to categories of technology-transfer agreements.

Consumer protection

What consumer protection laws are relevant to a supplier or distributor?

The most notable pieces of legislation that have to be taken into account by the supplier or distributor are Book VI of the Belgian Code of Economic Law on Trade Practices and Consumer Protection and sections 1649-bis to 1649-octies of the Belgian Civil Code on Consumer Sales.

Product recalls

Briefly describe any legal requirements regarding recalls of distributed products. May the distribution agreement delineate which party is responsible for carrying out and absorbing the cost of a recall?

Both suppliers and distributors have the obligation to provide safe products and have to immediately warn both customers and the government (the Belgian Federal Department of Economy) of any issues that might arise. The law obliges the supplier to take corrective measures including a recall if needed.

The contract may delineate which party is responsible for absorbing the cost of a recall. The carrying out of the recall will be up to the supplier, but the distributor is legally obliged to cooperate. In practice, the absorption of the cost of the recall will often lead to a discussion and even litigation.

Warranties

To what extent may a supplier limit the warranties it provides to its distribution partners and to what extent can both limit the warranties provided to their downstream customers?

As the relationship between the supplier and its distribution partner is a business-to-business relationship, the supplier can use its contractual freedom to limit its warranties provided to such partner. However, that limitation has boundaries. An exemption clause taking away the essence of the obligations of a contracting party or restricting liability in case of wilful misconduct will be considered unlawful.

Second, business-to-consumer relationships are subject to regulation with a view to protecting the consumer, meaning that the supplier cannot validly limit or exclude its warranties towards end customers.

Data transfers

Are there restrictions on the exchange of information between a supplier and its distribution partners about the customers and end users of their products? Who owns such information and what data protection or privacy regulations are applicable?

Specific legislation applies to the processing of personal data (eg, on 25 May 2018, the European General Data Protection Regulation (GDPR) came into effect).

Specific regulations apply to the transfer of personal data to countries outside the EER that do not offer an adequate level of protection (eg, the United States). Expert advice is strongly recommended.

Employment issues

May a supplier approve or reject the individuals who manage the distribution partner’s business, or terminate the relationship if not satisfied with the management?

As a distribution relationship is construed between two independent parties, the supplier may, in principle, not approve or reject the distribution partner’s managing personnel, or terminate the relationship out of mere disagreement with the distributor’s management’s decision, insofar as the decision does not constitute a breach of contract.

However, contractual freedom allows the parties to provide for key-person clauses. These clauses are often used in practice and allow for the termination of the contract by a party in case of a change in the management or ownership of the other party.

Are there circumstances under which a distributor or agent would be treated as an employee of the supplier, and what are the consequences of such treatment? How can a supplier protect against responsibility for potential violations of labour and employment laws by its distribution partners?

A distributor or agent could indeed be considered an employee of the supplier if the factual circumstances show that the latter exercises authority over the distributor or agent, who would be in a subordinate position (eg, no freedom to organise work and time).

If a distributor or agent would be qualified as an employee, there would be serious consequences for the supplier, such as retroactive recovery of social security contributions and taxes due, administrative fines and even criminal sanctions.

The supplier must make sure that the distributor or agent has the freedom to organise its professional activities as it sees fit, and that they can operate as truly independent business entities.

Commission payments

Is the payment of commission to a commercial agent regulated?

The principal and agent are free to agree on the agent’s remuneration, which may consist of either a fixed amount or commissions or a combination of both.

If the remuneration consists at least in part of commissions, the agent shall be entitled to a commission on business deals concluded during the period covered by the commercial agency agreement where:

  • the business deal is concluded as a result of the agent’s activities;
  • the business deal is concluded with a third party whom the agent had previously acquired as a customer for business deals of the same nature; or
  • the agent has an exclusive right to a specific geographical area or group of customers and a business deal has been entered into with a customer belonging to that area or group.

The agent is also entitled to commission for business deals concluded after the termination or expiry of the commercial agency agreement where:

  • the business deal is mainly attributable to the agent’s efforts during the period covered by the commercial agency agreement and the business deal is entered into within a period of six months of the termination or expiry of the commercial agency agreement; or
  • the order of the customer reached the principal or the agent before the commercial agency agreement expired or was terminated.

The parties are free to agree on the exact moment the commission becomes due and payable. However, notwithstanding any provision to the contrary, the commission becomes due at the latest when the customer has performed his or her part of the business deal or when he or she would have done so if the principal had duly performed his or her part of the business deal, and the commission must be paid not later than on the last day of the month following the quarter in which it became due.

The parties may agree (in writing) that the right to commission will extinguish but only if and to the extent that:

  • the customer does not perform his or her part of the transaction, except when the non-performance is due to circumstances imputable to the principal;
  • the performance of the business deal has become impossible, unless this would be imputable to the principal; and
  • the performance of the business deal cannot reasonably be imposed on the principal, especially when there are serious reasons that justify the non-performance by the principal and that are imputable to the customer.

Good faith and fair dealing

What good faith and fair dealing requirements apply to distribution relationships?

There are no specific provisions on good faith and fair dealing requirements for distributors under Belgian law. However, the general obligation to perform contractual agreements in good faith applies (section 1134 of the Belgian Civil Code).

The commercial agent is expressly obliged to act in the best interest of the principal, to be loyal and of good faith. This means that the agent shall act in accordance with the goal of the commercial agency agreement, which is increasing business and customer volume.

Registration of agreements

Are there laws requiring that distribution agreements or intellectual property licence agreements be registered with or approved by any government agency?

In principle, distribution agreements or intellectual property licence agreements do not have to be communicated to, filed with or registered with a governmental agency, nor is the validity of such agreements subject to governmental approval.

This is, however, without prejudice to the obligation to seek the approval of the competent competition authority (national or the European Commission) in the framework of merger control. If, for instance a merger operation would involve distribution agreements or licences, they must be transmitted to the aforementioned authority for approval (see question 21).

Anti-corruption rules

To what extent are anti-bribery or anti-corruption laws applicable to relationships between suppliers and their distribution partners?

Belgian common criminal law contains both anti-bribery and anti-corruption provisions, which have to be respected by both the suppliers and their distribution partners.

Prohibited and mandatory contractual provisions

Are there any other restrictions on provisions in distribution contracts or limitations on their enforceability? Are there any mandatory provisions? Are there any provisions that local law will deem included even if absent?

In business-to-business relationships, restrictions to contractual provisions have to be provided for by law. For distribution and agency specifically, one must take into account that (almost all) the legal provisions are of a mandatory nature, meaning that they will apply irrespective of what has been provided for by the parties. This means that contractual provisions contrary to such mandatory legislation will not be enforceable and that certain rules are applicable even in the absence of any provision in this regard (see question 32).

Moreover, the Belgian legislator has provided for specific rules regarding pre-contractual information within the framework of commercial cooperation agreements. It is crucial to seek legal counsel before establishing a distribution network in Belgium, as non-compliance with these rules can result in the nullity of the concerned agreement.

Governing law and choice of forum

Choice of law

Are there restrictions on the parties’ contractual choice of a country’s law to govern a distribution contract?

For exclusive distribution agreements of indefinite term, Belgian law states that as soon as the distribution relationship is implemented, in whole or in part, on the Belgian territory (or a portion thereof), for any matter falling within the scope of the application of mandatory Belgian distribution law, the Belgian courts have jurisdiction and they will apply said mandatory legislation, notwithstanding any contractual provision to the contrary, such as a choice of law clause.

However, these rules are also subject to the application of any relevant rules of international and European law that governs this matter. In practice, a foreign principal will often try to avoid the application of mandatory Belgian law on the unilateral termination of exclusive distribution by providing that foreign law applies to the contract and that foreign courts shall have jurisdiction over any disputes related to the contract. This way, the foreign principal could pursue that the matter will not be referred to a Belgian judge, who will therefore not apply Belgian law.

Mandatory legislation on commercial agency agreements provides that all disputes involving an agent whose principal place of business is located in Belgium shall be subject to Belgian law and to the jurisdiction of the Belgian courts, notwithstanding any contractual provision to the contrary. However, this does not, again, affect the application of international conventions or treaties to which Belgium is a contracting state.

Choice of forum

Are there restrictions on the parties’ contractual choice of courts or arbitration tribunals, whether within or outside your jurisdiction, to resolve contractual disputes?

Belgian commercial agency law stipulates that all disputes involving an agent whose principal place of business is in Belgium shall be subject to the jurisdiction of the Belgian courts, notwithstanding any contractual provisions to the contrary. However, this does not affect the application of international conventions or treaties to which Belgium is a contracting state.

For exclusive distribution agreements of indefinite term, Belgian law states that as soon as the distribution relationship is implemented, in whole or in part, on the Belgian territory (or a portion thereof), for any matter falling within the scope of the application of mandatory Belgian distribution law, the Belgian courts have jurisdiction, notwithstanding any contractual provision to the contrary, such as a choice of forum clause or an arbitration clause.

However, these rules are also subject to the application of any relevant rules of international and European law that govern this matter. In practice, a foreign principal will often try to avoid the application of mandatory Belgian law on the unilateral termination of exclusive distribution by providing that foreign law applies to the contract and that foreign courts shall have jurisdiction over any disputes related to the contract. This way, the foreign principal could confirm that the matter will not be referred to a Belgian judge, who will therefore not apply Belgian law.

It is also important to note that, under the prevailing case law, arbitration clauses in distribution agreements will only be abided by in Belgian courts if the arbitrators are compelled by the arbitration clause to apply the provisions of the said mandatory legislation in case of an in-scope dispute. A recent judgment opened up some discussion in this regard but it is too early to draw conclusions.

Dispute resolution procedures

What courts, procedures and remedies are available to suppliers and distribution partners to resolve disputes? Are foreign businesses restricted in their ability to make use of these courts and procedures? Can they expect fair treatment? To what extent can a litigant require disclosure of documents or testimony from an adverse party? What are the advantages and disadvantages to a foreign business of resolving disputes in your country’s courts?

There are nine commercial courts in Belgium (Brussels Dutch-speaking, Brussels French-speaking, Antwerp, Ghent, Liège, Leuven, Hainaut, Brabant-Wallon and Eupen), which have exclusive jurisdiction to deal with first instance litigation between commercial companies. A judgment can be appealed to one of the five courts of appeal (Brussels, Antwerp, Ghent, Liège and Mons).

Belgium is a party to the European Convention on Human Rights, meaning that all fair trial requirements have to be abided by. There is no restriction on foreign business making use of these courts and procedures.

A court can order a party to disclose the proof that it is considered to be in possession of (article 871 of the Belgian Judicial Code). A mandatory disclosure can also be requested by a party, but will only be granted by the court upon proof of serious, well-defined and concurrent presumptions that the other party has evidence in its possession that might be relevant (article 877 of the Belgian Judicial Code).

Belgian justice is considered relatively cheap and of high quality. However, it can take some time before a final judgment would be handed down.

Alternative dispute resolution

Will an agreement to mediate or arbitrate disputes be enforced in your jurisdiction? Are there any limitations on the terms of an agreement to arbitrate? What are the advantages and disadvantages for a foreign business of resolving disputes by arbitration in a dispute with a business partner in your country?

Conventional litigation can indeed be side-stepped if parties appeal to an arbitral tribunal. Arbitration can occur both in contractual and in extra-contractual relations between two or more parties. The parties must agree on arbitration through an ‘arbitration agreement’ or ‘arbitration clause’ to an agreement.

In practice, arbitration is often more expensive than conventional litigation, but is considered faster and has the advantage of confidentiality.

Also, see question 38 regarding arbitration clauses in distribution agreements.