What is new?
The European Commission is paving the way for a second revision of the Directive combating late payments in commercial transactions
March 2023
On 14 September 2022, in her State of the Union, Ursula Von der Leyen announced the revision of Directive 2011/7 combating late payments in commercial transactions (the “Directive” or the “late payment Directive”). The purpose of the European Commission’s President was to reinforce the Directive's protection mechanism for creditors and to promote a decisive shift to a culture of prompt payment. The second revision of the Directive is now under way, as a Call for evidence was launched by the European Commission on 12 January 2023 and will end in March 2023.
The never-ending modernisation of Belgian consumer protection legislation
May 2022
The Belgian legislator seems to have made some serious resolutions for 2022. After a first go in March at modernising Belgian consumer protection laws (see our revious alert), yesterday Belgium adopted an act amending Books I, VI and XV of the Code of Economic Law (the “Belgian Act”), implementing Directive (EU) 2019/2161 of 27 November 2019 as regards the better enforcement and modernisation of Union consumer protection rules (the “Omnibus Directive”).
The Act of 28 November 2021 on unfair trading practices in business-tobusiness relationships within the agricultural and food supply chain
April 2022
The Belgian Parliament has quietly adopted new legislation likely to turn business relationships in the agricultural and food supply chain sector upside down. With a few weeks’ delay, the Directive 2019/633 on unfair trading practices in business-tobusiness relationships in the agricultural and food supply chain has been transposed in Belgium through the Act of 28 November 2021 (the “Act”), which entered into force on 25 December 2021 (FR/NL). The farreaching nature of the Act calls for much commentary, not only on the new regime it creates (Sections 1 to 4) but also on its interactions with other legislation, such as the Act of 2 August 2002 on combating late payment in commercial transactions (the "Act of
2002"), or the Act of 4 April 2019 amending the Code of Economic Law with regard to abuse of economic dependence, unfair terms and unfair trading practices between undertakings (the "B2B Act") (Section 5).
Late payments in commercial transactions to be more vigorously combated
December 2021
The Belgian legislator took advantage of the summer of 2021 to quietly adopt legislation likely to have a noticeable impact on undertakings’ cash flow, namely the Act of 14 August 2021 (FR/NL) amending the Act of 2 August 2002 on combating late payments in commercial transactions (the “Act of 2002”). These modifications to the Act of 2002, which notably restrict parties’ freedom as regards contractual payment terms, will enter into force on 1 February 2022. It is now time for the undertakings concerned to anticipate what it may mean for them.
The prohibition of unfair terms in B2B contracts: the door opened to legal uncertainty
Use the tabs below to explore the key take away of the guide, or download the full in depth version below
Introduction
Following European trends, the Belgian legislator has in 2019 recognised the existence of significant imbalances in bargaining powers likely to lead to unfair trading practices between undertakings and the need to prohibit them or to frame their consequences.
The Law of 4 April 2019 targets and prohibits among others unfair clauses (Articles VI.91/2 and ff. CEL ) and unfair (aggressive and misleading) trading practices (Articles VI.104/1 and ff. CEL).
In this guide, we summarise the key elements of the B2B protection regime fighting unfair clauses. We also outline key action points.
The far-reaching scope of the B2B protection regime: to which undertakings and to what types of contracts does it apply?
Take-away
The B2B protection regime applies regardless of the size of the undertakings involved (small to larger) and regardless of the nature and the object of the commercial relations at stake (with a few exceptions).
Two exemptions have been included in the scope (Article VI.91/1, §§ 1-2 CEL): the first relates to financial services and the second refers to public procurement and contracts directly or indirectly deriving from the public procurement in question.
The nature of the B2B protection regime : is there any escape from it?
Take-away
The short answer is no, considering the legal nature of the B2B protection regime as “politiewet”/“loi de police”.
However, according to the legislator’s point of view, the B2B protection regime operates as a general regime (lex generalis), giving way to a certain extent if a lex specialis exists.
“Unfair clause / unfair contractual terms”: what does it mean? What is the sanction?
Take-away
Four provisions shape the concept of unfair clauses.
First, Article VI.91/2 CEL enshrines a general transparency requirement applicable to all contractual terms (be it essential or not). Contractual terms need to be drafted in plain and intelligible language.
Secondly, according to Article VI.91/3 CEL, a clause is unfair or abusive if it creates a significant imbalance between the rights and obligations of the parties. It must be noted that Article VI.91/3 CEL only targets clauses / contractual terms that are not essential, i.e. not relating to the definition of the main subject matter of the contract nor to the adequacy of the price or remuneration against the services or goods supplied in exchange.
Thirdly, Article VI.91/4 CEL contains a black list of clauses / contractual terms regarded as always unfair.
Fourthly, Article VI.91/5 CEL contains a grey list of clauses / contractual terms presumed to be unfair.
The above rules are to be combined in a certain logical order : first, check the black and the grey lists provisions, and secondly – as the case may be – apply the unfairness test which can in turn be triggered by a non-compliance with the transparency requirement.
According to article VI.91/6 CEL, the unfair clause / contractual term is prohibited and void. The avoided clause / contractual term is retrospectively invalid as from the beginning. The contract may remain binding for the parties if it can exist without the avoided unfair clause / contractual term.
The black list and its restrictive interpretation
Take-away
The black list includes four contractual clauses which are in any case regarded as unfair or abusive:
- 1° the clauses making an agreement binding on one contract party while the performance of the obligations of the other party is subject to a condition whose realisation depends on its own will alone
- 2° the clauses enabling one contract party to unilaterally interpret any clause of the contract
- 3° the clauses dismissing any legal remedy for one contract party in case of a dispute; and
- 4° the clauses laying down the irrebuttable presumption that one contract party had knowledge of or adhered to the contractual provisions, when it did not actually have knowledge of such provisions before entering into the contract
The grey list - “Comply or explain and convince”
Take-away
The grey list targets eight clauses deemed unfair, but for which the proof of the contrary can be adduced.Conclusion
The B2B protection regime applies to contracts concluded after 1 December 2020 as well as to previously concluded contracts being renewed or amended after 1 December 2020.
When assessing your contract, run through this check-list:
- Does the contract in question benefit from one of the specific exemptions?
- If not, is the clause / contractual term in question an essential clause / contractual term ?
- If not, is there a lex specialis which would impact the application of the B2B protection regime?
- If not, the B2B protection regime applies. It is time to run through the clauses / contractual terms with a critical mindset in order to check:
a) whether any clause / contractual term could possibly fall in the scope of the black list or the grey list
b) if not, whether the clause / contractual terms in question pass the unfairness test between the rights and obligations of the undertakings (for non-essential clauses / contractual terms and in the event an essential clauses / contractual term does not fulfil the transparency requirement).
At this stage, the general transparency requirement and its possible breach are to be verified. - Based on the above assessment, certain actions will have to be considered, including removing or re-drafting specific clauses / contractual terms or adapting the preamble in the contract to insert indications evidencing the conscious striking of a balance between the rights and obligations of the parties.
For a more in depth view, download our full guide
The prohibition of unfair trading practices: what to expect?
Use the tabs below to explore the guide or download the full version below
Introduction
Following European trends, the Belgian legislator has in 2019 recognised the existence of significant imbalances in bargaining powers, likely to lead to unfair trading practices between undertakings and the need to prohibit them or to frame their consequences.
With the aim of providing businesses with more effective tools to combat unfair trading practices, the Law of 4 April 2019 revised the few existing provisions and significantly extended their scope (Articles VI.103/1 and ff. CEL) .
In this guide, we summarise the key elements of the B2B protection regime fighting unfair trading practices.
A general prohibition combined with specific prohibited trading practices
Following European trends, the Belgian legislator has in 2019 recognised the existence of significant imbalances in bargaining powers, likely to lead to unfair trading practices between undertakings and the need to prohibit them or to frame their consequences.
With the aim of providing businesses with more effective tools to combat unfair trading practices, the Law of 4 April 2019 revised the few existing provisions and significantly extended their scope (Articles VI.103/1 and ff. CEL) .
In this guide, we summarise the key elements of the B2B protection regime fighting unfair trading practices.
A general prohibition combined with specific prohibited trading practices
Next to the pre-existing and general provision prohibiting any act contrary to honest trading practices (Article VI.104 CEL) , the new provisions target specific unfair practices, namely:
- Misleading trading practices (Article VI.104/1, 1° and Articles VI.105 – VI.105/1 CEL),
- Aggressive trading practices (Article VI.104/1, 2° and Articles VI.109/1 - VI.109/2 CEL),
that cause or are likely to cause the other business to take a transactional decision that it would not have taken otherwise (Article VI.103/1), and
- Trading practices supporting an act considered as a breach of Book VI of the CEL or as an offence under specific provisions of the CEL (Article VI.104/1, 3° CEL)
Operation since 1 September 2019 , apply to:
- All commercial transactions, whatever their stage, object or nature,
- All “enterprises”, i.e. any natural or legal person which pursues an economic objective in a durable manner, including its associations (Article I.8, 39° CEL). This encompasses businesses irrespective of whether privately or publicly owned, and regardless of their size, turnover, bargaining positions or sectors.
A trading practice?
The notion of trading practice is not legally defined but is attributed a broad meaning.
It includes any act, omission, course of conduct or representation, commercial communication (including advertising and marketing) from a business linked to a commercial transaction (e.g. promotion, sale or purchase, order or supply) with another business and involving a product.
The concept of product relates to any goods or services, including immovable property, rights and obligations.
The trading practice takes place before, during and/or after the commercial transaction.
Finally, the trading practice may be carried out by any of the contracting parties, regardless of their capacity (seller or purchaser).
A transactional decision impacted by the unfair trading practice?
The transactional decision taken by a business that would have been different in the absence of the unfair trading practice is legally defined by Article VI.103 CEL.
It encapsulates any decision taken by a business, whether to:
- conclude a contract and as the case maybe under what terms, or
- maintain or waive a contract, or
- make a payment in whole or in part, or
- exercise a contractual right in relation to a product,
causing the business either to act or to refrain from acting.
In other words, given the broad meaning attributed to the transactional decision, it is not required that the business (the victim of the unfair trading practice) had concluded a contract or had made the envisaged purchase.
What are the sanctions?
Misleading and aggressive trading practices are sanctioned through:
- injunction proceedings (cease-and-desist action), initiated by the injured business(es) or filed by the competent ministers if it concerns a misleading or an aggressive practice,
- criminal sanctions, i.e. fines of EUR 26 to EUR 100,000, and
- a claim for damages.
What in practice?
The prohibitions on unfair trading practices have been aligned with those already granted in the B2C context, thereby giving effective and far-reaching tools to businesses to combat unfair trading practices.
By way of examples:
- the Law of 4 April 2019 qualifies as a misleading trading practice, the non-compliance by a business with firm and verifiable commitments contained in sectorial codes of conduct by which the business has undertaken to be bound.
It implies that self-regulated industries are no more immune to challenges by competitors or authorities if they have not fulfilled commitments and/or targets settled within the framework of sectorial codes of conduct, - the Law of 4 April 2019 qualifies as an aggressive trading practice, the exercise of undue influence that significantly impairs or is likely to impair the business’ freedom of choice or conduct with regard to a product.
Given the broad meaning of undue influence, an imbalance in the respective (bargaining) position linked to the exercise of a pressure, in a way which significantly limits the business’ ability to make an informed decision, might suffice to develop strategic litigation defences for a party dissatisfied with a settlement agreement or credit restructuring negotiations…
Consider franchise agreements and the frequent observation regarding the operation of a scheme of economic dependence. Whilst they will not necessarily meet the strict requirements of an abuse of economic dependence, this situation could be challenged by claiming the existence of an aggressive trading practice, based on an undue influence (as exemplified by the contractual position of the respective parties) …
Focus on the prohibited misleading trading practices (Articles VI.104/1,1° and VI.105-105/1 CEL)
A misleading trading practice can consist of either active deception or misleading omission in relation to information that allows a business to take an informed transactional decision.
Active deception: false or potentially deceiving information (Article VI.105 CEL)
The misleading practice contains false information and is therefore untruthful or, in any way, including overall presentation, deceives or is likely to deceive a business, even if the information is factually correct, in relation to one or more of the ten following elements:
- the existence or the nature of the product,
- the main characteristics of the product, such as its availability, benefits, risks, execution, composition, accessories, after-sale assistance and complaint handling, method and date of manufacture or performance, its delivery, fitness for purpose, usage, quantity, specification geographical or commercial origin or the results to be expected from its use or the results and material features of tests and checks carried out on the product,
- the extent of the other contracting party’s commitments, the motives for the trading practice and the nature of the sales process, any statement or symbol in relation to direct and indirect sponsorship or approval of the business or the product,
- the price or the manner in which the price is calculated, or the existence of a specific price advantage,
- the need for a service, part, replacement or repair,
- the nature, attributes and rights of the other contracting party or its agent, such as its identity and assets, its qualifications, status, approval, affiliation or connection and ownership of industrial, commercial or intellectual property rights or its awards and distinctions,
- the business’ rights or the risks it may face,
- any marketing of a product, including any comparative advertisement which creates confusion with any products, trade-marks, trade names or other distinguishing marks of a competitor,
- non-compliance by the other contracting party with commitments contained in sectorial codes of conduct by which the business has undertaken to be bound where the commitments are not aspirational but are firm and capable of being verified,
- passing on disparaging elements with respect to a business, its assets, services or activity.
Misleading omission: where the information provided is not enough (Article VI.105/1 CEL)
A trading practice is misleading if, in its factual context, taking into account of all its features and circumstances and the limitations of the communication medium, it omits material information that the other business needs to take an informed transactional decision and thereby causes or is likely to cause the other business to take a transactional decision that it would not have taken otherwise.
A business hiding or providing in an unclear, unintelligible, ambiguous or untimely manner such material information or failing to identify its commercial intent, if not already apparent from the context, thereby causing or being likely to cause the other business to take a transactional decision that it would not have taken otherwise, also commits a misleading trading practice.
Focus on the prohibited aggressive trading practices (Articles VI.104/1, 2° and VI.109/1-2 CEL)
A trading practice shall be regarded as aggressive if, in its factual context, taking account of all its features and circumstances, by harassment, coercion, including the use of physical force, or undue influence, it significantly impairs or is likely to significantly impair the business’ freedom of choice or conduct with regard to the product and thereby causes it or is likely to cause it to take a transactional decision that it would not have taken otherwise.
The concept of undue influence is legally defined as exploiting a position of power in relation to another business so as to apply pressure, even without using or threatening to use physical force, in a way which significantly limits the business’ ability to make an informed decision.
The recourse to harassment, coercion and undue influence is further illustrated under Article VI.109/2 by taking into account six elements:
- the timing, location, nature or persistence of the trading practice,
- the use of threatening language or behaviour,
- the exploitation by the business - of which it is aware - of any specific misfortune or circumstance of such gravity as to impair the other business’ judgement to influence its decision with regard to the product,
- any onerous or disproportionate non-contractual barriers imposed by the business where the other business wishes to exercise rights under the contract, including rights to terminate a contract or to switch to another product or another business,
- any threat to take any action that cannot legally be taken,
- the contractual position of one business towards the other business.
Conclusion : a wise business is worth two…
The B2B protection regime against unfair trading practices equips businesses with efficient and powerful tools to combat unfair trading practices but is also an open door to strategic judicial tactics in the hands of fierce competitors.
It compels any business to revisit carefully the way they approach their business counterparts on a daily basis and to review the information they pass on with a view to making or executing a commercial transaction.
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