On 21 March 2019, the Belgian Parliament adopted a proposal for a law amending the Code of Economic Law with respect to the abuse of economic dependency, abusive clauses and unfair market practices between undertakings.
The legislature's intention was to protect the small and medium-sized enterprises which characterise the B2B environment in Belgium. However given the broad definition of undertakings in the Code of Economic Law, any undertaking (thus not only legal entities but also non-profit organizations, self-employed persons and large multinational such as Google) will be able to benefit from the new provisions.
The law, based on European initiatives and national B2C legislation, essentially targets two types of abusive practices between businesses, namely the abuse of economic dependency and unfair commercial practices, and aims to sanction abusive clauses in B2B contracts
Businesses will be given time to adapt to the new legal environment (4 to 19 months following publication of the law in the Moniteur belge/Belgisch Staatsblad. See the summary table below).
(i) The abuse of economic dependency
Henceforth not only the abuse of a dominant position on the Belgian market will be prohibited but also the abuse of economic dependency, which is defined as: "a position of subjugation of an undertaking to one or more other undertakings characterised by the absence of a reasonably equivalent and readily available alternative, at reasonable terms and expense, allowing one or all of the [dominant] undertakings to impose performances or conditions that could not be obtained under normal market conditions".
It should be noted that the law will prohibit only the abuse of a position of economic dependency, not situations of economic dependency per se, and there must be an effect on competition on the Belgian market or a substantial part thereof.
The Belgian Competition Authority will monitor compliance with the new provisions and may impose a fine of up to 2% of the turnover of the undertaking concerned as well as penalties (2% of the daily turnover) for violations. Compensation can also be granted to the injured party.
This type of prohibition exists in other countries, such as France, but is rarely enforced in practice.
(ii) Unfair B2B practices
The new law provides businesses with effective tools to combat unfair commercial practices, i.e. potentially misleading or aggressive acts. Another possible remedy for such behaviour is an action for injunctive relief.
(iii) Abusive B2B contractual clauses
The Act of 21 March 2019 introduces rules prohibiting and invalidating abusive clauses in new contracts between businesses or that are renewed or amended as from its entry into force.
This is certainly the new provision that has drawn the most attention from business circles as the courts will henceforth be able to exercise control over contracts between businesses.
Applying the same test as for the B2C contracts, an abusive clause in a B2B contract is the one that, taken alone or in combination with one or more other clauses, creates a clear imbalance between the rights and obligations of the parties.
The abusive nature of a contractual clause is assessed taking into account the nature of the goods that form the object of the contract and referring, at the time of conclusion of the contract, to all circumstances surrounding its conclusion, the overall economic balance of the contract, the applicable trade practices, as well as all other clauses of the contract or of another contract on which it depends Furthermore, all contractual clauses must be drafted in clear and understandable language
The law provides moreover for a black list of invalid clauses. The list includes four types of clauses:
(a) potestative (discretionary) clauses;
(b) clauses intended to confer on a party the right to unilaterally interpret a contractual provision;
(c) clauses related to a waiver of a right of recourse in the event of a dispute, and;
(d) clauses intended to irrefutably establish the other party's knowledge of or adherence to terms with which it did not have an opportunity to familiarise itself prior to conclusion of the contract.
It should be noted, however, that these types of clauses are, in practice, rarely included in contracts.
The law also provides for a grey list of clauses presumed to be abusive but for which the undertaking may produce proof that, having regard to the circumstances and characteristics of the contract, the clause does not create a clear imbalance between the rights and obligations of the parties. The law lists eight types of such clauses, which occasionally appear in business contracts, including for example extension and tacit renewal clauses, clauses contractually shifting the commercial risk, clauses excluding or limiting liability in the event of fraud or gross negligence and clauses restricting the type of evidence available to a party, etc.
The new rules do not apply to financial services or to public (procurement) contracts, unless provided otherwise by royal decree
Every undertaking, especially those active in certain sectors like the food industry, should therefore review and amend, if necessary, its standard contracts to avoid unpleasant surprises in the event of a dispute and litigation. Moreover, self-regulation in certain sectors in the form of a code of conduct could help to achieve the legislature's desired balance between the rights and obligations of business partners.