Change is the only constant, it is said. Well, in the legal practice, change typically takes somewhat longer than in other domains but the recent recodification of Belgian economic law has brought about a legal landslide in terms of initiatives to bring what is (still) essentially Napoleonic legislation into the 21st century.
One of these intitiatives involves a novel take on contract terms and commercial conditions in business to business (B2B) relationships. While until today B2B contract drafters enjoyed a reasonable degree of freedom from some of the constraints that their B2C (business to consumers) counterparts are facing due to the much stricter legal rules on consumer protection, it looks like all that is about to change before Christmas.
In summary, the new Belgian Commercial Code introduces four new components to the B2B legal mix:
Abuse of a position of economic dependence
Unlawful contract clauses
Aggressive commercial practices between undertakings
Misleading commercial practices between undertakings
We will get into the (potentially significant) antitrust inspired implications of the introduction of the theory of economic dependence in a next contribution. For now, we want to focus on the unfair clauses principle and the two lists of questionable contract clauses that the new Law highlights for future scrutiny.
The new B2B Law essentially introduces a "catch all" rule prohibiting any clause that would create a "clear contractual imbalance" between business partners.
The test of such imbalance would be a case by case analysis relying on industry practices and should be rooted in economic reality.
The new Law furthermore distinguishes between two types of clauses: a "black list" includes clauses that are by definition not allowed and a "grey list" lists provisions for which there is a rebuttable assumption of illegality:
BLACK LIST
So-called "potestative" clauses, which make the execution of contractual obligations exclusively dependent on the will of one party;
Unilateral interpretation clauses;
Clauses that force a party to waive its right of recourse in case of a dispute.
GREY LIST
Unilateral price change provisions;
Tacit renewal and renewal without a reasonable notice period;
Provisions reversing commercial risk without counterpart;
Cancellation clauses;
Clauses limiting legal recourse in case of malperformance;
Clauses preventing parties from terminating the agreement within a reasonable period of time;
Exoneration of liability for crucial commitments;
Provisions limiting means of proof;
Unfair penalty clauses.
If you have a clause on the grey list, the assumption is that the clause is illegal unless the party relying on it can prove that the parties entered into it freely and with "eyes wide open".
This principle could lead to some interesting case law. How do you prove that parties opted for these clauses consciously and free from coercion? I am curious to see how the courts will interpret this burden of proof and what will be the legal benchmark. It does seem all but certain that the paper trail of precontractual negotiations will see its stock value rise significantly in this context.
So a proper document retention on contract negotiations seems key.
The new legislation enters into force as of December 2, 2020 and will apply to all B2B contracts (to which Belgian law applies) concluded as of that date. So if you conclude B2B agreements subject to Belgian law or if you conduct business in Belgium in a way that triggers the applicability of Belgian legislation, you may want to review your contract templates prior to December.
Comments