Commercial Agency Contracts in Belgium

The regulation of commercial agency is found in the Code of Economic Law, in Title 1 of Book X.

An agent is one who acts on a permanent basis and for remuneration for a principal, without being subject to the authority of the principal. The agent negotiates and eventually concludes business in the name and on behalf of the principal. In general, the agent acts only for one principal and is therefore economically dependent.

The first alternative of commercial intermediation is the commercial representative. Unlike the agent, who acts independently, the commercial representative is an employee. He acts under the authority of his employer and follows his instructions. He therefore enjoys all the advantages of employee status.

The second alternative is brokerage: in this case, the broker simply puts several people in touch with each other. He therefore plays no role in the negotiation or conclusion of the deal.

The third possibility is the dealership contract. In general, the dealer buys goods from the manufacturer and resells them in his own name and for his own account, unlike the commercial agent, who acts for the principal.

Finally, the last possibility is the franchise. It differs from the others in that real know-how is made available to the franchisee, who in return pays a fee to the franchisor. The franchisee remains independent.

There are no particular formalities, the commercial agency contract is a consensual contract, which requires writing only for reasons of evidence.

As the commercial agent is independent, there are however obligations that are specific to him: registration with the Crossroads Bank of Companies, registration with the INASTI, VAT.

There is no legal provision organizing exclusivity between the commercial agent and its principal. Exclusivity is not essential for a commercial agent, since he is independent in nature. In general it is allowed that the commercial agent represents multiple principles at the same time.

However, it is generally accepted in legal doctrine that exclusivity between the agent and the principle can be agreed upon contractually. Under Belgian law exclusivity clauses can concern a specific territory and time (i), for specific clientele (ii) and only for those acts wherein the agent can represent the principal (iii).

Exclusivity is only regulated by the granting of indirect commissions. Article X.8 of the Code of Economic Law grants the agent, who is remunerated via commissions, the right to a commission when a deal has been concluded with a person who is part of his exclusive territory or part of his exclusive target group, even if he has not intervened at all.

The commercial agent is only entitled to commission when:

(i) the sale was accomplished through his intervention;
(ii) the purchaser is someone who was previously brought in by him as a customer for similar cases
(iii) he agreement between the agent and the principal stipulates the area where the agent should act (i) and in this area a sale was accomplished because of the acts by the agent (ii) (art. X.8 CEL).

In principle, there is no commission if the agent was not an intermediary to the sales. Whether or not an agent would be entitled to commission on these online sales depends therefore on the contractual arrangements parties have agreed upon.

Concluding, if the agent can demonstrate that he is responsible for bringing in these particular clients or that certain sales have been accomplished in his area whilst it was contractually agreed that all sales in this area are for the agent, he can claim his commission.

Even more, the ECJ has decided in 2016 that an agent can also try to claim a commission at the end of the commercial agency agreement for sales of other products than those within his contractual task. This would be possible when these sales follow out of the circumstance that the agent created a business relationship with this customer because of the sales based on the product which he was supposed to mediate (ECJ 7 april 2016, Marchon Germany GmbH / Yvonne Karaszkiewicz).

In Belgium, the claim for these sales can be made following the provisions for indemnities at the termination of the commercial agency agreement.

We therefore recommend to always verify the contractual stipulations and in case it is not preferable to be hold for commissions in this circumstance, to exclude this circumstance specifically.

Under Belgian law a non-compete clause after the commercial agency agreement is valid only when:

• this clause is in writing;
• the non-competition is only for the matters where the agent was charged with;
• the non-competition is only for the territory where the agent was supposed to act;
• the timeframe does not exceed six months after the ending of the agreement. (art. X.22 CEL).

In case of breach of a non-competition clause, the damages can in principle not be higher than the indemnity for goodwill (these new customers) payed to the agent and based on the calculation for the year before the end of the agreement.

Because of the fact that art. XI. 22 WER is mandatory, Belgian jurisprudence is strict in terms of interpretation of what a non-compete clause is. This provision cannot be put aside and therefore, we recommend to respect these conditions strictly.

We also point out that as soon as a non-compete clause is stipulated in a commercial agency agreement, Belgian law creates a presumption that the agent has brought new clientele to the principal. This will have its consequences for the calculation of the indemnity for goodwill at termination of the commercial agency agreement. This calculation is based on the number of new clients the agent has brought to the principal.

The law on Commercial agents does not stipulate whether or not a non-compete clause is valid during the agreement. Indeed, it is not considered that the agent naturally has a non-competition obligation to respect. However, we point out that under general Belgian law it is possible to agree upon non-compete clauses in an agreement.

Under Belgian law a non-compete clause is valid only when it is proportionate to the purpose of the clause. In order to be valid, the clause must be limited in three ways:

• limited in time: this is in any case the fact since it only governs the period of the agreement;
• for a specific territory: this is the same as the territory where the agent was supposed to act;
• for specific activities: only the activities which are carried out by the commercial agent.
  

Under Belgian law, it is a priori not possible to exclude the activity of a commercial agent from the scope of Belgian law for as long as the agent has its main residence in Belgium (art. X.25 CEL). However, it is recognised that the rules of Belgian law cannot override supranational law. This means that under European law, and in particular under the Rome Regulation, the parties may designate a foreign law as applicable. Belgian case law generally considers that a clause designating a foreign law as applicable to a Belgian commercial agent is only valid if the foreign law offers equivalent protection. (Ondrb. Antwerpen (afd. Antwerpen) 13 maart 2020, RW 2020-21, 1432).

However, we would like to point out that following private international law this main residence cannot be used only to escape the obligatory and mandatory provisions on commercial agents in the Code of Economic law (eg. the non-compete clause). Parties can always try to requalify the law that governs an agreement in case of a dispute.

Belgian case law recognises the validity of arbitration clauses when the law declared applicable offers equivalent protection to Belgian law.

As for a clause attributing jurisdiction to foreign courts, it is considered valid, even in the presence of a Belgian agent, as long as it meets the conditions imposed by Article 25 of the Brussels 1bis Regulation (Van den Broeck, K. en Ulrix, E., «Internationale handelsagentuur en forumkeuze », R.A.B.G., 2020/5, p. 436-440).

Commercial agency agreements fall under article 7.1 (b) Brussels I Recast Regulation (nr. 1215/2012) since the commercial agent provides services for his principal. The applicability of the Brussel I Recast Regulation implies for example that all provisions concerning jurisdiction including choice of law are applicable, but also that judgements should travel freely within the EU. Enforcement and recognition is therefore governed by the Regulation.

The default position is that once a judgment in one Member State is delivered, no exequatur is required. Other Member States can only refuse the recognition and enforcement of this judgment if they have ground to challenge this recognition and enforcement. For more information on enforcement and recognition of judgments, we refer to Private International Law sections.

In case a judicial decision is rendered in a non-Member State, this swiftness of the process of recognition and enforcement is not applicable. A national judge is required to render an exequatur in order to enforce the foreign judicial order. The requirements for this exequatur are based on bilateral treaties between the third country and Belgium, or, failing that, on residual private international law rules.

The most important grounds for a judge to refuse enforcement and/or recognition are:

• incompatibility with Belgian public order;
• violation of Rights of Defense;
• incompatibility with earlier Belgian judgments;
• exclusive jurisdiction of Belgian Courts on this matter (art. 25 Belgian IPR).

When the situation does not fall within one of these categories provided by law, the exequatur needs to be given by the Belgian Court.

A commercial agency agreement for an indefinite period can always be ended by one of the parties to the contract.

A commercial agency agreement that has been concluded for a fixed period of time, ends automatically at the end of the contract or by mutual consent. In principle parties cannot terminate the agreement before the end date, however they can deviate from this contractually.

In case they included the possibility of earlier termination or in case of a contract for an indefinite period, parties can only terminate the contract if they give prior notice. This needs to be given one month before chosen termination date in the first year of the contract. For each extra year, this notice period is extended with a month with a maximum of six months. In any case, parties cannot agree to a shorter notice period (art. X.16 CEL).

If this notice period is not respected, the non withdrawing party can claim damages for wrongful termination for an amount that is ‘reasonable’ and equals the notice period. If the agent was used to receive a commission, this fee is calculated based on the average commissions earned in the twelve months before the termination of the commercial agency agreement.

The contract may also be terminated by mutual agreement; by judicial resolution in the event of a breach of contract by one party; in the event of an “acte equipollent à rupture” , i.e. in the event of a unilateral change in the commission rate (article X.13 Code of Economic Law).

Parties are free to contractually agree on reasons justifying the unilateral termination of a commercial agency agreement. However, they are not allowed to include conditions that are completely within the power of one party (art. 1174 CC).

If parties do not agree on special terms for termination in case of just case, any party can end the agreement without notice and before the termination date, in case that any professional cooperation has become impossible or when the other party flagrantly fails to perform its obligations (i.e. a serious breach of its obligations).

The party wishing to terminate the contract for these reasons must give notice of termination within 7 working days of becoming aware of the reasons, the law does not impose any specific form but it is preferable to keep proof of the termination. The party then has further seven working days to notify the reasons by registered mail (i) or by bailiff's writ (ii). Both notifications can be made simultaneously in the registered letter or by writ. (art. X.17 CEL).

Thus, it is considered that negligence leading to an abnormal and very significant decrease in turnover may constitute gross negligence on the part of the agent. However, the final assessment will rest with the judge.

After termination of the commercial agency agreement, an agent is entitled to a termination indemnity when he can prove that he has brought in new customers or when he has expanded the current clientele. When the agreement has a non-compete clause, it is presumed that the principal still has these advantages. The agent is obliged to claim this indemnity within one year after the termination of the agreement.

The amount of this indemnity is calculated based on the expansion and the new customers, but cannot be higher than the remuneration based on the average of the five previous years (or less if the commercial agency agreement was concluded not longer than five years before termination).

This indemnity is not due when:

• the principal has terminated the agreement because of a serious breach (see question 11);
• the agent terminates the agreement himself, unless it is for just cause (see question 11);
• the agent or its inheritors transfer the agreement to a third party (art. X.18 CEL).

The Belgian legislator has implemented under art. X.19 CEL as one of the few European countries the option from the Directive that the agent can claim an additional indemnity if the goodwill does not cover all the damage the agent has suffered.

Following article 5 of the OECD Model Convention an enterprise does not have a permanent establishment merely because it carries business through an independent commission agent or agent of independent status.

Based on these grounds an independent commercial agent carrying out activities in Belgium will not be considered as a permanent establishment of this company. Only when the agent is closely related to the foreign company (i.e. a dependency) the agent shall not be considered independent and can therefore be seen as a permanent establishment. However, this would be contrary to the Belgian definition of a commercial agent since a commercial agent is supposed to remain independent (art. I.11, 1° CEL).