Philip F. Zeidman
Dateline: Brussels
I took some heat from readers for my "disrespectful" tone about this city in a prior article (" . . . this gray city, perennial gray skies, gray buildings . . . gray civil servants . . ."; Sense of place, Franchise Times April 2013). It is thus a relief to be able to report that on this trip the climate was unaccustomedly lovely: brisk and breezy but sunny and pleasant.
The legal climate: not quite as sunny.
In the early years of this century numerous proposals were made for franchising legislation. Many of the proposals would have chilled the development of franchising in that country: requiring extended terms; making non-renewal difficult; expanding the consequences of termination; banning quota clauses, post-term covenants against competition and certain forms of encroachment; mandatory judicial rewriting of the terms in the event of changed conditions, etc.
As I noted in one of my columns addressing the prospects for such measures, " . . . given the relatively small size of the Belgian market, any legislation incorporating these features would have been enough to persuade many franchisors to seek less thorny pastures" (In Brussels, the next step...but not necessarily the final one (with Koen De Maeyer), Franchise Times, March 2006).
Franchisors were accordingly relieved that what emerged from that process of consideration and debate was a much shrunken form of legislation: devoid of any "relationship" provisions, the new statute (December 19, 2005) was a fairly standard set of disclosure obligations, with little in them to give heartburn to franchisors accustomed to the obligations imposed by the Federal Trade Commission and more than a dozen U.S. states and a growing number of jurisdictions elsewhere.
Several disclosure requirements of a vague or uncertain scope sent a momentary shudder through the franchising community, but have not proven to pose difficulties in practice.
The principal aspect of the law which troubled franchisors was the requirement to provide disclosures at least 30 days in advance, failure to do so giving the franchisee the right to nullify the agreement within two years after entering the contract.
But franchisors have operated under this regime for eight years, and the prospect of revisions made many wonder whether the new provisions would add additional obligations, or alter the statutory pattern in a materially adverse way.
The new law (technically, a substitute for the old, effected by amendments to the Belgian Economic Code, also covering agency agreements, commercial collaboration agreements and distribution agreements) was approved on April 2, published on April 28 and became effective on May 31. It leaves the nature of the disclosure obligations essentially intact, and introduces no "relationship" provisions.
It does, however, make changes which will come as something of a nasty surprise to franchisors with agreements already in effect:
It extends the disclosure obligation (including the 30-day and two-year provisions) to renewals, new agreements between the same parties, and modifications. Fortunately, there are some provisions that limit the scope and effect of these new requirements, but they will nonetheless upset the assumptions under which franchisors have been operating.
If the pre-contractual information is itself modified after disclosure, the franchisor must provide the modified disclosure information to the franchisee (triggering the running of another 30 days).
There are some features of the new law that will receive at least a restrained welcome: Franchisees may waive their right to seek annulment (but only after a period of one month of "reflection"); and the parties may enter into an enforceable confidentiality agreement even before the 30-day waiting period has elapsed.
But these are hardly enough to outweigh the new set of obligations that franchisors will now confront in Belgium—obligations to existing as well as to prospective franchisees.
It is not a storm, to be sure. But it is certainly enough, at a minimum, to render the regulatory climate partly cloudy.
Philip F. Zeidman is a senior partner in the Washington, D.C., office of DLA Piper. He can be reached at [email protected].
