Belgium: modified rules on pre-contractual information affect franchise agreements in Belgium – existing as well as future

by DLA Piper

Book X of the Belgian Economic Code concerning agency agreements, commercial collaboration agreements and distribution agreements is now in force.  All franchisors will be affected, but those with existing franchise agreements in Belgium need to be especially attentive.

Section 2 of Book X replaces the mandatory Law of December 19, 2005 on pre-contractual information for commercial collaboration agreements (informally referred to as the Belgian Franchise Law).

Essentially, that Law obliged franchisors to supply franchisees in Belgium with a mandatory list of pre-contractual information at least one month prior to the conclusion of the franchise agreement.  If a franchisor did not comply with its pre-contractual information obligations, the franchisee could request the annulment of the franchise agreement up to two years after its conclusion.

Although Section 2 of Book X is largely a copy of the Belgian Franchise Law, it does contain a number of relevant additions that affect the obligations of franchisors.  There has been only a minimal revision of the information to be disclosed; rather, the principal changes relate to when the disclosure obligation applies, and the remedies of the franchisee.

First, franchisors are not only obliged to provide pre-contractual information to a new franchisee. It has now been made clear that there is also a disclosure obligation in case of (i) the renewal of a franchise agreement of definite duration, (ii) the conclusion of a new franchise agreement between the same parties or (iii) the modification of a franchise agreement that has been in effect for more than two years. 

This is a significant change for franchisors with existing franchise arrangements in Belgium, who have operated under the assumption that providing disclosure at the outset of the relationship discharges their obligations.  There are two limitations on the scope and effect of these new requirements:  (a) the scope of the pre-contractual information is more limited than the pre-contractual information to be supplied prior to the start of an entirely new franchise agreement; and (b) no pre-contractual information is required at all in case a change to a franchise agreement is requested in writing by the franchisee.

Second, whereas franchisees are entitled to request the annulment of the franchise agreement in case they did not receive all the pre-contractual information prior to the start of the contract, existing franchisees have the same right in case they did not receive all the pre-contractual information prior to the modification or renewal of the contract.  In addition, if the pre-contractual information related to a renewal or modification of a franchise agreement is incorrect or incomplete, franchisees may request the partial or entire annulment of the resulting franchise agreement, but only if they can demonstrate that they would not have concluded the agreement if they were given the complete and accurate information. 

Third, franchisees are expressly given the right to waive their right to request an annulment of the franchise agreement.  However, this is only possible after a reflection period of one month following the execution of the contract and provided that the franchisees expressly specify their reasons for the waiver.  The interrelationship of the timing provisions thus would appear to work as follows: When a franchisor does not comply with its disclosure obligations the franchisee can request annulment for a two-year period.  The franchisee can waive that request, but only after the first month of that two-year period has elapsed.

Fourth, it has been clarified that in case pre-contractual information is modified after it has been supplied to the franchisee, the franchisor is obliged to provide a copy of the modified disclosure to the franchisee, after which a new waiting period of at least one month has to be taken into account before concluding the contract.

Fifth, whereas the Belgian Franchise Law prohibited the consummation of any contract during the one-month waiting period after the supply of the pre-contractual information, the parties are now expressly allowed to conclude a confidentiality agreement during that waiting period.

The legislation applies to all Belgian franchise agreements that are concluded after May 31, 2014.  In addition, it also applies to pre-existing franchise agreements that are modified or renewed after May 31, 2014.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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