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On 19 December 2005 the Law relative to pre-contractual information in the framework of commercial partnership agreements (Loi relative à l’information précontractuelle dans le cadre d’accords de partenariat commercial / Wet betreffende de precontractuele informatie bij commerciële samenwerkingsovereenkomsten) (Moniteur belge / Belgisch staatsblad 18 January 2006)was adopted in Belgium. The law entered into force on 1 February 2006.

Although the law is not limited to franchising, franchising is quite clearly to be recognised in the description of the agreements to which the law applies: agreements of commercial partnership concluded between two persons, each of whom acts in his own name and on his own behalf, by which one against compensation of whatever nature, direct or indirect, grants the other the right to use a commercial formula in one or more of the forms listed (a common sign, a common commercial name, the transfer of know-how, commercial or technical assistance) in the sale of products or in the providing of services (Article 2).

Article 3 provides that at least one month before the conclusion of the commercial partnership agreement the person who grants the right is to provide the other with a draft agreement as well as with a special document containing the information listed in Article 4. The draft agreement and special document are to be in writing or in a durable medium accessible to the person to whom the right is granted. The article specifically prohibits the undertaking of any obligation or the requesting or making of any payment, deposit or security before the expiration of the one month period following the delivery of the document.

Article 4 specifies that the information document is divided into two parts. The first contains important provisions to the extent to which they are provided for in the agreement: an indication of whether the agreement has been concluded intutitu personae or not; a specification of the obligations of the parties; the consequences of not meeting the obligations; the method of calculation of the compensation paid by the person who is granted the right, and how, if necessary, it should be reviewed in the course of the contract and on the occasion of its renewal; non-competition clauses, their duration and conditions; the term of the agreement and conditions for renewal; notice requirements and requirements for the end of the agreement, in particular as regards charges and investments; rights of preemption or call options in favour of the person who grants the right and the rules for the determination of the value of the business when such rights or options are exercised; exclusivities reserved to the person granting the right.

The second part contains information for the correct understanding of the agreement: the name or denomination of the person granting the right as well as his contact details; when the right is granted by a legal person, the identity and the capacity of the natural person who acts in its name; the nature of the activities of the person granting the right; the rights to the intellectual property the use of which is granted; if necessary, the annual accounts of the last three financial years of the person granting the rights; the experience in commercial partnership and the experience in the exploitation of the commercial formula outside a commercial partnership agreement; the history, the state and the prospects of the market on which the activities are exercised, from a general and a local viewpoint; the history, the state and the prospects of the market share of the network from a general and a local viewpoint; if necessary, for each of the last three years the number of users who are part of the Belgian and international network as well as the prospects for development of the network; if necessary, for each of the three last years the number of commercial partnership agreements that were concluded, the number of commercial partnership agreements that were ended by initiative of the person granting the right and by initiative of the person receiving the right, as well as the number of commercial partnership agreements that were not renewed at the end of their term; the charges and the investments to which the person who receives the right commits himself at the beginning and during the performance of the commercial partnership agreement, indicating their sums and their allocation, as well as the length of time for their amortisation, the moment in time when they will be committed and their fate at the end of the contract.

The second paragraph of the article states that the King may establish the form the particular document should have, and may also integrate the list of items to disclose.

If Article 3 is not respected, the person who receives the right may invoke the nullity of the contract within two years of the conclusion of the contract (Article 5, first paragraph), and similarly if the information document does not include the data listed in Article 4(1) part 1, the person who receives the right may invoke the nullity of the provisions concerned in the commercial partnership agreement.

Article 6 provides for the confidentiality of the information obtained in the negotiation process, and Article 7 requires both the agreement and the special document to be drafted in a clear and comprehensible manner: where the meaning of a provision or data is in doubt, the interpretation most favourable to the person who receives the right shall prevail.

Article 8 states that the provisions of the law shall apply notwithstanding contract clauses to the contrary. Article 9 states that in the pre-contractual phase Belgian law shall apply and Belgian courts shall be competent if the person who receives the right exercises the activity concerned principally in Belgium.

Article 10 concerns the entry into force of the law, but also states that the Government should before 1 July 2006 submit an evaluation report to the Chamber of Deputies, which should indicate the extent to which pre-contractual information contributes to the completeness, the clarity and the balance of commercial partnership agreements; the presence in contracts of provisions causing a manifest imbalance between the parties, inter alia non-competition clauses and clauses determining the value in the case of reacquisition, conditions for termination and ending of the contract and the obligations de résultat.

Furthermore, the King is to set up an Arbitration Commission with equal representation of organisations which defend the interests of each of the two parties. This Commission will also before 1 September 2006 submit an evaluation report to the Chamber of Deputies.

 

 

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