Distribution law in Belgium

Under Belgian law, parties can conclude an Agency Agreement orally or in writing. There are no specific formalities. However, one party may request to have the Agency Agreement formalized in writing.

However, if the Agency Agreement qualifies as “commercial cooperation agreement”, the Belgian Code of Economic Law (Book X, Title 2) imposes on the principal the obligation to disclose certain information such as the important provisions of the contract and data allowing for a proper assessment of the contract (such as data on the market, the network, etc.) one month before the conclusion of such contract.

Commercial cooperation agreements are all agreements in which one party grants the other party the right to use its commercial formula when selling products or services. A commercial formula can consist of either the use of a trade name or logo, a transfer of know-how or a technical or commercial assistance. An Agency Agreement can fall within the scope of this obligation if the Principal grants the Agent the right to use its commercial formula when selling the products or services.

Contracts concluded in breach of this obligation can be declared null upon request of the Agent.

Yes, the Commercial Agent can bind the Principal if the Agency Agreements grants the Agent the power to do so, i.e., to negotiate and conclude agreements with customers in the name and on behalf of the Principal.

Key examples of the duties of a Commercial Agent are:

• promote the Principal’s products or services;
• negotiate and conclude in good faith agreements on behalf of the Principal;
• give the Principal all necessary information concerning the market; and
• follow reasonable instructions given by the Principal.

The Principal has the following duties:

• give to the Commercial Agent the necessary documents and information (relating to the goods or services) that are reasonably required for the proper performance by the Agent of its activities under the Agency Agreement;
• pay the agreed remuneration to the Commercial Agent;
• inform the Commercial Agent in due time of changes, reductions or expansions of the products or services list; and
• inform the Commercial Agent without delay about the acceptance or rejection of a transaction intermediated by the Commercial Agent

The remuneration of the Agent comprises either:

• a fixed remuneration,
• a variable commission, or
• a combination of both systems.

The commission is due at the latest as soon as:

• the customer has executed the transaction (i.e. pay the price to the Principal); or  
• the Principal should, according to its agreement with the customer, have executed its obligations under the transaction.

Unless otherwise agreed, the Commercial Agent is entitled to a commission if:

• the transaction has been concluded as a result of its intervention;
• the transaction has been concluded with customers that where exclusively assigned to the Agent;
• the transaction has been concluded within a territory that was exclusively assigned to the Agent;
• the transaction has been concluded with a third party whom the Agent has previously acquired as a customer for transactions of the same kind.

Unless otherwise agreed, the Commercial Agent is entitled to a commission if:

• the transaction is mainly attributable to the commercial agent's efforts during the period covered by the Agency Agreement and if the transaction was concluded within six months after that contract terminated; or
• the order of the third party reached the Principal or the Commercial Agent before the Agency Agreement terminated.

Yes, a del credere clause is valid but it must be stipulated in writing.

Parties are free to decide on the duration of the agreement. Agreements of definite duration are converted to agreements for indefinite duration if they continue to be performed after the fixed term.

If an Agency Agreement is concluded for an indefinite period, either party may terminate it by notice.

The party terminating the Agency Agreement for convenience must give a minimum notice period. One month’s notice must be given during the first year of the Agency Agreement, two months’ notice during the second year, three months’ notice during the third year, four months' notice during the fourth year, five months' during the fifth year and six months’ notice during the sixth and any subsequent.

The Commercial Agent can seek compensation for its efforts in finding and developing the clientele for the principal’s products or services. This is known as goodwill indemnity.

The Commercial Agent can successfully claim goodwill indemnity if it can prove that:

• the Commercial Agent has brought the Principal new customers or has significantly increased the volume of existing business; and
• it is to be expected that the Principal will be able to derive considerable benefits from this volume of business even after termination of the Agency Agreement.

The amount of the goodwill indemnity may not exceed one year's average annual remuneration of the Commercial Agent over the preceding five years.

If the Commercial Agent is entitled to a goodwill indemnity and this indemnity does not cover its actual damage caused by the contract termination, the Commercial Agent can also seek compensation for any actual damage above the goodwill indemnity.

No compensation is due to the Commercial Agent if:

• the Principal has terminated the Agency Agreement because of default attributable to the Commercial Agent that would justify the immediate termination of the Agency Agreement;
• the Commercial Agent has terminated the Agency Agreement, unless such termination is justified by circumstances attributable to the Principal or on grounds of age, infirmity or illness of the Commercial Agent in consequence of which he cannot reasonably be required to continue its activities;
• the Commercial Agent assigns its rights and duties under the Agency Agreement to another person with the consent of the Principal.

The Commercial Agent loses the compensation claim if it has not notified to the Principal within one year after termination of the Agency Agreement that it wishes to claim its rights for compensation.

A post contractual non-compete obligation is valid if:

• it is stipulated in writing;
• it is limited to the type of transactions covered by the Agency Agreement;
• it is limited to the territory or type of clientele attributed to the Commercial Agent;
• it is limited to 6 months after termination of the Agency Agreement.

A post contractual non-competition clause will not be enforceable if the Agency Agreement is terminated by the Principal without breach of the Commercial Agent, or by the Commercial Agent for breach of the Principal.

All claims based on the Agency Agreement expire one year after the termination if the Agency Agreement or five years after the claim originates, whichever comes first.

>> Go to the top 

Under Belgian law, parties can conclude a Distribution Agreement orally or in writing. There are no specific formalities. 

However, if the Distribution Agreement qualifies as “commercial cooperation agreement”, the Belgian Code of Economic Law (Book X, Title 2) imposes on the Principal the obligation to disclose certain information such as important obligations of the contract and data allowing for a proper assessment of the contract (such as data on the market, the network, etc.) one month before the conclusion of such contract.

Commercial cooperation agreements are all agreements in which one party grants the other party the right to use its commercial formula when selling goods or services. A commercial formula can consist of either the use of a trade name or logo, a transfer of know-how or a technical or commercial assistance. A Distribution Agreement can fall within the scope of this obligation if the Principal grants the Distributor the right to use its commercial formula when selling the products.

Contracts concluded in breach of this obligation can be declared null upon request of the Distributor.

Yes, but only to the extent permitted by EU regulation on vertical restraints.

Yes, non-compete clause in a Distribution Agreement are valid, but they must comply with EU Competition law.

Yes, there are no mandatory rules under Belgian law prohibiting minimum sales quota.

The Principal may impose only maximum prices or suggest recommended resale prices.

Fixed-term Distribution Agreements that do not allow for an early termination end when their term expires. This occurs without the need to give prior notice. But notice must be given if not giving one conflicts with the principle of reasonableness and fairness.

Open-term Distribution Agreements with no contractually stipulated termination notice may be terminated only if a reasonable and timely notice period is given. To assess whether a notice period is reasonable, one must consider all the circumstances of the case, such as:

• investments made by the aggrieved party;
• duration of the cooperation;
• importance of the contract in the aggrieved party’s general business.

EXCLUSIVE OPEN-TERM DISTRIBUTION AGREEMENTS

As mentioned earlier, Book X, Title 3 of the Belgian Code of Economic Law applies to three categories of Distribution Agreements:

1. exclusive Distribution Agreements: These are contracts whereby one Distributor has been granted the exclusive right to sell the Principal’s products on a specific territory. Shared exclusivity does not preclude the courts from finding that the contract is an exclusive distribution contract;
2. quasi exclusive Distribution Agreements: These are contracts in which the Distributor sells 80 % or more of the Principal’s products on the territory;
3. Distribution Contracts in which significant obligations are imposed on the Distributor, such as investments in stores, hiring qualified personnel, following marketing instructions, reach certain quota’s, etc.

Book X of the Belgian Code of Economic Law applies not only to the above types of exclusive open-term Distribution Agreements but also fixed-term contracts that have been renewed explicitly (expressly) or tacitly more than three times

If the Principal terminates an exclusive open-term Disgtribution Agreement  for other reasons than serious breach of contract by the Distributor, it must give the Distributor a reasonable notice period (Article X.36 of the Belgian Code of Economic Law), and vice-versa.

The Belgian Code of Economic Law does not specify what exactly is a reasonable notice period, so this must be assessed case by case. If the other party considers that the notice period is not reasonable, parties can dispute this in court. The courts consider the following criteria (which is not exhaustive) in determining what is reasonable:

• duration of the Distribution Agreement;
• size (geographical scale) of the territory granted to the Distributor;
• importance of the distributed products in the Distributor's entire business;
• opportunities on the market for the Distributor; 
• customer’s awareness of the products in question;
• turnover and profits generated by the Distributor for the Principal’s products, etc.

If the Distributor is the terminating party, the courts will consider the following criteria:

• duration of the Distribution Agreement;
• the importance of the Distributor’s business in selling the Principal’s products in the Principal’s entire business;
• the opportunities on the market for the Principal;
• turnover and profits generated by the Principal under the contract with the Distributor.

Belgian courts typically award notice periods ranging from 3 months to 42 months. For distributorships that lasted 10 years, the court will usually find that a notice period of 12 to 18 months is reasonable.

If a party terminates the Distribution Agreement without giving any or insufficient notice period, the other party may seek compensation. The sum of the compensation corresponds to the average semi-gross margin that the terminated party would have earned during the reasonable notice period.

The formula for calculating the semi-gross margin is as follows:

Net profits before taxes + irreducible overhead costs*

*(i.e., costs that the other party cannot eliminate immediately after the termination of the Distribution Contract.)

No, there are no specific formalities.

Distribution Agreements in general

 There is no statutory right to compensation. Belgian ordinary law does not automatically provide for compensation to the aggrieved party for termination. However, parties can provide for specific remedies in their contract or invoke relevant provisions of Book X of the Belgian Code of Economic law (see below) if the contract falls within the scope of that Code.

Book X, Title 3 of the Belgian Code of Economic Law

If the Principal terminates the agreement for other reasons than a material breach committed by the Distributor, the Distributor will be entitled to additional compensation under Article X.37 of the Belgian Code of Economic Law.

These types of compensation are the following: goodwill, expenses and severance pay.

The Distributor can seek compensation for its efforts in finding, developing the clientele for the Principal’s products. This is known as goodwill indemnity.

The Distributor can successfully claim goodwill indemnity if it can prove that its customers are loyal to the Principal’s brand and products and not to the business of the Distributor as such. In other words, the customers will continue to purchase the Principal’s products after termination of the Distribution Agreement.

The Distributor will not be entitled to goodwill indemnity if it keeps its existing customers for itself (e.g. it sells other competing products to them).

The goodwill indemnity is determined according to equity, which makes it difficult to assess. Courts often express this as the equivalent of the Distributor’s net profits before taxes (sometimes increased by overhead costs) or the equivalent of one or two years of its gross profits.

The Distributor can seek compensation for the expenses that it incurred/made throughout the duration of the contract to promote the distribution of the Principal’s products. Another condition that the Distributor must meet to obtain this is that it must prove that such expenses benefit the Principal even after the contract termination. The courts don’t usually consider advertising and promotion costs/expenses in their calculation of this compensation unless the Distributor invested significantly in a (large-scale/major) campaign just before the contract termination. 

The Distributor can seek compensation for the severance pay that it had to pay to laid-off staff because of the contract termination.

The Distributor bears the burden of proving that because of the contract termination, it was forced (it had to) lay off its staff.

The severance pay for dismissing personnel in Belgium is relatively high, ranging from minimum three months for low-ranking employees to several years for managers.

Bankruptcy does not automatically result in contract termination.

Parties can contractually stipulate bankruptcy as a ground for contract termination.

However, stipulating judicial reorganization under Book XX, Title V of the Belgian Code of Economic Law in the contract is not a valid ground for termination.

Claims relating to distribution agreements are time-barred after 10 years. 

Yes. Parties may choose arbitration to settle their dispute and stipulate this in their contract.

>> Go to the top