Belgium introduces new 'unfair terms' for the food sector 

The purpose of the Act of 4 April 2019 that amended the Code of Economic Law (Code de Droit Économique) (CDE)  was to put in place a legal framework guaranteeing the regulation of practices between companies and to protect companies deemed weaker or in a situation of economic dependence. 

On 20 June 2024, the legislator adopted a royal decree supplementing the lists of "unfair terms" already included in the 2019 regulations for commercial partnership agreements relating to predominantly food retailing in non-specialised shops.  

The legislator has also recently adopted another draft royal decree aimed at penalising certain unfair practices in business-to-business (B2B) relations within the agricultural and food supply chain. However, this draft decree has not yet been published.  

Prohibition of unfair terms 

The rules that are set out in articles VI.91/1 of the CDE are essentially based on the existing rules on unfair terms in consumer contracts.  

The law establishes a general principle for B2B relationships, according to which clauses that create a manifest imbalance between the rights and obligations of the parties to a contract are unfair and therefore prohibited. 

The law sets out two lists of unfair terms: "black" terms, which are considered unfair in all circumstances (the black list), and "grey" terms, which are presumed unfair until proven otherwise (the grey list). 

Black and grey clauses

Black clauses are considered unfair if their purpose is to :  

• Provide that the "weaker" party is bound by commitments while the other party is completely free to release itself from its commitments.
• Confer on a single party the right to interpret the contract concluded. 
• In the event of a dispute, waive all rights of recourse for the other party.
• A finding that a party has adhered to principles and conditions even though it has not had the opportunity to become acquainted with them.   

Grey clauses include those whose purpose is to : 

• Allow a company to change the price, characteristics or conditions of the contract without a valid reason. 
• Place the economic risk on one company without compensation when, depending on the sector concerned, it should normally fall on the other party.
• Bind the parties without providing a reasonable period for terminating the contract. 
• Enable the company to avoid liability for gross negligence or wilful misconduct.
• Limiting the types of evidence that can be used by a party. 
• Setting excessive penalty clauses (which manifestly exceed the extent of the loss likely to be suffered).  

These lists are not exhaustive. In practice, any clause may be deemed unfair if, on its own or in combination with other clauses, it creates a manifest imbalance between the rights and obligations of the parties. 

Extension of unfair terms in food sector 

The regulations provide for the possibility of adopting royal decrees to supplement the regulations applicable to unfair terms and unfair commercial practices.

In this context, the legislator recently adopted a royal decree aimed at extending the principles that have been in force for several years to the food sector. 

The aim of this royal decree is to ensure a fair balance between the rights and obligations of players in the food retail sector, with a limited number of major players with a very high combined market share on the one hand and a large number of small independents who need greater protection on the other. 

The legislator believes that care must be taken to guarantee minimum rights for franchisees in this poorly regulated sector, characterised by strong legal and economic dependence on the major players. 

This royal decree supplements the existing black and grey lists of unfair terms in order to prohibit clauses in commercial partnership agreements relating predominantly to food retailing in non-specialised shops. This draft royal decree is clearly aimed at franchise agreements for the operation of supermarkets. 

However, its scope is broader and covers any "commercial partnership agreement", so it could cover other types of contract other than franchise agreements. The new royal decree completes the list of unfair terms included in articles VI.31/4 and VI.91/5 of the CDE. 

Blacklist clauses

The following clauses have been added to the blacklist (clauses that are illegal in any event) and are therefore prohibited for the sector concerned: 

• Erosion of the franchisor's obligation to deliver. Clauses that excessively reduce the franchisor's liability to deliver to the franchisee.
• Limitation of the right to prepare for or begin negotiations during the termination period or the period covered by a non-competition clause. Clauses prohibiting preparation for or commencement of negotiations during the notice period or during the period covered by a non-competition clause.
• Passing on the cost of various promotional campaigns. Clauses requiring the franchisee to bear more than half the costs of promotional activities.
• The competent judge. Clauses requiring exclusive recourse to the franchisor's territorially competent court or to a court whose head office is located in a language region other than the language region of the franchisee's head office. 

The grey list

In the grey list (clauses presumed to be illegal unless proven otherwise), the following clauses have been added and are therefore, in principle, prohibited: 

• Option clauses or pre-emption rights with unbalanced valuations. These provide for a lump-sum valuation fixing a price that would be manifestly unreasonable in relation to the normal valuation of a business or the shares of a company.
• The obligation to continue a loss-making operation. These are clauses that contractually require a company that has been structurally loss-making for at least 12 months to continue trading.
• "Unreasonable" resolutory clauses. These are clauses giving the franchisor the right to terminate the franchise contract unreasonably by applying an express resolutory clause (i.e. extra-judicial termination for fault on the part of the franchisee).  

Entry into force 

This royal decree will come into force on 1 January 2025 for new trade partnership agreements concluded, renewed or amended after this date and on 1 May 2025 for existing trade partnership agreements concluded before 1 January 2025 and not renewed or amended after that date.

Practical difficulties 

This new regulation could give rise to practical difficulties, as highlighted in the opinion issued by the Unfair Clauses Commission on 9 January 2024. 

These regulations contain a number of vague concepts that give rise to a degree of legal uncertainty. In particular, the concept of a "structurally loss-making" company seems highly elastic and imprecise.   

In addition, certain "classic" and widely used clauses are now on the blacklist. These include jurisdiction clauses. 

In the case of franchising, for reasons of consistency, contracts generally stipulate that the court with jurisdiction will be that of the place where the franchisor's head office is located. 

Other fairly traditional clauses in franchise contracts are also affected by the new regulations, such as the express resolutory clause. 

Osborne Clarke comment

In any event, this royal decree should affect the usual practices of most retailers. They will need to exercise caution when signing new contracts and adapt their existing contracts in the light of the new regulations. 

It is also important to continue to follow the news as a second royal decree is due to be published shortly on unfair practices in the agricultural and food supply chain.