The Belgian Disclosure Act
The Belgian Disclosure Act, included in Book X of the Belgian Economic Law Code, imposes extensive disclosure requirements that need to be complied with prior to entering into an agreement granting a right to use a commercial formula by way of a common trade sign, a common trade name, a transfer of know-how and/or commercial or technical assistance ("Commercial Cooperation Agreement"), when the beneficiary is conducting its activities mainly on the Belgian territory.
The classic example of a Commercial Cooperation Agreement to which the Belgian Disclosure Act applies is a franchise agreement for a franchise to be operated in Belgium.
Under the Belgian Disclosure Act, the grantor of the right (e.g., a franchisor) needs to disclose a draft of the agreement as well as a separate document (the PID) containing (i) a summary of the main contractual provisions and (ii) data relating to the (e.g., franchise) opportunity, and this at least one (1) month prior to signing the agreement. There are more relaxed disclosure requirements in case of an amendment to or renewal of an existing agreement (provided it has been in force for more than two (2) years). Non-compliance results in the counterparty being able to claim the nullity of the agreement or certain of its provisions.
As the Belgian Disclosure Act is considered a so-called "super-mandatory" law, the choice for the laws of another state will not necessarily prevent the application of the provisions of the Belgian Disclosure Act to the extent the relevant activities would be conducted in Belgium.
Challenges under the current Disclosure Act
In practice, the summary of the main contractual provisions in the PID is often very extensive and in some cases a mere copy-paste of the provisions of the draft agreement. This is due to (i) the Belgian Disclosure Act requiring the inclusion of all the obligations (of the counterparty) mentioned in the draft agreement, as well as (ii) the consequences of non-compliance (nullity of the entire agreement or certain provisions).
As such practice risks to defeat the purpose of the PID, the Arbitration Commission has requested the legislator in its Opinion 2022/18 to limit the list of information that is to be included in the PID to a list of concrete and important contractual provisions.
The legislator has now addressed this through Article 29 of the Act.
(Legal) Information to be included in the (first part of) the PID
Following the entry into force of the new Act, the following important contractual provisions will need to be included in the first part (i.e., the legal part) of the PID:
- Provisions concerning the intuitu personae character of the agreement.
(This was already required under the original version of the Belgian Disclosure Act).
- Provisions concerning the duration of the Commercial Cooperation Agreement and the conditions for renewal and termination for convenience as well as its financial consequences, in particular with regard to capital and operating expenditures.
(This is mainly rephrasing already existing requirements under the original version of the Belgian Disclosure Act, extended with an express requirement to also inform the grantee of the financial consequences).
- The direct remuneration that the grantee will have to pay to the grantor and the method of calculation of indirect remuneration that the grantor will receive, as well as, as the case may be, the method of revision during the course of the agreement and upon its renewal.
(This was already required under the original version of the Belgian Disclosure Act).
- Start-up or recurring costs such as marketing, IT, transport, and training at the expense of the grantee and the conditions for modification of these costs.
(Although this is a new requirement that was not previously mentioned as one of the provisions to be included in the first part of the PID, such information was often already included in the second part of the PID (i.e., data relating to the (e.g., franchise) opportunity)).
- Exclusivity reserved by the grantor.
(This was already required under the original version of the Belgian Disclosure Act).
- Non-competition clauses, duration and conditions, and the consequences of non-compliance.
(This was already required under the original version of the Belgian Disclosure Act, it is understood that it is now expressly clarified that also the consequences of non-compliance should be included).
- Obligations to adhere to maximum prices.
(This is a new requirement on the basis of which the PID will need to inform the grantee at a minimum whether - and if so, to what extent - the freedom to set its own prices is restricted by imposing maximum prices).
- Minimum turnover and minimum purchase obligations and the consequences of non-compliance.
(In light of the significant implications that provisions regarding these obligations and failure to meet them can have (such as a right to terminate the Commercial Cooperation Agreement), it is now a new requirement under the Act to include these provisions in the PID).
- Restrictions on the use of intellectual property rights.
(The inclusion of the intellectual property rights of which the use is allowed was already required to be included in the second part of the PID under the original version of the Belgian Disclosure Act. However, as a new requirement, the restrictions applicable to the use of those rights also need to be highlighted to the grantee in the PID (e.g., limitations on the license, limitations of the use of the IP rights in an online context, and limitations on the possibility to use the IP rights to advertise and promote)).
- Restrictions on access to and rights to the use of client data by the grantee during and following the expiry of the agreement.
(This is a new requirement. It was emphasized in the preparatory works to the Act that this should not be a list of all rights and obligations under the General Data Protection Regulation (GDPR), as this would defeat the purpose of the PID as a brief and clear summary document. As a minimum, the grantor should include a description of the limitations on the use or access to personal data and/or other data (client data, consumption behavior data)).
- Restrictions on online sales and online promotion.
(This is a new requirement).
- Pre-emption rights or purchase options in favor of the grantor and the rules for determining the value of the business at the moment that right or option is exercised.
(This was already required under the original version of the Belgian Disclosure Act).
- Clauses concerning the relationship and dependence between the Commercial Cooperation Agreement and the lease or any other agreement regarding the operating facility.
(This is a new requirement).
- The grounds for termination expressly mentioned in the agreement as well as the financial consequences, in particular with regard to capital and operating expenditures.
(This was already a requirement under the original version of the Belgian Disclosure Act. According to the preparatory works, it has now been clarified that all financial consequences of the agreement being terminated to the detriment of the grantee must be mentioned in the PID (e.g., contractual compensations) and the description should therefore not be limited to the impact such termination may have on the grantee's capital and operating expenditures).
- Jurisdiction, choice of law, and procedural language clauses.
(This is a new requirement).
Next steps
Article 29 of the Act enters into force on the first day of the sixth (6) month following its publication in the Belgian Official Gazette, i.e., on 1 September 2024.
It will apply to any new Commercial Cooperation Agreements entered into as well as to amendments or renewals of Commercial Cooperation Agreements already in force after that date.
