For a long time, Belgian Law has been characterised by a material intervention of the legislator into the domain of BtoB agreements. Therefore, clauses freely negotiated in the worldwide standard practice may risk being considered null and void in Belgium. E.g. Belgian Law provides for:
- A black list of clauses that cannot be inserted into an agreement (at Art. VI.91/4 of the Economic Law Code), e.g. conferring the power to interpret a clause only to one party or stating the knowledge of clauses that a party has not effectively been given the possibility to know, etc.; and
- A grey list of clauses (at Art. VI.91/5 of the Economic Law Code) whose presence in an agreement must be justified as non-abusive by the benefiting party, e.g. conferring the power to modify the price or other material characteristics of the contract to one party and with no reasons or tacitly renewing an agreement without permitting a reasonable termination notice period, etc.
Belgian Law is also characterised by specific legislation protecting exclusive distributors upon the termination of the contract, dating back to 27 July 1961, subsequently modified and incorporated into the abovementioned Economic Law Code (its Book X).
This protective Law applies to the benefit of exclusive distributors (including quasi-exclusive distributors and other distributors considered in a position of economic weakness) engaged in agreements concluded for an indefinite period, including those concluded for a defined period but then renewed at least twice. In such a case, upon termination, excluding the termination for cause of the distributor, the latter is entitled to reasonable notice or, failing that, a just compensation.
In such a case, the distributor is entitled to sue the supplier in Belgium, and Belgian Courts shall apply Belgian Law only.
The judgment of the Belgian Supreme Court of 7 April 2023 has important repercussions not only with reference to the distributor/supplier relationships but also and potentially, as we will see at the end of this article, with reference to all Belgian protective legislation into the BtoB area.
The case at stake has been brought by a Belgian distributor of products manufactured by an Austrian supplier. The agreement was governed by Austrian Law and contained an arbitration clause selecting Vienna as the arbitration venue.
Following the supplier’s unilateral termination of the distribution agreement, the plaintiff-distributor sought damages by the abovementioned Belgian Economic Law Code provisions before the Business Court of Turnhout, Belgium. The defendant-supplier challenged the jurisdiction of the Business Court, raising the exception of arbitration, which, however, was not upheld.
The Austrian supplier subsequently appealed to the Antwerp Court of Appeal, which, this time upholding his plea, refused to decide on the merit and stated the validity of the arbitration clause. The Belgian distributor further appealed the matter before the Supreme Court, insisting on the competence of Belgian Courts and the application of Belgian Law.
What has been the reasoning of the Belgian Supreme Court in deciding the case?
The Supreme Court began by dealing with the question of the arbitrability of the matter, responding in the affirmative.
Indeed, the amendments of the Judicial Code entered into force on 24 June 2013 allow (with some exceptions) the arbitrability of all matters of pecuniary nature. Also, the issues regarding the termination of a distribution agreement may be referred to arbitration.
On this point, it can be added that, after the entry into force of the abovementioned amendments, Belgium can certainly be considered an “arbitration-friendly place”, characterised by good relationships between courts and arbitration panels, especially whenever conflicts may arise, e.g. in case interim measures are requested or questions of competence are at stake.
Then the Court recalled the primacy of EU Law and, namely, of Art. 9(1) of the Rome I Regulation (Regulation (EC) No 593/2008 of the European Parliament and the Council on the Law applicable to contractual obligations), providing for the following:
“Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this Regulation”.
At this point, the key question had to be dealt with: does the Belgian Law protecting exclusive distributors qualify as an “overriding mandatory provision” within the meaning of Article 9(1) of the Rome I Regulation or not?
To respond to this question, the Belgian Supreme Court referred to a case, again originating from Belgium and decided that way by the European Court of Justice (ECJ), namely, Case C-184/12, Unamar.
In this case, a Belgian agent concluded a commercial agency agreement with a Bulgarian principal. The agreement, which was for a one-year term and was renewed annually, provided for that it was to be governed by Bulgarian Law and that any dispute relating to the agreement was to be determined by the arbitration chamber of the Chamber of Commerce and Industry in Sofia (Bulgaria).
The Bulgarian principal then terminated the contract, and the Belgian agent brought an action before a Belgian Court seeking compensation. After reaching the appeal and the Belgian Supreme Court, the case was referred by the latter, for a preliminary ruling, to the ECJ.
The Unamar case is, therefore, quite like the one decided by the Belgian Supreme Court on 7 April 2023.
In the Unamar case, the ECJ stated that the “mandatory nature” can be found only in the rules for which it can be proven “on the basis of a detailed assessment, that (…) the legislature of the State of the forum held it to be crucial, in the legal order concerned”.
Bearing in mind the above, the Belgian Supreme Court, in view of the principle of primacy of EU law over national Law, assessed that the provisions protecting Belgian exclusive distributor, although considered as Law relating to public order under Belgian Law, cannot satisfy the test provided for by the ECJ and must be set aside: indeed, the Belgian Law provisions at stake merely protect “private interests”, do not safeguard the public interests of the Belgian State and cannot amount to “overriding mandatory provision”. The arbitration clause is therefore valid, and Austrian Law can be applied.
At first sight, the judgment increases legal certainty for foreign suppliers by materially reducing the risk of being sued by distributors before the Belgian Courts.
However, we wonder if, in the future, this approach will also be followed in other areas in which a business partner is granted increased protection, to the detriment of the other, like we saw at the beginning of the article, with reference to the black and grey list of clauses in BtoB agreement.
The disruptive case of 7 April 2023 has brought increased legal certainty in the field of distribution but has spread potential legal uncertainty in all other areas of business-to-business litigation.