Belgium: Belgian Ship Agency

In The Light Of The Implementation Of EC Directive 86/653

For almost 20 years the European Commission worked on the unification of the rules pertaining to agency contracts. This resulted in the European Directive 86/653 which ordered its implementation in the national laws of the member states not later than 1^st January 1990 (except for the United Kingdom, Ireland and Italy). Belgium only implemented the Directive by Law on Commercial Agency Contracts of 30^th April 1995 ("L.C.A.C.") and chose for a maximised protection of the agent’s interests.

Important is that this agency law also applies to ship agency contracts. This is not the case throughout Europe and a number of member states have limited the field of application to contracts of sales agency only.

The L.C.A.C. consists of a body of rules pertaining to the rights and duties of both agent and principal, on the agent’s remuneration and on the termination of the agency contract. Most important amongst these rules, are those governing the contract termination (art. 18 to 22 L.C.A.C.).

Art. 18 L.C.A.C. deals with the notice period that has to be respected in case of termination of an agency contract for an indefinite period of time. The rule is simple and the party terminating the contract has to respect a one month’s notice for each running year but with a maximum of 6 months. Notice should be given in writing by way of a registered letter or a court bailiff’s notification. If the contract termination has immediate effect, compensation equal to the remuneration normally earned during the notification period should be paid.

According to art. 19 L.C.A.C. a contract party to an agency contract can terminate a contract ‘for urgent reasons’ with immediate effect and without compensation provided that exceptional circumstances make all and any professional co-operation between principal and agent definitely impossible or when either of the parties is in serious breach of fulfilling it’s duties.

Apart from respecting a notification period or paying redundancy compensation, the law foresees two further additional indemnities in case of contract termination: in accordance with art. 20 L.C.A.C. client compensation should be paid if the agent’s work resulted in the principal acquiring clients. The amount of the client compensation should be determined either by agreement or by a court’s decision, always taking into consideration the true input of clients by the agent but limited to a maximum of the annual average of the last five years of remuneration.

Provided that the agent evidences (1) that he is suffering damages exceeding the amounts awarded sub art. 18 and 20 L.C.A.C. and (2) that his losses resulting from the contract termination are exceeding the 12 month average earnings’ compensation, he may in exceptional circumstances, always provided that he evidences the extent of his damages, claim for additional compensation.

The implementation of the Belgian Commercial Agency Law did not give rise to great difficulties. Either the parties found an amicable solution upon termination, or they were ignorant of the new Belgian agency rules. An important role may also indirectly have been played by the FONASBA standard agency contracts that in general refer sub art. 7.0 to London arbitration and the application of English law.

In view of the mandatory nature of certain rules of the Commercial Agency Law, some Belgian legal authorities question the validity of the insertion such arbitration clause in agency contracts.

Furthermore could the reference to English law be questioned in Belgium. Art. 2.05 of the FONASBA standard agency contract rules that "In countries where the position of the agent is in any way legally protected or regulated, the agent shall have the benefit of such protection or regulation, unless otherwise agreed." The United Kingdom has chosen for a restricted implementation of the European Directive 86/653 and the UK Commercial Agency Regulation 1993 will not apply to ship agents. The choice of English law could therefore result in the Belgian ship agent losing the mandatory legal protection awarded to him under Belgian law. The choice of English law could furthermore conflict with art. 3.3 of the 1980 EEC Contract Convention.

Although the impact and importance of the FONASBA standard agency contract on the industry is well appreciated, we are of the opinion that the reference in art. 7.0 of the FONASBA standard agency contract could be questioned in the light of the 1995 Belgian Commercial Agency Law, implementing EC Directive 86/653, and may after all not be in the (Belgian) ship agent’s interest.

Belgian ship agents could therefore contest the FONASBA jurisdiction- and applicable law-clause and still rely on the favourable L.C.A.C. provisions on contract termination, claiming also for client compensation and eventually additional damages.