No Job Nameloyensloeffnews.be/.../01/...of-Agency-and-Distribution-Agreements.pdf · International Bar Association Series International Encyclopedia of Agency and Distribution Agreements

International Encyclopedia of Agencyand Distribution Agreements

Volume 1

iInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

iiInternational Encyclopedia of Agency

and Distribution Agreements – (Supp 26/2014)

International Bar Association Series

International Encyclopedia of Agencyand Distribution Agreements

Editor

Agustín Jausàs

Published in association with Committee M (International Sales and RelatedCommercial Transactions) of the Section on Business Law of

the International Bar Association

iiiInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

Published, by:Kluwer Law InternationalP.O. Box 3162400 AH Alphen aan den RijnThe NetherlandsE-mail: [email protected]: http://www.kluwerlaw.com

Sold and distributed in North,Central and South America by:Aspen Publishers, Inc.7201 McKinney CircleFrederick, MD 21704United States of AmericaEmail: [email protected]

Sold and distributed in all other countries by:Turpin Distribution Services Ltd.Stratton Business ParkPegasus DriveBiggleswadeBedfordshire SG18 8TQUnited KingdomE-mail: [email protected]

This title is available on www.kluwerlawonline.com

© Kluwer Law International 2014First published in 1997

Basic Work ISBN 978-90-411-0943-9

All rights reserved. No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted in any form or by any means, mechanical, photocopying, record-ing or otherwise, without prior written permission of the publishers.

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Printed in the Netherlands.

ivInternational Encyclopedia of Agency


Contents

Volume 1

About the IBA, the Section on Business Law and the International Salesand Related Commercial Transactions Committee (Committee M)

vii

Preface ix

List of Contributors xi

Argentina i–24

Australia i–14

Austria i–48

Belgium i–24

Brazil i–14

Canada i–28

Chile i–62

China i–10

Colombia i–10

Costa Rica i–10

Czech Republic i–10

Denmark i–28

Dominican Republic i–6

Egypt i–16

Finland i–24

France i-76

Germany i–26

Greece i–32

Guatemala i–14

Contents–vInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

Honduras i–18

Hungary i–10

Iceland i–10

India i–16

Ireland i–70

Israel i–18

Italy i–30

Volume 2

Japan i–10

Korea i–12

Kuwait & Saudi Arabia i–18

Lebanon i–34

Malta i–60

Mexico i–20

The Netherlands i–22

Nigeria i–10

Norway i–32

Pakistan i–16

Papua New Guinea i–16

Paraguay i–6

Poland i–22

Portugal i–12

Russia i–10

Singapore i–62

Slovakia i–6

South Africa i–22

Spain i–58

Sweden i–44

CONTENTS

vi–ContentsInternational Encyclopedia of Agency


Switzerland i–16

Taiwan i–10

Thailand i–44

Turkey i–32

United Arab Emirates i–50

United Kingdom i–40

United States i–12

Uruguay i–50

Venezuela i–58

Vietnam i–12

CONTENTS

Contents–vi.iInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

CONTENTS

vi.ii–ContentsInternational Encyclopedia of Agency


List of Contributors

Editor

Agustín JausàsJAUSASP° de Gracia, 103 - Planta 7a

08008 Barcelona, SpainTel. 34 934150088 / Fax. 34 934152051E-mail: [email protected]

Contributors

ARGENTINA

Justo F. Norman, Maria Victoria PazMaciel Norman & AsociadosCerrito 1136, 10th FloorC1004AAX – Buenos Aires, ArgentinaTel. +54 11 4813-2044E-mail: [email protected]

AUSTRALIA

Fred ChiltonEmil Ford LawyersLevel 5, 580 George StreetSydney, NSW 2000, AustraliaTel. 61 2 92679800 / Fax. 61 2 92832553E-mail: [email protected]

AUSTRIA

Rudolf KrilyszynRudolf Krilyszyn & Ass.Porzellangasse 39A-1090 Wien, AustriaTel. 43 1 3199470 / Fax. 43 1 3199470-70E-mail: [email protected]

List of Contributors–xiInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

BELGIUM

Yves van Couter & Marie-Caroline MorelleLoyens & Loeff AvocatsWoluwe Atrium, Rue Neerveld 101-1031299 Brussels, BelgiumTel. 322 7 434343 / Fax. 322 7434310E-mail: [email protected]

BRAZIL

Maria Regina Mangabeira Albernaz Lynch,Motta, Fernandes Rocha AdvogadosAl. Santos, 2335, 10° Andar, Cerqueira Cesar01419-002 Sao Paulo, SP – BrasilTel. +55 (11) 3082-9398 / +55 (11) 2192-9300E-mail: [email protected]

CANADA

Stephen WeinsteinWeinstein & Associates, Montreal, CanadaUpdated by Neil Ezra HazanBorden Ladner Gervais LLP1000, rue de la Gauchetiere Ouest,Suite/bureau 900Montreal, PQ H3B 5H4, CanadaTel. (514) 879 1212 / Fax. (514) 954 1905E-mail: [email protected]

CHILE

Florencia Larrain V. Blanco y Cia.Nueva York, N° 9 – Piso 16Casilla 21123, Correo 21Santiago de Chile, ChileTel. 56 2 6988450 / Fax. 56 2 6985630E-mail: [email protected]

LIST OF CONTRIBUTORS

xii–List of ContributorsInternational Encyclopedia of Agency


CHINA

Nathan KaiserEIGERCrystal Century TowerSuite 17-A, No. 567, Weihai RoadShanghai 200041ChinaTel. (86) 1391 048 1315E-mail: [email protected]

COLOMBIA

Carlos Umaña Trujillo, Álvaro CalaBrigard & UrrutiaCalle 70 A No. 4-41Bogotá, ColombiaTel. (571) 3462011 / Fax. (571) 3100609E-mail: [email protected]

COSTA RICA

John Aguilar QuesadaAguilar Castillo LoveCentro Corporativo Plaza RobleEdificio El Pórtico III Nivel,Escazú, San José, Costa RicaTel. (506) 2225959 / Fax. (506) 2229653E-mail: [email protected]

CZECH REPUBLIC

Jörg Nörnberg & Miroslaw TichýDLA Weiss-TessbachMánesova 5CZ-120 00 Praha 2Czech RepublicTel. (420) 224234413 / Fax. (420) 222246065E-mail: [email protected]

DENMARK

Jørn Vestergaard-Jensen, Kristian Storgaard & Joris Pieter AndersenKromann ReumertRadhuspladsen 3Postboks 18 – DK-8100 Arhus C.DenmarkTel. 45 70 121211 / Fax. 45 70 121411E-mail: [email protected]


List of Contributors–xiiiInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

DOMINICAN REPUBLIC

Georges Santoni RecioRussin Vecchi & Heredia BonettiCalle Recodo N° 2 – 3rd floorEnsanche Bella VistaSanto Domingo, D.N., Dominican RepublicTel. (809) 535-9511 / Fax. (809) 535-6649E-mail: [email protected]

EGYPT

Amr Zaki Abdel MotaalAbdel Motaal, Moharram & Heiza Law Firm5, Al Zohour St., Mostaza Mahmoud Sq.,Mohandessin – Giza 12311, EgyptTel. 20 2 3361601 / Fax. 20 2 3361602E-mail: [email protected]

FINLAND

Tuija ViinakkaTurku School of EconomicsRehtorinpellonkatu, 3Fin-20100 Turku, FinlandTel. 358 21 6383311 / Fax. 358 21 6383302

Markus HandelinJaanti, Becker, DeBeck, van Setten & LeissnerMikonkatu 4FI-00100 Helsinki, FinlandTel. 358 9 6869080 / Fax. 358 9 6869081

FRANCE

Gérard Kling & Stéphanie Hurtut de GiovanniC’M’S’ Bureau Francis Lefebvre1-3, villa Emile Bergerat92522 Neuilly-sur-Seine Cedex, FranceTel. +33-1 47385500 / Fax. +33-1 47385555E-mail: [email protected]


xiv–List of ContributorsInternational Encyclopedia of Agency


GERMANY

Klaus Günther LLM and Silvanne Helle LLMOppenhoff & PartnerKonrad-Adenauer-Ufer 2350668 Köln, GermanyTel. 49 2212091-0 / Fax. 49 2212091-333E-mail: [email protected]

GREECE

Spyros G. Alexandris LLMBahas, Gramatidis & Partners26 Filellinon Street105 58 Athens, GreeceTel. (30) 210 3318170 / Fax. (30) 210 3318171E-mail: [email protected]

GUATEMALA

Alfonso Carrillo M.Carrillo y AsociadosDiagonal 6, 10-01 zona 10Centro Gerencial Las Margaritas Torre II Nivel 7Guatemala, C.A. 01010Tel. (502) 2421-5700 / Fax. (502) 2421-5724E-mail: [email protected]

HONDURAS

Vanessa L. Velasquez, Cecilia Bendeck Acevedo &Roberto A. WilliamsCasco Fortín Cruz & AsociadosEdificio Torre Alianza I, Suite 701,Tegucigalpa, M.D.C., HondurasTel. (504) 2271-0072/73E-mail: [email protected]

HUNGARY

Péter KomáromiSándor Szegedi Szent-Ivány Komáromi EvershedsPasaréti út 59H-1026 Budapest, HungaryTel. (36-1) 3943121 / Fax. (36-1) 3924949E-mail: [email protected]


List of Contributors–xvInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

Edit PintérDr Pintér Edit Law FirmCsalogány u. 12. fszt. 10.H-1015 Budapest, HungaryTel. (36-1) 7983836 / Fax. (36-1) 7981812E-mail: [email protected]

ICELAND

Thordor S. GunnarssonArnason & PartnersHofdabakki, 9112 Reykjavik, IcelandTel. 354 5871211 / Fax. 354 5671270

INDIA

Rabindra Jhunjhunwala and Aakash ChoubeyKhaitan & Co.One Indiabulls Centre, 13th Floor, 841 Senapati Bapat Marg,Elphinstone Road, Mumbai 400 001, IndiaTel. (91 22) 66365000 / Fax. (91 22) 66365050E-mail: [email protected]

IRELAND

Edwina DunnSolicitor45 Glenageary Woods, GlenagearyCo. Dublin, IrelandTel. 353 1 2850894

ISRAEL

Alon Kaplan and Gideon Koren1, King David Ave.,Tel Aviv 64953, IsraelTel. (972-3) 6954463 / Fax. (972-3) 6955575E-mail: [email protected]


xvi–List of ContributorsInternational Encyclopedia of Agency


ITALY

Monica Aparo and Daniela GhittiPicchi & Associati Studio LegaleVia G. Obezolan 1/A25128 Brescia, ItalyTel. (39) 030 37722044 / Fax. (39) 030 3752802E-mail: [email protected]

JAPAN

Yasuzo TakenoHamada & MatsumotoSankyu Building6-14, Kasumigaseki 3-chomeChiyoda-KU, Tokyo 100, JapanTel. 81 3 35803377 / Fax. 81 3 35920912

KOREA

Soo Chang KimKim & Company23rd Floor Gateway Tower Bldg.12, Dongja-Dong, Yongsan-guSeoul, 140-709, KoreaTel. 82 2 37825500 / Fax. 82 2 37825501E-mail: [email protected]

KUWAIT, SAUDI ARABIA

Sara Carmeli, Jordi Farres Valcarce and Joe BertiStudio Legale Perone & Fiori ApolloniVia XIV Settembre, n. 7106122 Perugia (Italy)Tel. (039) 075 5726404 / Fax. (039) 075 5738511E-mail: [email protected]

LEBANON

Mohamed Y. AlemAlem & Associates126 Foch StreetBeirut Central DistrictBeirut 20126609 - LebanonTel. + 961 1 999717 / Fax. + 961 1 999607E-mail: [email protected]


List of Contributors–xviiInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

MALTA

Arthur Galea SalomoneGalea Salomone & AssociatesEuropa Centre113 St. Francis StreetFloriana VLT 08, MaltaTel. 356 21221107 / Fax. 356 21243280E-mail: [email protected]

MEXICO

Jorge A. Sánchez-Dávila & Rosario Huet-CovarrubiasGoodrich, Riquelme y AsociadosPaseo de la Reforma 265Mexico City 06500, MexicoTel. 52 55 55110738 / Fax. 52 55 55251227E-mail: [email protected]

THE NETHERLANDS

Ep W.J. Hannema & M. FlesNorton Rose LLPRembrandt Tower, 24th FloorAmstelplein 1, 1096 HA AmsterdamP.O. Box 94142, 1090 GC AmsterdamThe NetherlandsTel. 31 20 46 29 413E-mail: [email protected]

NIGERIA

Lawrence Fubara AngaAELEX7th Floor, Marble House1, Kingsway Road, FalomoIkoyi, Lagos, NigeriaTel. 234 1 4736296 / Fax. 234 1 2692072E-mail: [email protected]

NORWAY

Didier RigaultBraekhus Dege Advokatfirma DAPB 1369 VikaNo 0114 Oslo, NorwayTel. +47 23 23 90 90 / Fax. +47 22 83 60 60E-mail: [email protected]


xviii–List of ContributorsInternational Encyclopedia of Agency


PAKISTAN

M. Farrukh Irfan KhanIrfan & IrfanWest End Building61, The MallLahore-54000, PakistanTel. +92 42 7249638 / Fax. +92 42 7323501E-mail: [email protected]

PAPUA NEW GUINEA

Vincent BullAllens Arthur RobinsonPort Moresby, Papua New GuineaTel. 675 320 2000 / Fax. 675 320 0588E-mail: [email protected]

PARAGUAY

Esteban BurtPeroni Sosa Tellechea Burt & NarvajaEulogio Estigarribia N° 4846 (Villa Morra)1892 Asunción, ParaguayTel. +595-21 663536 / Fax. +595-21 600448E-mail: [email protected]

PERU

Carlos Alayza BettocchiAlayza ConsultoresGuillermo Marconi #451San Isidro, Lima, PerúTel. +511 4720628 / Fax. +511 7070600E-mail: [email protected]

POLAND

Ewa Butkiewicz, Joanna Krakowiak, Sylwia Paszek and Antoni BoleckiWARDYNSKI & PARTNERSWARSAW Head Office:Aleje Ujazdowskie 1000-478 Warsaw, PolandTel. (48-22) 437 82 00, (48-22) 537 82 00 / Fax. (48-22) 437 82 01, (48-22) 537 82 01E-mail: [email protected]: www.wardynski.com.pl


List of Contributors–xixInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

PORTUGAL

António Serra Lopes, Francisco Barona &Ana Guedes TeixeiraSerra Lopes, Cortes Martins & Associados – Sociedade de Advogados, RLRua General Firmino Miguel, n° 3 torre 2 – 12 andar1600-100 Lisboa, PortugalTel. 351 217234000 / Fax. 351 217234029E-mail: [email protected]

RUSSIA

Jonathan Russin & Stanislav Y. SachnevRussin & Vecchi L.L.CUlitsa Sadovnicheskaya, 35-37Building 2, Suite 406Moscow 115035, RussiaTel. 7-495-783-0522Fax. 7-495-783-0523E-mail: [email protected], [email protected]

SINGAPORE

Tham Kok Leong, Daena Goh & Alexander YapAllen & Gledhill LLPOne Marina Boulevard No. 28-00Singapore 018989Tel. 65 68907526 / 65 68907587 / 65 68907627Fax. 65 63023046 / 65 63023015 / 65 63023049E-mail: [email protected] / [email protected] /[email protected]

SLOVAKIA

Jana MarkechovaWeiss-TessbachRotenturmstrasse 13A-1010 Wien, AustriaTel. 43 53316510 / Fax. 43 53315252


xx–List of ContributorsInternational Encyclopedia of Agency


SOUTH AFRICA

Leora BlumbergWebber Wentzel Bowens60 Main StreetJohannesburg, South AfricaTel. 27 11 8322636 / Fax. 27 11 8346701

Revised and updated by Byron AngelopuloSpoor & FisherP.O. Box 454 Pretoria, South AfricaTel. 27 12 6631611 / Fax. 27 12 6631942

SPAIN

Héctor Jausàs JausàsP° de Grácia, 103 – 7th floor08008 Barcelona, SpainTel. +34 934150088 / Fax. + 34 934152051E-mail: [email protected]

SWEDEN

Mikael Karlsson & David KloseMoll Wenden AdvokatbyraStortorget 8SE-211 34 Malmö, SwedenTel. + 46-40 6656511 / Fax. +46-40 971917E-mail: [email protected]

SWITZERLAND

Bernhard F. Meyer & Nadine S. Reinfried EgliMME – Meyer Müller Eckert PartnerKreuzstrasse 42CH – 8008 ZürichTel. +41 44 2549966 / Fax. +41 44 2549960E-mail: [email protected]/[email protected]


List of Contributors–xxiInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

TAIWAN

Nathan KaiserEIGER12F, Bldg. A, 25-2 Ren Ai Rd, Sec. 4Taipei 10685TaiwanTel. 886 926181004E-mail: [email protected]

Wu Hsin-yangPh.D. candidate at the University of WashingtonEIGER LawTaiwanTel. 886 926181004E-mail: [email protected]

THAILAND

E.T. Hunt Talmage IIIChandler & Thong-EK7th Fl., Bubhajit Bldg.20 North Sathorn Rod.Bangkok 10500, ThailandTel. 66 2 2666483 / Fax. 66 2 2666483E-mail: [email protected]

TURKEY

Esin Çamlıbel & Noyan TurunçTURUNÇCumhuriyet Bulvari 140/1Alsancak 35210 Izmir, TurkeyTel. 90 232 4634907 / Fax. 90 232 4634909E-mail: [email protected]; [email protected]

UNITED ARAB EMIRATES

Essam Al TamimiAl Tamimi & CompanyAdvocates & Legal Consultants,6th floor, Building 4 – The Gate Precinct – Int Financial CentreDubai, United Arab EmiratesTel. +971 4 3641641 / Fax. +971 4 3641777E-mail: [email protected]


xxii–List of ContributorsInternational Encyclopedia of Agency


UNITED KINGDOM

Mark Williamson & John MilliganClyde & CoThe St. Botolph Building,138 HoundsditchLondon, EC3A 7AR, EnglandTel. + 44 207 876 5000 / Fax. + 44 207 876 5111E-mail: [email protected]

UNITED STATES

Mark F. KatzKatz & Associates1221 Broadway, 21st Floor,Oakland, CA 94612, U.S.A.Tel. 650 996 4792E-mail: [email protected]

URUGUAY

Marcela Hughes & Marcelo SchuppHughes & Hughes25 de Mayo 455 – 2° piso11000 Montevideo – UruguayTel. 598 2 9160988 / Fax. 598 2 9161003E-mail: [email protected]

VENEZUELA

Carlos Eduardo Acedo SucreMendoza, Palacios, Acedo, Borjas, Páez Pumar & Cía.Edificio ‘ABA’ Calle Veracruz Las MercedesCaracas 1060 – Apartado 3857Caracas 1010-A, VenezuelaTel. 58 212 9091600 / Fax. 58 212 9931237E-mail: [email protected]

VIETNAM

Phan Ho Thien Vu & Do Thanh CongRussin & Vecchi15/F, OSC-VTP Building8 Nguyen Hue Blvd, D1Ho Chi Minh City, VietnamTel. (84-8) 3824-3026 / Fax. (84-8) 3824-3113E-mail: [email protected]


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xxiv–List of ContributorsInternational Encyclopedia of Agency


Belgium

Yves Van Couter and Marie Caroline MorelleLoyens & Loeff Avocats Brussels, Belgium

This chapter is up to date as of 31 October 2013

Belgium–iInternational Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

BELGIUM

ii–BelgiumInternational Encyclopedia of Agency


Table of Contents

1. AGENCY 1

1.1 Definitions of Various Types of Agency and Criteria to Distinguish 11.2 Basic Aspects of Commercial Agency Agreements under Belgian

Law and Court Practice 21.2.1 Formalities 21.2.2 Exclusivity 31.2.3 Remuneration 31.2.4 Territory 51.2.5 Main Obligations of Principal 51.2.6 Main Obligations of Agent 6

1.2.6.1 General Features 61.2.6.2 Delcredere Clause 6

1.2.7 Duration 61.2.8 Indemnification upon Termination 7

1.2.8.1 Termination without Cause 71.2.8.2 Termination for Cause 81.2.8.3 Indemnity for Clientele and Goodwill 81.2.8.4 Supplementary Indemnity 9

1.2.9 Non-competition after Termination 101.2.10 Miscellaneous 10

1.2.10.1 Pre-Contractual Information Requirements 101.2.10.2 Sub-Agents 111.2.10.3 Statute of Limitations 111.2.10.4 Self-Limitative Effect of the Agency Act 121.2.10.5 Competent Courts/Arbitration, Governing Law and

Conflicts of Laws 12

2. DISTRIBUTION 15

2.1 Definitions 152.2 Basic Aspects of Distribution Agreements under Belgian Law and

Court Practice 162.2.1 Formalities 162.2.2 Exclusivity 162.2.3 Territory 162.2.4 Main Obligations of Supplier 172.2.5 Main Obligations of Distributor 172.2.6 Duration 172.2.7 Indemnification upon Termination 17

2.2.7.1 Termination of Fixed-Term Distribution AgreementsFalling Within the Scope of the Distribution Act 17

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2.2.7.2 Termination of Indefinite-Term DistributionAgreements Falling Within the Scope of theDistribution Act 182.2.7.2.1 Express Termination Clause 182.2.7.2.2 Reasonable Notice/Indemnity in Lieu of

Notice 182.2.7.2.3 Serious Shortcoming 202.2.7.2.4 Complementary Indemnity 20

2.2.7.3 Termination of Distribution Agreements FallingOutside the Scope of the Distribution Act 21

2.2.8 Non-competition after Termination 222.2.9 Miscellaneous 22

2.2.9.1 Pre-Contractual Information Requirements 222.2.9.2 Sub-Distributors 222.2.9.3 Statute of Limitations 232.2.9.4 Self-Limitative Effect of the Distribution Act 232.2.9.5 Competent Courts/Arbitration, Governing Law and

Conflicts of Laws 23

TABLE OF CONTENTS

iv–BelgiumInternational Encyclopedia of Agency


1. AGENCY

1.1 Definitions of Various Types of Agency and Criteria toDistinguish

(a) Commercial Agents (Handelsagent/Agent Commercial)

In Belgium, agency agreements are governed by the Agency Act of 13 April 1995,as amended by laws of 4 May 1999, 1 June 1999 and 21 February 2005 (the ‘AgencyAct’). This Act implements Council Directive 86/653/EEC of 18 December 1986on the coordination of the laws of the Member States relating to self-employedAgents.

In the future, the Agency Act is meant to be integrated in the contemplated Codeof Economic Law and, more specifically, in book X of that Code. The given bookwill deal with the commercial intermediaries (see also below under Section 1.2.10.1).

The Agency Act defines an agency agreement as follows:

An agency agreement is an agreement whereby one of the parties, the agent, is entrusted,on a permanent basis and against remuneration, but without subordination, by the otherparty, the principal, with the negotiation and possibly the conclusion of businesstransactions in the name and for the account of the principal. The agent organizes hisactivity as he sees fit and disposes freely of his time.

An agency relationship thus exists when the following requirements are met:

(i) the Agent acts in the name and for the account of the Principal;(ii) the Agent negotiates and possibly enters into business transactions (covering

services and/or goods);(iii) the Agent is entitled to remuneration;(iv) the Agent is self-employed; and(v) the agency relationship is exercised on a permanent basis.

(b) Sales Representatives (Handelsvertegenwoordiger/Représentant de Commerce)

A sales representative agreement is an employment agreement by which an employee,the sales representative, undertakes to seek and visit customers against remuneration inorder to negotiate or conclude such transactions (except for insurance contracts) underthe authority, in the name and for the account of the Principal.

Notwithstanding any contrary provisions or the silence of the agreement, anyagreement entered into between a Principal and an intermediary is deemed to be asales representative employment agreement, no matter the qualification given by theparties. This presumption is, however, refutable.

Bearing in mind the extensive protection of employees in Belgium, most Principalswill prefer to avoid requalification of an agency agreement into a sales representativeagreement, in particular because of the difference in treatment from a tax and social

Belgium–1International Encyclopedia of Agencyand Distribution Agreements – (Supp 26/2014)

security perspective. The burden of proof lies, however, with the Principal.Appropriate agreement drafting is therefore of the utmost importance.

The presence of a subordinate relationship is characteristic of a sales representativeagreement.

The authority of the Principal over the employee (the sales representative),constitutes the criterion and determining factor for identifying and qualifying anagreement as a sales representative agreement. The Act of 27 December 2006(Programmawet I/Loi Programme I) lists general criteria allowing the assessment ofthe existence or absence of authority:

– the parties’ will, as expressed in their agreement, provided that the latter correspondswith the performance of the agreement;

– the freedom to organize the work and working hours;– the possibility to exercise hierarchical control.

However, the following elements are considered not to be decisive in demonstrating(the absence of) an employee relationship:

– the title of the agreement;– registration with a social security institution;– registration with the Crossroads Bank for Enterprises;– registration with the Value Added Tax Authorities;– the way in which revenues are declared to the Tax Authorities.

In summary, and taking into account the above guiding principles, the subordinaterelationship and the authority of the Principal must be assessed on a case-by-case basisby the Courts, taking into account all factual circumstances.

1.2 Basic Aspects of Commercial Agency Agreements underBelgian Law and Court Practice

1.2.1 Formalities

The Agency Act does not stipulate any formal requirements for entering into anagency agreement.

There are no language requirements, although, in the context of legal proceedings,a Court may require that the parties provide a Dutch or French translation of theagreement.

For evidentiary purposes, written agreements are preferable. The existence of anagency agreement can be demonstrated by any means, including witness statementsand presumptions.

The Agency Act requires that certain contractual commitments be put down inwriting in order to be valid and enforceable:

– a fixed term;– a non-compete clause;

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– a delcredere clause.

Furthermore, the Agency Act provides that each party is entitled to receive from theother, upon request, a signed written document setting out the terms of the agencyagreement or any modifications agreed subsequent to the entering into the agreement.

1.2.2 Exclusivity

Exclusivity is a common feature among agency agreements.Depending on the person upon whom exclusivity is imposed, one may contemplate

different types of exclusivity:

(i) either the Agent commits himself/herself to negotiate and possibly concludetransactions with respect to only limited activities and in the name and for theaccount of a single Principal;

(ii) or the Principal grants the Agent an exclusive right on a specific geographicalarea or group of customers.

However, granting such exclusivity is not necessary for an agency agreement to fallwithin the scope of the Agency Act.

For evidentiary purposes, exclusivity should be granted in writing. The existenceof exclusivity can nevertheless be demonstrated by any means, including witnessstatements and presumptions.

When nothing in this respect is provided for, the Agent is not automatically, on thebasis of his/her obligation of loyalty, prevented from representing other competingproducts and/or services without the Principal’s express consent.

1.2.3 Remuneration

The Agency Act does not define what constitutes an Agent’s remuneration. It merelystates that an Agent’s remuneration may consist of a fixed amount, commissions or acombination of both. Any portion of remuneration varying according to the number orvalue of business transactions is deemed to constitute a commission.

The parties are free to fix the amount of the commission. If the parties have notdetermined the amount of the commission, it will be fixed by reference to local andsector usage and, in last resort, ex aequo et bono by the judge if such usage does notexist.

If the remuneration is partly or wholly paid in commissions, the following rulesapply:

(a) Computation of Commissions: Unless otherwise agreed, the Agent’scommission is calculated on the basis of the gross amount invoiced to the customer,including incidental expenses unless invoiced separately. Incidental expenses includepackaging, transportation and insurance costs. Taxes and duties are, however,excluded from the basis of calculation of the commission. Fidelity discounts, refundsand cash discounts unilaterally granted by a Principal to a customer cannot bededucted from the basis of calculation of the commission payable to the Agent.

AGENCY


If, during performance of the agreement, a Principal unilaterally modifies thecommission rate initially agreed upon, such modification may constitute an actamounting to breach equivalent to unilateral termination of the agreement (‘acteéquipollent à rupture’).

The Agency Act provides for a specific commission adjustment mechanism forAgents acting within the banking, insurance and regulated securities/stock marketsindustry.

(b) Entitlement to Commissions: For commercial transactions concluded during theperiod covered by the agency agreement, the Agent is entitled to commission:

(i) where the transaction has been concluded as a result of his/her action; or(ii) where the transaction is concluded with a third party whom he/she has

previously acquired as a customer for transactions of the same kind; or(iii) where it was agreed that the Agent has an exclusive right to a specific area or

group of customers and where the transaction has been entered into with acustomer belonging to that area or group.

For commercial transactions concluded after termination of the agency agreement, theAgent is entitled to commission:

(i) if the transaction is mainly attributable to the Agent’s efforts during the periodcovered by the agency agreement and if the transaction was entered into withinsix months after that agreement terminated; or

(ii) if the order of the third party reached the Principal or the Agent before theagency agreement terminated and the transaction is concluded with a third partywhom he/she has previously acquired as a customer for transactions of the samekind.

The Agent will have to establish that these two latter conditions are fulfilled.In principle, when both the former Agent and his/her successor could be entitled

to commission, the right to commission of the former Agent prevails over the rightto commission of his/her successor. The Agent appointed as a result of termination ofa previous agency agreement will not be entitled to commission in respect oftransactions for which the Agent’s predecessor is entitled to commission, unless thecircumstances dictate that it is equitable for the commission to be shared betweenboth Agents. If the parties cannot agree, the Court will decide on this in equity.

(c) Payment of Commissions: Commissions fall due as soon as any of thefollowing occurs:

(i) the Principal has performed the agreement with the customer or should havedone so; or

(ii) the third party has complied with its obligations.

Furthermore, the commission can be claimed as soon as the customer has performedits part of the agreement or should have done so, had the Principal performed its part.

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The commission must be paid no later than the last day of the month following thequarter during which it accrued.

If the Agent’s remuneration consists in whole or in part of a fixed salary, the salarymust be paid monthly, unless the parties agree otherwise.

(d) Circumstances in which Commissions Are Not Due: The parties may agree thatthere will be no entitlement to commissions under the following circumstances:

(i) if it is established that the customer will not perform its obligations, exceptwhere such failure to perform is attributable to circumstances within thePrincipal’s control;

(ii) if performance was rendered impossible as a result of circumstances beyond thePrincipal’s control;

(iii) if performance cannot reasonably be required from the Principal, especiallywhen there are serious reasons attributable to the customer that justify non-performance.

In order to be valid and legally enforceable vis-à-vis the Agent, these situations mustbe explicitly provided for in the agency agreement.

1.2.4 Territory

The concept of territory is generally linked to exclusivity.An Agent’s territory may be the whole or part of Belgium (possibly together with

(parts of) other countries).The (exclusivity within the) Agent’s territory may also be expressed in terms of a

category of customers (e.g., wholesalers, governmental departments, etc.).

1.2.5 Main Obligations of Principal

The Principal’s main obligation is to pay the Agent’s remuneration.In addition, the Principal is obliged to behave loyally and in good faith. The

following obligations are furthermore imposed on the Principal:

(i) The Principal must provide the Agent with all necessary documentationregarding the business.

(ii) The Principal must obtain all necessary information in order to allow the Agentto perform the agreement and, in particular, notify the Agent within areasonable period once he anticipates that the volume of commercialtransactions will be significantly lower than that which the Agent couldnormally have expected.

(iii) The Principal must keep the Agent informed in due time of the acceptance,refusal or non-performance of a transaction concluded through the Agent.

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1.2.6 Main Obligations of Agent

1.2.6.1 GENERAL FEATURES

The Agent must look after the Principal’s interests and act loyally and in good faith.More specifically, the Agent must:

(i) accurately handle negotiations and, where applicable, conclude transactions atthe end of these negotiations;

(ii) provide the Principal with any information of which he/she has knowledge; and(iii) comply with all reasonable guidelines from the Principal.

The parties are free to agree on further obligations for the Agent.

1.2.6.2 DELCREDERE CLAUSE

Unless otherwise agreed in writing, a delcredere clause provides for the Agent’s com-mitment to act as guarantor for the solvency of the customers with which the Principalhas entered into a business transaction. In principle, insolvency implies a definitivecessation of payment. However, the parties are free to broaden the scope of the term‘insolvency’ in their agreement, provided it is in writing.

A delcredere clause is only valid when the following conditions are met:

(i) The clause is agreed upon in writing.(ii) The scope of the clause is limited to business transactions personally concluded

or negotiated by the Agent or by its sub-Agent(s).(iii) The Principal does not a posteriori unilaterally modify the payment or delivery

conditions to the customer’s detriment.(iv) The amount is not higher than the commission fee, unless the clause relates to

one specific transaction or to transactions concluded by the Agent in the nameand for the account of the Principal. In such cases, the parties can agree on ahigher amount than the commission fee. However, if there is a significantdiscrepancy between the risk the Agent has to bear and the commission agreed,the Courts can mitigate the effect of a delcredere clause, taking into account thecircumstances of the case; the right to mitigate remains limited to the part ofliability that exceeds the amount of the commission due.

The Agency Act provides for a specific regime with respect to certain categories ofAgents acting in the sector of credit institutions.

1.2.7 Duration

Agency agreements can be entered into for either a fixed term or an indefinite term.The parties can enter into an unlimited number of fixed-term agency agreements.An agency agreement is deemed to be entered into for an indefinite term if:

(i) it is not in writing;

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(ii) its fixed term was not specified in writing at the time of entering into theagreement;

(iii) a fixed-term agency agreement continues to be performed after its contractualexpiration date;

(iv) a fixed-term agency agreement provides for a clause allowing early termination.

1.2.8 Indemnification upon Termination

1.2.8.1 TERMINATION WITHOUT CAUSE

A fixed-term agreement performed until its contractual expiration date does not giverise to any compensation except for a possible clientele or goodwill compensation.

If either party terminates such fixed-term agreement prior to the contractualexpiration date, the other party will be entitled to claim adequate compensation.Exceptionally, specific performance may be granted.

An indefinite-term agreement can be terminated by either party subject to givingsufficient prior notice.

The notice period will depend on the duration of the agreement and amount to onemonth per year, with a maximum of six months. A year commenced is computed asa full year. The parties cannot agree on a shorter notice period to the detriment of theAgent before notification of the decision to terminate. However, they can agree on alonger notice period, provided the notice due to be given by the Principal is notshorter than the one that must be observed by the Agent.

Notice must be in writing and with indication of the commencement date andduration of the notice period. It can be given through delivery of a letter to the otherparty, by registered letter becoming effective on the third business day after the dateof dispatch, or by means of a bailiff’s writ. Unless otherwise agreed in the agreement,the end of the notice period must coincide with the end of a calendar month. If theseformalities are not met, the termination is valid but the notice granted is null andvoid.

If a party does not grant sufficient advance notice as per the Agency Act and doesnot rely on the legal grounds of serious breach or exceptional circumstances and/orcomply with the prescribed procedure as defined in the Agency Act to terminate theagreement with immediate effect, the termination will be effective, but the other partywill be entitled to an indemnity in lieu of notice. The indemnity in lieu of noticecorresponds to the remuneration that would have been payable if the proper noticeperiod had been respected. If the Agent’s remuneration consists in whole or in partof commission, the indemnity in lieu of notice is calculated on the basis of theaverage monthly commission/remuneration earned over the twelve months precedingtermination of the agreement or, if the agreement has been in effect for less thantwelve months, over the months preceding termination of the agreement. Theindemnity in lieu of notice is a lump sum that is due no matter the actual damage orloss suffered.

The Agency Act provides for specific protection and related indemnitymechanisms for two specific categories of Agents acting within the banking,insurance and regulated securities/stock markets industry.

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1.2.8.2 TERMINATION FOR CAUSE

Each party may terminate the agency agreement with immediate effect without grant-ing prior notice in the event that:

(i) exceptional circumstances render all further professional cooperation betweenthe Principal and the Agent permanently impossible; or

(ii) the other party seriously fails to comply with its obligations.

The existence of exceptional circumstances does not presuppose any fault and will bedecided by the Courts, taking into account the circumstances of the case. For instance,the fact that the Agent’s health prevents him/her from continuing his/her activities orthe take-over of the Agent by the Principal’s direct competitor shall be deemed to beexceptional circumstances.

A clause providing for automatic termination when the Agent does not complywith one of his/her obligations shall be declared null and void. Taking into accountthe mandatory character of the Agency Act, the majority of scholarly opinion defendsthe position according to which a condition subsequent is unenforceable, but can stillbe used by the Court in order to assess the seriousness of a breach.

The Agency Act sets out two conditions for terminating an agreement forexceptional circumstances or serious breach:

(i) the terminating party was not aware of the circumstances/breach justifyingtermination with immediate effect during seven or more working days prior totermination; and

(ii) the notification of the serious breach or exceptional circumstances underlyingthe termination must take place either by means of a bailiff’s writ or byregistered mail sent within seven working days following termination withimmediate effect.

1.2.8.3 INDEMNITY FOR CLIENTELE AND GOODWILL

An Agent will be entitled to a clientele and goodwill indemnity if he/she demonstratesthat:

(i) he/she has brought in new customers or substantially increased the Principal’svolume of business with existing customers; and

(ii) the Principal continues to derive substantial benefits from business with suchcustomers following termination of the agency agreement.

The clientele and goodwill indemnity takes into account both the contribution of newcustomers and the increase of existing business.

The Agent will still be entitled to the clientele and goodwill indemnity:

(i) When the agency agreement is terminated by mutual agreement.

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(ii) When the increase of customers or of the Principal’s volume of business withexisting customers is due to efforts by both the Principal and the Agent.

If the agency agreement contains a non-compete clause, there is a refutable presump-tion in favour of the Agent that the Principal continues to derive substantial benefitsfrom the clientele brought in by the Agent. Case law held that this presumption iseffective even if the non-compete clause is null and void.

Compensation for goodwill is capped at an equivalent of one year of averageremuneration, based on the remuneration paid over a period of five years immediatelyprior to termination of the agency agreement or over the duration of the agreementif it lasted for less than five years. In case of discussion, the judge will decide inequity.

The parties may only contractually depart from the legal provisions on thecondition that the agreed indemnity is equivalent to or higher than the amount towhich the Agent is entitled pursuant to the Agency Act.

However, no compensation will be owed in any of the following cases:

(a) the agreement is lawfully terminated by the Principal because of a seriousbreach attributable to the Agent;

(b) the agreement is terminated by the Agent, unless such termination occurs as aresult of a serious breach attributable to the Principal or on grounds of theAgent’s age, disability or illness, as a result of which the Agent can no longerreasonably be required to continue his/her activities;

(c) the Agent (or his/her heirs) assigns his/her rights and obligations under theagency agreement to a third party with the Principal’s consent.

The Agent loses his/her right to an indemnity for clientele and goodwill if he/she doesnot notify the Principal of his/her intentions to exercise this right within one year aftertermination of the agreement.

1.2.8.4 SUPPLEMENTARY INDEMNITY

In the event that the Agent is entitled to a clientele and goodwill indemnity, and pro-vided that the amount of this indemnity does not fully cover the damage or loss suf-fered, the Agent can claim additional compensation covering the difference betweenthe damage or loss actually suffered and the amount of the clientele and goodwillindemnity granted.

Scholarly opinion and case law are divided on the question as to which kinds ofdamage or loss may be taken into consideration when determining the supplementaryindemnity, and the Courts are rather reluctant to grant additional damages on thisbasis.

Logically, the supplementary indemnity is meant to cover damage or loss not yetcovered by the notice period or the indemnity in lieu of notice and by the clienteleand goodwill indemnity. For instance, indemnities paid to third parties (severance payfor the Agent’s employees who become redundant due to termination of the agencyagreement) are deemed to be covered by the supplementary indemnity.

Evidence of the additional damage or loss will have to be provided by the Agent.

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The parties may only contractually depart from the legal provisions on thecondition that the agreed indemnity is equivalent to or higher than the amount towhich the Agent is entitled pursuant to the Agency Act. In practice, however, it isalmost impossible for them to predict the amount to which the Agent will be entitled.

1.2.9 Non-competition after Termination

A post-contractual non-compete clause is only valid when it:

(i) is agreed upon in writing;(ii) relates to the type of business transactions assigned to the Agent;

(iii) solely relates to the geographical area, or group of persons and geographicalarea entrusted to the Agent; and

(iv) has a maximum duration of six months following effective termination of theagreement.

Courts must invalidate non-compete clauses that do not meet all of the requirementsset out in the Agency Act.

A non-compete clause is unenforceable in the event that the Principal terminatesthe agency agreement for reasons other than serious breach or exceptionalcircumstances as defined in the Agency Act or when the Agent terminates the agencyagreement for such reasons.

Parties may agree on a lump-sum indemnity in the case of a breach of anon-compete clause. However, the lump-sum indemnity agreed in the agencyagreement may not exceed a sum equivalent to one year of remuneration, calculatedon the basis of the average annual remuneration over the previous five-year period or,if the agency agreement has been entered into for less than five years, the precedingyears. This does not prejudice the Principal’s right to claim a higher amount,provided he/she demonstrates the existence and the extent of the damage or losssuffered.

If the Principal is more interested in rapidly halting infringement of the non-compete clause than in obtaining a lump sum, he/she may consider initiatingsummary proceedings against the Agent concerned and/or against the new employeror the new Principal of the Agent concerned.

1.2.10 Miscellaneous

1.2.10.1 PRE-CONTRACTUAL INFORMATION REQUIREMENTS

In the absence of any relevant case law, contradicting scholarly opinion exists as towhether the Act of 19 December 2005 regarding pre-contractual information withinthe framework of commercial cooperation agreements (Wet betreffende de precontrac-tuele informatie bij commerciële samenwerkingsovereenkomsten/Loi relative àl’information précontractuelle dans le cadre d’accords de partenariat commercial)governing the pre-contractual phase of commercial cooperation agreements, alsoapplies to agency agreements falling within the scope of the Agency Act. The Act of

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19 December 2005 only relates to the pre-contractual phase of commercial coopera-tion agreements falling within its scope. Whereas this Act was essentially worded tocover franchising agreements, its scope is, however, much broader.

This Act applies to:

(i) commercial cooperation agreements;(ii) entered into between two parties;

(iii) each of which acts individually in its own name and for its own account;(iv) whereby one party grants the right to the other party;(v) which in return pays a remuneration of any kind (either directly or indirectly);

(vi) to use a commercial formula;(vii) for the sale of products or the rendering of services.

The right to use a commercial formula may adopt the form of: (i) a common sign, (ii)a common trade name, (iii) transfer of know-how or (iv) commercial or technical sup-port.

The question of the applicability of this Act to agency agreements is crucialbecause of the important obligations it contains and the heavy penalties for non-compliance with the Act, should it be applicable. If in doubt, the Principal will bewell advised to take this Act into account when negotiating and entering into theagency agreements and to supply the Agent with a draft agreement and an additionaldocument that contains the required information no less than one month prior to theconclusion of the proposed agreement, in order to avoid the potential adverseconsequences resulting from a breach of this Act. Indeed, failure to (timely) complywith any of the detailed obligations may result in nullity either of a specific clauseor of the entire commercial cooperation agreement.

In the future, the Act is meant to be integrated in the contemplated Code ofEconomic Law and, more specifically, in book X. That book deals with thecommercial intermediaries. At this occasion, the content of the Act is expected to beslightly amended to integrate the recommendations of the Arbitration Commission setup by the Act.

1.2.10.2 SUB-AGENTS

Unless otherwise agreed, the Agent can call upon sub-Agents to perform its activities.These sub-Agents will be remunerated by the Agent and will act under his/her

responsibility. The Agent qualifies as Principal with respect to these sub-Agents.

1.2.10.3 STATUTE OF LIMITATIONS

All claims resulting from an agency agreement are time-barred one year following theend of the agreement or five years following the event that forms the basis for theclaim, whichever date is earlier.

The claim for a clientele and goodwill indemnity is only time-barred if the Agentdoes not notify the Principal of his/her intention to exercise this right within one yearafter termination of the agreement.

The Cour de Cassation held that, with respect to non-compete clauses, theone-year period starts as from the moment that the non-compete obligation ends.

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1.2.10.4 SELF-LIMITATIVE EFFECT OF THE AGENCY ACT

It is generally accepted that the Agency Act has a self-limitative effect. As a result,when the Agent is active in more countries than Belgium, the Belgian Agency Act willnot apply to the foreign activities, unless the parties have expressly chosen for theapplication of the Belgian Agency Act to these activities.

1.2.10.5 COMPETENT COURTS/ARBITRATION, GOVERNING LAW ANDCONFLICTS OF LAWS

The Agency Act provides that, subject to the application of international treaties oragreements, all disputes regarding an Agent whose principal place of business islocated in Belgium will be subject to Belgian jurisdiction and Belgian law.

Since most of the articles of the Agency Act are mandatory (dwingend/impératifs)and not of internal/international public order (interne/internationale openbare orde/ordre public interne/international), parties cannot opt, before termination of the agencyagreement, to derogate from them in writing to the detriment of the protected party/parties.

For agency agreements with an international dimension, the Belgian Code ofPrivate International Law (the ‘PIL code’) specifically addresses the jurisdiction ofBelgian Courts, governing law and the conditions for the effect in Belgium of foreignjudgments in international matters. The PIL code is, however, subject to theapplication of the international treaties and European Union (EU) law, which takeprecedence.

As regards international jurisdiction and conflicts of law, and alongside the PILcode, the possibly relevant EU and international law provisions include:

(i) as regards jurisdiction, EC Regulation 44/2001 of 22 December 2000 onjurisdiction, recognition and the enforcement of judgments in civil andcommercial matters;

(ii) as regards governing law, EC Regulation 593/2008 of 17 June 2008 on the lawapplicable to contractual obligations that applies to agreements entered intoafter 17 December 2009 (Regulation ‘Rome I’) and the 1980 Rome Conventionon the law applicable to contractual obligations (the ‘Rome Convention’) thatapplies to agreements entered into before 18 December 2009;

(iii) as regards arbitration, the United Nations Convention on the Recognition andEnforcement of Foreign Arbitral Awards of 10 June 1958 (the ‘New YorkConvention’) and the European Convention on International Commercial Arbitra-tion of 21 April 1961 (the ‘Geneva Convention’).

As far as arbitration is concerned, two major clarifications were brought by the Bel-gian Cour de Cassation and by the Court of Justice of the European Union:

(i) The Belgian Cour de Cassation recently upheld the setting aside, at the stageof a motion contesting jurisdiction, of arbitration clauses in international agencyagreements (falling within the scope of the Agency Act and agreed before thetermination of the agency agreement) that do not provide for the Agency Actnor the law of a Member State of the European Union which meets the

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minimum protection requirements laid down by Council Directive 86/653/EEC.Therefore, an arbitration clause providing for the application of foreign (non-EU) law shall not be enforceable.

(ii) The Court of Justice of the European Union ruled on 17 October 2013 (UnitedAntwerp Maritime Agencies (Unamar) NV v. Navigation Maritime Bulgare)(C-184/12) that, when parties to a commercial agency agreement choose thelaw of another Member State of the European Union which meets the minimumprotection requirements laid down by Council Directive 86/653/EEC, the law ofthis Member State may be rejected by the Court of another Member Statebefore which the case has been brought in favour of the law of the forum,owing to the mandatory nature, in the legal order of that Member State, of therules governing the situation of self-employed commercial agents, only if theCourt before which the case has been brought finds, on the basis of a detailedassessment, that, in the course of that transposition, the legislature of the Stateof the forum held it to be crucial, in the legal order concerned, to grant thecommercial agent protection going beyond that provided for by that Directive,taking account in that regard of the nature and of the objective of suchmandatory provisions.

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2. DISTRIBUTION

2.1 Definitions

With respect to Distributors, Belgian law only specifically addresses the unilateral ter-mination of certain distribution agreements (for goods only) entered into for an indefi-nite term between a Supplier (concessiegever/concédant) and a Distributor(concessiehouder/concessionnaire).

Indeed, Belgian law does not contain specific rules on distribution agreements,except as provided in the Act of 27 July 1961, as amended by the Act of 13 April1971 (the ‘Distribution Act’), which only applies to certain categories of distributionagreements and only deals with the unilateral termination of such agreements.

In the future, the Distribution Act will be integrated in the contemplated Code ofEconomic Law and, more specifically, in book X. The given book deals with thecommercial intermediaries.

Agreements falling within its scope are governed by this Distribution Act, and theparties cannot derogate from its provisions (mandatory character of the DistributionAct).

General principles of Belgian contract law as set out in the Belgian Civil Codegovern all other aspects of distribution agreements (e.g., the establishment of theagreement).

The Distribution Act defines a distribution agreement as follows: any agreement bywhich a Supplier grants to one or more Distributors the right to sell in their ownname and for their own account products manufactured or distributed by the Supplier.

It is clearly to be distinguished from an agency agreement, which is characterizedby the fact that the Agent operates on behalf and for the account of the Principalrather than in his/her own name and for his/her own account.

The Distribution Act only applies to certain categories of distribution agreements.It applies as soon as:

– there is a framework agreement under which the Supplier’s products are sold to theDistributor for resale by the latter to other Distributors or end-users and specialrights are granted to, and obligations are imposed on, the Distributor;

– (quasi) exclusivity is granted to, or substantial obligations are imposed on, theDistributor (e.g., restrictions on selling outside a given area, obligation to organizeafter-sales services, obligation to advertise, restriction on selling competitiveproducts, etc.);

– there is coverage of all or parts of Belgium; and– there is an indefinite term (see infra 2.2.6).

The Distribution Act also provides for mandatory formalities for the termination ofdistribution agreements entered into for a definite term. These formalities require theterminating party to give prior written notice by registered mail between six and threemonths before the contractual expiration date.


2.2 Basic Aspects of Distribution Agreements under Belgian Lawand Court Practice

2.2.1 Formalities

The Distribution Act does not impose any formal requirements when entering into adistribution agreement.

For evidence purposes, however, written agreements are preferred.There are no language requirements although, in the context of legal proceedings,

a Court may require that the parties provide a Dutch or French translation of thedistribution agreement.

The existence of a distribution agreement can be demonstrated by any means,including witness statements and presumptions. The existence of a distributorshipmay be inferred from the parties’ conduct.

As one cannot definitely exclude that the Act of 19 December 2005 regardingpre-contractual information within the framework of commercial cooperationagreements governing the pre-contractual phase of commercial cooperationagreements applies to distribution agreements falling within the scope of theDistribution Act, the Supplier will be well advised to take this Act into account andto supply the Distributor with a draft agreement and an additional document thatcontains the required information no less than one month prior to the conclusion ofthe proposed agreement, in order to avoid the potential adverse consequencesresulting from a breach of this Act (see supra 1.2.10.1 and infra 2.2.9.1).

2.2.2 Exclusivity

If the extensive protection of Distributors in the event of unilateral termination (otherthan for serious shortcoming) is in principle limited to exclusive distribution agree-ments concluded for an indefinite period of time, the following types of agreementsnevertheless also benefit from the protection granted by the Distribution Act:

(i) Quasi-exclusive distribution agreements, i.e., those under which the Distributorsells in the territory practically only the products that are the subject-matter ofthe agreement.

(ii) Distribution agreements under which the Principal imposes on the Distributorsignificant obligations that are strictly and particularly related to the distributionand the burden of which is such that the Distributor would suffer seriousdamage or loss in the event of termination of the distribution agreement.

2.2.3 Territory

The Distribution Act applies as soon as there is coverage of all or parts of Belgium.

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2.2.4 Main Obligations of Supplier

The Supplier’s main obligation is to sell and deliver (to supply) the products to theDistributor.

As the Distribution Act does not cover this issue, parties can freely determine inthe distribution agreement what will happen to a Distributor’s stock upon terminationof the distribution agreement. Case law generally holds that a Supplier is required torepurchase a Distributor’s stock if nothing has been provided for in the distributionagreement or if the Distributor terminates the distribution agreement for seriousshortcoming by the Supplier.

2.2.5 Main Obligations of Distributor

The Distributor has an implied duty to use his/her best efforts to promote the sale ofthe distributed products in the territory or within the customer groups granted.

Distribution agreements often impose minimum purchase obligations, inventoryrequirements and post-sale servicing obligations.

2.2.6 Duration

Distribution agreements can be entered into for either a fixed or an indefinite term.However, the agreement is deemed to be entered into for an indefinite term if:

(i) it is not in writing;(ii) its fixed term was not specified at the time of entering into the agreement in

writing;(iii) the fixed-term agreement continues to be performed after its contractual

expiration date;(iv) the parties do not comply with the mandatory termination requirements to

terminate their fixed-term agreement and the parties have not agreed upon tacitrenewal of the agreement;

(v) the fixed-term agreement already twice renewed is renewed a third time.

2.2.7 Indemnification upon Termination

2.2.7.1 TERMINATION OF FIXED-TERM DISTRIBUTION AGREEMENTSFALLING WITHIN THE SCOPE OF THE DISTRIBUTION ACT

A fixed-term agreement performed until its contractual expiration date does not giverise to any indemnity (e.g., a complementary indemnity) provided that the terminatingparty complies with the mandatory formalities imposed by the Distribution Act (i.e., togive prior written notice by registered mail between six and three months before thecontractual expiration date). If no notice is given, or if notice is given either more thansix months or less than three months before the contractual expiration date, the fixed-term agreement will be deemed to be an agreement for an indefinite term as from the

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initial date it was entered into, unless the parties have agreed upon tacit renewal of theagreement.

Parties can contractually provide for an express termination clause, either relatedto a contractual shortcoming (uitdrukkelijk ontbindend beding/clause résolutoireexpresse) or related to the occurrence of a condition subsequent (ontbindendevoorwaarde/condition résolutoire). Pursuant to a termination clause, either party mayterminate the agreement with immediate effect and without having to pay anindemnity on the occurrence of a contractual shortcoming or of a conditionsubsequent, irrespective of whether a breach was committed. No prior Court approvalwill then be required. If termination occurs on the ground of an express terminationclause, the Court’s discretionary power is in principle limited to examining whetherthe event occurred or the shortcoming existed. It is only if the wording of the clauseis too general that the Court will be allowed to examine the seriousness of the allegedshortcoming and may order specific performance of the agreement.

If either party terminates the fixed-term agreement prior to the contractualexpiration date without invoking an express termination clause, the other party willbe entitled to claim adequate compensation.

2.2.7.2 TERMINATION OF INDEFINITE-TERM DISTRIBUTIONAGREEMENTS FALLING WITHIN THE SCOPE OF THEDISTRIBUTION ACT

2.2.7.2.1 Express Termination ClauseEither party can terminate an indefinite-term agreement with immediate effect andwithout having to pay any indemnity by invoking an express termination clause on theoccurrence of either a contractual shortcoming (uitdrukkelijk ontbindend beding/clause résolutoire expresse) or of a condition subsequent, irrespective of whether abreach was committed (ontbindende voorwaarde/condition résolutoire) (see supra2.2.7.1).

2.2.7.2.2 Reasonable Notice/Indemnity in Lieu of NoticeEither party can terminate an indefinite-term agreement at any time by either givingreasonable notice or paying an indemnity in lieu of notice. There are no formalrequirements.

Taking into account the notice’s irrevocable nature, a terminating party is boundby its decision. It cannot unilaterally decide to extend or reduce the notice periodgranted. During the notice period, the parties’ rights and obligations remain unaltered.

Furthermore, given the mandatory nature (dwingend karakter/caractère impératif)of the Distribution Act, parties cannot, before the intent to terminate has beennotified, agree on the length of the notice period to be granted. Therefore, clauses ina distribution agreement providing a notice period agreed between the Supplier andthe Distributor either on execution of or during the performance of the distributionagreement are, in principle, unenforceable. However, this does not restrict the parties’right to insert a minimum notice period into the agreement. If, following notificationof the intent to terminate, the parties do not agree on the notice period, it will be upto the Court to decide on the matter in equity, possibly taking into account applicablecustoms.

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The Distribution Act does not define or indicate what constitutes reasonable notice.According to recent scholarly opinion, supported by recent Appellate Courts and theCour de Cassation case law, the reasonable notice period is meant to give theDistributor the time necessary to live up to his/her obligations towards third partiesand to reorganize his/her activities so that the termination does not lead to theDistributor’s financial ruin. In addition, the reasonable notice period must allow theDistributor to find another source of net income equivalent to the one lost, if neededthrough full or partial conversion of his/her activities. A Distributor is not entitled toclaim a notice period allowing him/her to find a new distributorship generating effectsequivalent to the lost distributorship beyond this requirement of equivalent netincome.

Courts traditionally take a number of parameters into account in determining theduration of the reasonable notice period. The most important are:

(i) the duration of the terminated distributorship agreement;(ii) the territorial scope of the distributorship;

(iii) the importance of the distributorship in the distributor’s global business/turnover;

(iv) the prominence and renown of the distributed brand/trademark (Is there a lot ofcompetition on the market? Will it take a long time for the Distributor torepresent a competing brand with a corresponding reputation?); and

(v) the (evolution of the) profits generated by the distributorship (How long wouldit reasonably take to find a distributorship with an equivalent profitabilitypotential?).

There is no mathematical formula for calculating the duration of the reasonable noticeperiod, and the Distribution Act does not give any indication in this respect. It is oftendifficult to predict what importance a Court will give to each of the parameters set outabove. It is therefore similarly difficult to predict what a Court deems to be reasonablenotice. Courts have granted notice periods ranging from one month up to three years.

If the Court holds the period of notice given to be unreasonable, it will grant anindemnity in lieu of notice based on what it considers to be a reasonable period ofnotice. Following notification of the intent to terminate the distribution agreement,parties can also agree on what would constitute a reasonable indemnity in lieu ofnotice, including its basis of calculation.

An indemnity in lieu of notice compensates the economic disadvantages theterminated party incurs as a result of not having been granted (sufficient) notice.

The Distribution Act only states that the indemnity in lieu of notice must beequitable. There is no specific formula to calculate an indemnity in lieu of notice. TheCourts usually grant an indemnity equal to the net distributorship profits before taxesthat the terminated party could have made during the part of the reasonable period ofnotice that was not granted by the terminating party, plus ‘non-compressible’ costsrelated to the distributorship that were financed by the Distributor and related to therelevant part of the notice period (the total amounts to the ‘semi-gross profits’).‘Non-compressible’ costs are costs inevitably borne by the Distributor during thenotice period (and which cannot be immediately reduced on termination of thedistribution agreement, for example building lease costs, insurance premiums,

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maintenance of the buildings, etc.). Another way to obtain the semi-gross profits isto subtract ‘compressible’ costs from the gross profits.

Normally, the Courts take the average net profits (before taxes) plus the non-compressible costs of the last two to three years immediately preceding terminationof the agreement as the basis of calculation. However, recent scholarly opinion,supported by recent Appellate Courts and Cour de Cassation case law, argues thatevents that occur (results obtained) during the notice period can also be included onthe basis of calculation and, furthermore, that the Courts may take into account allelements of fact that are at their disposal at the time of rendering their judgments.

2.2.7.2.3 Serious ShortcomingEither party can terminate an indefinite agreement with immediate effect for seriousshortcoming by the other party (grove tekortkoming/manquement grave). In such acase, the terminating party does not have to grant notice nor does it have to pay anindemnity in lieu of notice. Case law has held that granting (too long) a notice periodis not compatible with termination for serious shortcoming.

When terminating for serious shortcoming, the Distribution Act does not requirethat any formal requirements be met. However, case law requires that the terminatingparty specify the serious shortcoming in the notification of termination of theagreement.

The Distribution Act does not define what is meant by ‘serious shortcoming’. Caselaw clarifies that the shortcoming should be serious to such a degree that it rendersany further cooperation between the parties impossible. The party facing a seriousshortcoming by the other party needs to terminate the agreement with immediateeffect. Examples of serious shortcomings include the unilateral modification of theDistributor’s territory, repeated failure to meet agreed sales quotas and the refusal tosupply. No prior Court approval for such termination is required. The terminatedparty may nevertheless always challenge the alleged serious shortcoming in Court.

2.2.7.2.4 Complementary IndemnityIn addition to an indemnity in lieu of notice and even when the notice period grantedhas been adequate, a Distributor may be entitled to a complementary indemnity if:

(i) the Supplier terminates the distributorship on other grounds than seriousshortcoming by the Distributor;

(ii) the Distributor terminates the distributorship for serious shortcoming of theSupplier.

Contrary to an indemnity in lieu of notice, only Distributors are entitled to a comple-mentary indemnity.

A complementary indemnity may only consist of the following three elements:

(1) Clientele and Goodwill Indemnity in order to claim a clientele and goodwillindemnity, the Distributor must prove:(a) the existence of a notable increase in turnover, sold products and/or

customers in the course of the distribution agreement;(b) that such an increase was realized through its marketing efforts; and

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(c) that customers will continue to buy the Supplier’s products after terminationof the distribution agreement.

These conditions must be cumulatively fulfilled.Cour de Cassation case law has held that, for the purpose of determining whether

a Distributor is entitled to a clientele and goodwill indemnity, a Court can take intoaccount all elements that are at its disposal at the time of rendering a judgment, inparticular the situation of the Distributor following termination of the distributionagreement.

When a Distributor successfully meets the burden of proof, recent case law oftengrants a clientele and goodwill indemnity with as basis of calculation of theDistributor’s (average) gross profits in the preceding one- to three-year period (asopposed to net profits, semi-gross profits or amounts ex aequo et bono) related to theterminated distributorship.

(2) Expenditures Benefiting the Supplier Subsequent to the Termination of theDistribution Agreement Incurred by the Distributor in the Course of theDistributorship

Advertising costs are normally not recoverable expenditures, unless the Distributormeets the burden of proof that such expenditures would still have a positive effect onthe Supplier after termination of the distribution agreement.

(3) Indemnity for Severance Pay to Employees Becoming Redundant Due toTermination of the Distribution Agreement

A Distributor is entitled to an indemnity for severance pay if he/she is forced todismiss employees as a direct consequence of termination of the distributionagreement. Redundancy payment is only due for employees allocated to theterminated distributorship and not for employees who worked for anotherdistributorship or as part of the global activities of the Distributor. Redundancypayments that have already been included in non-compressible costs as part of theindemnity in lieu of notice cannot be taken into consideration when granting acomplementary indemnity.

The Distributor will in principle not be entitled to an indemnity for severance payif the notice period to be granted to the redundant employees is the same as or lessthan the notice period granted for termination of the distribution agreement.

2.2.7.3 TERMINATION OF DISTRIBUTION AGREEMENTS FALLINGOUTSIDE THE SCOPE OF THE DISTRIBUTION ACT

If the Distribution Act does not apply but Belgian law is applicable (either pursuant toan express choice of law or as a result of the application of conflict of law provisions),the distribution agreement will be governed by general principles of Belgian contractlaw.

If it is concluded for an indefinite period of time, a distribution agreement can beterminated at any time, provided that termination is not abusive or in bad faith.Generally speaking, the obligation to avoid abuse or bad faith translates itself into arequirement to give reasonable prior notice of termination. A notice period betweenthree and six months is generally advisable, depending on the circumstances, exceptwhere termination should take place for serious shortcoming. Here also, in the event

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of termination for serious shortcoming, the terminating party should act immediatelyafter it becomes aware of the shortcoming, failing which it may be argued that theshortcoming could not justify termination. As a rule, termination of an agreementconcluded for an indefinite period of time need not be substantiated, but iftermination takes place for serious shortcoming and without prior notice, theterminating party will be well advised to specify the reasons for termination.

A fixed-term distribution agreement cannot be terminated prematurely, except forserious shortcoming or pursuant to an express termination clause (see supra 2.2.7.1).

2.2.8 Non-competition after Termination

The Distribution Act does not contain any provision similar to the one existing in theAgency Act with respect to non-compete clauses (see supra 1.2.9); it does not dealwith non-compete obligations.

In order to be enforceable, a non-compete clause should be limited both in timeand in geographic scope. In addition, it will only be enforceable if it complies withthe requirements of European competition law.

Non-compete clauses are interpreted narrowly.

2.2.9 Miscellaneous

2.2.9.1 PRE-CONTRACTUAL INFORMATION REQUIREMENTS

In the absence of any conclusive case law, contradicting scholarly opinion exists as towhether the Act of 19 December 2005 regarding pre-contractual information withinthe framework of commercial cooperation agreements governing the pre-contractualphase of commercial cooperation agreements (see supra 2.2.1) also applies to distri-bution agreements falling within the scope of the Distribution Act.

As a consequence, the parties will be well advised to take the Act into account,more particularly when the Supplier grants commercial or technical support to theDistributor in exchange for remuneration, if they wish to avoid the heavy penalties(including possible nullity of either a specific clause or the entire distributionagreement) for non-compliance with the Act, should it be applicable (see supra1.2.9).

In the future, the Act will be integrated in the contemplated Code of EconomicLaw and, more specifically, in book X. The given book deals with the commercialintermediaries. The content of the Act is meant to be slightly amended to integratethe recommendations of the Arbitration Commission set up by the Act.

2.2.9.2 SUB-DISTRIBUTORS

Unless otherwise agreed, a Distributor can always appoint a sub-Distributor. The Dis-tribution Act’s provisions also apply to distributorships granted by a Distributor to oneor more sub-Distributors.

As is the case with commercial (sub-)agency agreements, no direct contractualrelationship exists between a main Supplier and a sub-Distributor. Therefore, asub-Distributor cannot, in principle, initiate legal proceedings against the main

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Supplier. A sub-Distributor can only initiate legal proceedings against his/her directSupplier (i.e., the main Supplier’s Distributor).

However, the Distribution Act stipulates that a sub-Distributor can initiate legalproceedings against the main Supplier if termination of the indefinite-term sub-distributorship is caused by termination of the main indefinite-term distributorshipand such termination is not attributable to the (main) distributor. Furthermore, whenthe contractual expiration dates of the fixed-term sub-distributorship and of thefixed-term main distributorship coincide, the Distributor will have a fortnight as fromthe moment of receipt of its own termination notice to, in turn, give notice to his/hersub-Distributor.

2.2.9.3 STATUTE OF LIMITATIONS

All claims and legal actions resulting from a distribution agreement are time-barred asten years from the end of the agreement.

2.2.9.4 SELF-LIMITATIVE EFFECT OF THE DISTRIBUTION ACT

The Distribution Act is said to have a self-limitative effect. This means that when theDistributor is active in more countries than Belgium, the Distribution Act will notapply to the foreign activities, unless the parties have expressly chosen for the appli-cation of the Distribution Act to these activities.

2.2.9.5 COMPETENT COURTS/ARBITRATION, GOVERNING LAW ANDCONFLICTS OF LAWS

Subject to directly applicable international and EU rules of law, the Distribution Actgoverns all disputes regarding the unilateral termination of a distribution agreementfalling within the scope of the Distribution Act, and Belgian Courts are explicitlygranted jurisdiction by the Distribution Act.

In case of a distributorship covering the whole or part of the Belgian territory, theDistributor will therefore always be able to initiate legal proceedings against theSupplier before the Belgian Courts, either before the Courts of its own domicile orbefore the Courts of the Supplier’s domicile or registered or operational offices. ABelgian Court must apply the Distribution Act, unless the distributorship does notcover the Belgian territory and the parties have not explicitly provided that the Actwould be applicable to the agreement.

One must bear in mind that all issues unrelated to the termination of the agreementfall outside the scope of the Distribution Act.

As the Distribution Act is mandatory (dwingend/impératif) and is not of internal/international public order (interne/internationale openbare orde/ordre public interne/international), the parties cannot derogate in writing from its provisions, at least notuntil notification of the intent to terminate has taken place.

As regards international jurisdiction and conflicts of law, and alongside the BelgianAct of 16 July 2004 containing the Belgian PIL Code, the possibly relevant EU andinternational law provisions include:

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(i) as regards jurisdiction, EC Regulation 44/2001 of 22 December 2000 onjurisdiction, recognition and the enforcement of judgments in civil andcommercial matters);

(ii) as regards governing law, EC Regulation 593/2008 of 17 June 2008 on the lawapplicable to contractual obligations that applies to agreements entered intoafter 17 December 2009 (Regulation ‘Rome I’) and the 1980 Rome Conventionon the law applicable to contractual obligations (the ‘Rome Convention’) thatapplies to agreements entered into before 18 December 2009;

(iii) as regards arbitration, the United Nations Convention on the Recognition andEnforcement of Foreign Arbitral Awards of 10 June 1958 (the ‘New YorkConvention’) and the European Convention on International CommercialArbitration of 21 April 1961 (the ‘Geneva Convention’).

As far as arbitration is concerned, the Belgian Cour de Cassation has confirmed theposition of Belgian Courts that, at the stage of a motion contesting jurisdiction, had setaside arbitration clauses in international distribution agreements (falling within thescope of the Distribution Act and agreed before termination of the distribution agree-ment) that did not provide for the Distribution Act as the governing law. Therefore, anarbitration clause providing for the application of foreign (non-Belgian) law or provid-ing for the application of Belgian law but excluding the Distribution Act shall not beenforceable.

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Documents

No Job Nameloyensloeffnews.be/.../01/...of-Agency-and-Distribution-Agreements.pdf · International Bar Association Series International Encyclopedia of Agency and Distribution Agreements