On 21 March 2019, the House of Representatives adopted legislation modifying the Code of Economic Law with regard to the abuse of economic dependency, abusive clauses and unfair trade practices between businesses.
The stated objective of the law is to contribute to "fairer markets and better protection for vulnerable economic players".
The law intends to regulate B2B relations by means of three prohibitions. Henceforth the following are expressly prohibited between businesses: the abuse of a significant dominant position, unfair trade practices and, finally, abusive clauses.
This article takes a closer look at the prohibition on abusive clauses in B2B contracts.
What is meant by an "abusive clause"?
Firstly, the legislature generally considers a contractual clause to be abusive if it creates an "obvious imbalance" between the rights and obligations of the businesses concluding the contract. The legislature then expressly lists certain clauses that will necessarily be deemed "abusive". Thus, a clause that requires a business to waive "all forms of redress" against its co-contracting party in the event of a dispute will be considered abusive. Finally, the legislature enumerates certain clauses that are presumed to be abusive, unless proven otherwise. For example, a clause that places "without consideration, the economic risk on a party despite the fact that this risk is normally borne by the other business or by another party to the contract" is presumed to be abusive.
The objective pursued by the legislature – the protection of businesses occupying a more vulnerable economic position – is commendable. However, there are concerns that the new rules on abusive clauses will have undesirable consequences in B2B relations.
An expected increase in litigation
While the legislature wished to enhance legal certainty in commercial relations, it has achieved instead a form of legal uncertainty.
The vague and ambiguous terms used in the law ("obvious imbalance" or the placement "without consideration, of the economic risk" that "is normally borne") open the door to heated debate on the scope and application of the new rules. The increase in litigation expected to be ushered in by the new legislation will not contribute to clearing up the backlog weighing down our courts.
Moreover, according to the legislative history to the law, it will henceforth be forbidden to insert an arbitration clause (a clause that confers the resolution of a dispute to an arbitral tribunal ra-ther than the courts) in a B2B contract since such a clause obliges a business to waive "all forms of redress" against its commercial partner and is thus supposedly abusive. This statement is sur-prising given that even the European Court of Human Rights has fully accepted arbitration as an alternative means of dispute resolution.
Freedom of contract be damned
Finally, while the legislative history to the law recalls that the cardinal rule of our legal order is freedom of contract, the law itself appears to wash its hands of this principle.
On the one hand, the law calls into question the validity of several clauses common in business dealings, such as those limiting a party's liability or releasing a party from liability.
On the other hand, the penalised prohibitions fixed by the law threaten to paralyse contractual innovation by businesses, while such innovation favours commercial exchanges and economic development.
Conclusion
While harshly criticised by specialists, the law is intended to apply to contracts "concluded, re-newed or amended" after 1 December 2020.
As a result, businesses must ensure that their contracts and general terms and conditions comply with the new legislation.
At the end of the day, separating the wheat from the chaff in B2B contractual clauses and giving up a certain degree of liberty will (perhaps) allow businesses to avoid litigation.
