The Belgian Act on precontractual information obligations in commercial cooperation agreements included in Book X of the Belgian Code of Economic Law (“CEL”) requires that at least one month before entering into any commercial cooperation agreements (which includes franchise agreements) a pre-contractual information document (“PID”) and a draft of the agreement must be provided. On 21 March 2024, an Act adopted on 8 February 2024 was published that modifies and clarifies the information to be included in the PID. It will apply to any new commercial cooperation agreement entered into as well as to amendments or renewals of such agreements in force as from 1 September 2024. Non-compliance may be penalised with the nullity of the non-disclosed clauses or even the whole agreement.
The PID contains a first part in which the important contractual provisions provided for in the commercial cooperation agreement must be listed and a second part with data allowing for a proper assessment of the agreement (such as data on the market, the network, etc.). The new Act amends the information listed in Article X.28 CEL to be included in this first part of the PID.
The reform follows advice issued by the Arbitration Commission, which was prompted by the criticism that often a PID drafted under the current legislation was nearly a copy of the entire draft agreement, as in the list of provisions to be included also “the obligations” was mentioned. The PID thus no longer has been serving the purpose of drawing the attention of the party to be protected to the commercial partnership’s most relevant aspects.
The new law has deleted this general reference to “the obligations” and specifies and complements the other provisions that must be included in the PID (to the extent that they are included in the cooperation agreement).
The following provisions are new requirements that had not yet been expressly provided for in the current law:
- Start-up or recurring costs such as marketing, IT, transport, and training costs at the franchisee’s expense and the conditions for the modification of these costs;
- Obligations to respect maximum prices;
- Minimum turnover and minimum purchase obligations and the consequences of non-compliance;
- Limitations on the use of intellectual property rights;
- Limitations on access to and rights to use customer data during and following the contract’s expiry;
- Limitations on on-line sales and on-line promotions;
- Clauses relating to the relationship and dependence between the commercial cooperation agreement and the lease or any other agreement regarding the point of sale;
- Grounds for termination mentioned in the agreement and the financial consequences, in particular regarding costs and investments;
- The jurisdiction, choice of law, and procedural language clauses.
It is worth noting that the Act not only applies to franchise agreements, but also to any other commercial cooperation agreements in which one party grants another party the right to use a certain commercial formula in the sale of products or the provision of services. The commercial formula can consist in a common sign board and/or a common trade name and/or a transfer of know-how and/or commercial or technical assistance. Also, other types of “distribution” agreements can therefore fall within this legislation’s scope.
Non-compliance with these legal provisions would result in the counterparty being able to claim the nullity of the agreement (if no PID has been communicated) or of certain provisions (if an incomplete PID has been communicated).
Franchisors and other parties operating a franchise network or any other commercial cooperation agreement in Belgium must therefore amend their template PID before 1 September 2024 to communicate it in time to any new franchisee/counterparty or existing franchisee/counterparty upon amendment or renewal of the existing agreements as from 1 September 2024.
Written by Carmen Verdonck, Expert member of the arbitration commission & Member of the BFF and EFF legal committees.
