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Belgium: What happened in 2019 and significant events in 2020

The Year in Review and Year to Come is a collection of contributions by our legal experts on the legal hot topics from 2019 as well as the major developments to be expected for 2020.

Key updates to

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pieces of legislation in 2019 and 2020

With recent changes to legislation, the European Union and the Belgian State have delved further into regulating commercial and financial relations. The recent Law on economic dependence transposed some principles of consumer protection law into the B2B environment. Looking forward, the Sustainable Finance Package developed by the European Commission will have a significant impact on financial markets and on its players. More about these reforms is reflected in our Year in review/Year to come publication.

Xavier Taton, Partner, Brussels

Xavier Taton

Significant legal topics 2019/2020

“Year in Review 2019 / Year to Come 2020”

Year in Review and Year to Come summarises a selection of the major legal topics in 2019, and major legal developments expected in 2020. 

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New Companies and Associations Code applies to new companies

Since May 2019 the new Belgian Companies and Associations Code is applicable to new (Belgian) companies (i.e., companies incorporated as from May 2019). As from 2020, the provisions of the new Code will also apply to existing companies, with the possibility to opt in earlier.

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Competition law: new rules prohibiting an abuse of economic dependence

The Law on the abuse of a position of economic dependence, published on 4 April 2019, tightens the regulation of B2B relations.

 

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Benelux Protocol implementing EU Trade Mark Directive

On 1 March 2019, the Benelux Protocol implementing certain provisions of the EU Trade Mark Directive came into force. This piece of legislation abolishes the requirement for Benelux trade mark applications to be graphically represented, broadens some of the exclusive rights granted to trade mark owners and facilitates taking action against allegedly infringing goods travelling in transit.

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Upcoming reform of the Criminal Code

A draft law introducing a new Criminal Code is expected to come into force on 1 October 2020. This recast of the Criminal Code aims at enhancing the readability, consistency and modernity of criminal law concepts.

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Excess profit rulings

We are awaiting the decision of the EU Court of Justice with respect to the appeal against the judgment of the EU General Court, which stated that the excess profit ruling system does not constitute an illegal State aid “scheme”.

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Reform of the Civil Code

The comprehensive reform of the Belgian Civil Code is on hold since the fall of the Belgian government. However, a law encapsulating the reform of the section on property law (Book III) was filed during the summer and is being further discussed in the Commission of Justice.

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Sustainable Finance

The Sustainable Finance Package developed by the European Commission is steadily taking shape. With this package, the EU wants to foster sustainable investments in the EU through regulation of the financial markets and players.

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Significant events in 2019

Explore the tabs below to review the key legislation you need to be aware of from 2019

Dispute Resolution

New evidence rules (Book VIII of the Civil Code): Book VIII is the first book of the new Civil Code to have been adopted in 2019 and will come into force on 1 November 2020. Book VIII adapts the Belgian rules on evidence to the needs of the modern legal world. It codifies concepts developed by case law and legal doctrine (such as the duty to collaborate in the administration of evidence); provides for contemporary definitions of concepts such as "signature" and "document"; lessens the formalistic approach to the evidence rules and introduces new techniques (such as the reversal of the burden of proof in exceptional circumstances).

Watch our video here.

New Companies and Associations Code – Real seat theory abandoned: Up to May 2019, legal persons having their “principal establishment” (or “real seat”) in Belgium were governed by Belgian law, and Belgian courts had jurisdiction over their validity, functioning, dissolution and winding-up. The Law introducing the new Companies and Associations Code has modified the Code of Private International Law in order to replace the real seat criterion with a new one. The applicable law and competent courts are now determined by the seat provided for by the legal person’s articles of association (the “registered office”), regardless of where the legal person actually operates. “Foreign” legal persons adopting a Belgian registered office must comply with the cross-border conversion procedure set out by the new Companies and Associations Code.

Corporate

New Companies and Associations Code applies to new companies: Since May 2019 the new Belgian Companies and Associations Code has applied to new (Belgian) companies (i.e. companies incorporated as from May). As from 2020, it will apply to existing companies (see Year to come), with the possibility to opt in earlier.

Watch our video here for details on the transitional regime.

Finance

Prospectus Regulation and Prospectus Law: The provisions of the Prospectus Regulation as well as the corresponding Prospectus Law have applied in full since 21 July 2019. The new rules bring considerable change such as the limitation of the length of and the number of risk factors in the summary; stricter requirements regarding the drafting of risk factors; the extension of the wholesale disclosure regime; the use of a universal registration document for regular issuers and more relaxed disclosure requirements for secondary issues.

Register of Ultimate Beneficial Owners (UBO): Pursuant to the Royal Decree on the practical modalities of the UBO register, each Belgian legal entity must disclose specific information about its ultimate beneficial owners.  This information is published in the publicly available UBO register. The deadline for uploading the relevant information on UBOs in the register was extended to 30 September 2019 with a grace period until 31 December 2019 during which no sanctions will be imposed.
 

Competition

Reform of the Belgian competition rules: The Belgian legislator adopted a new Law on 24 May 2019 that will entirely replace Book IV of the Code of Economic Law (CEL), containing the substantive and procedural rules of Belgian competition law. The new Book IV CEL mainly aims to correct inconsistencies and does not involve major substantive or procedural changes, save for the change of the 10% cap on competition fines which will now apply to worldwide turnover, instead of domestic turnover.

2019 priority sectors for the Belgian Competition Authority: According to the 2018 Annual Report of the Belgian Competition Authority (BCA) (published in 2019), its focus over the past year has been the telecommunications market, the distribution sector and relationships with suppliers, the service industry, public procurement, the pharmaceutical sector and the logistics industry. As to the categories of practices that were prioritised, the

BCA aimed to strike a balance between going after clear hardcore cases and more complex or innovative practices.

B2B relations – New sets of rules: The Law on the abuse of a position of economic dependence published on 4 April 2019, tightens the regulation of B2B relations. The Law introduces three sets of rules: a new competition infringement (i.e. the abuse of an economic dependence, a new prohibition on certain terms and conditions in B2B contracts); and a statutory basis for the concepts of aggressive and misleading market practices. While the latter is only an extension of existing rules, the two former sets of rules are entirely new in a B2B context and will come into force during 2020. These rules fundamentally overhaul the legal framework surrounding B2B transactions and will require companies to rethink their market behaviour. Interestingly, the prohibition on unfair terms does not yet apply to financial services but can be extended to them by Royal Decree.

 

 

 

Tax

New Companies and Associations Code – Tax implications: Notwithstanding the introduction of several features in the new Companies and Associations Code, from a tax perspective, the legislator opted for neutrality. Hence, new specific tax legislation has been adopted providing amongst other things that tax residency of companies remains determined by reference to their real seat (and not their registered office) and that the notion of “capital” remains unchanged (also for the BV/SRL).

Excess profit rulings: In 2016, the European Commission decided that the Belgian so-called excess profit ruling system constituted a State aid scheme and ordered the recovery of all deemed aid. On 14 February 2019, the EU General Court overruled the Commission and annulled its decision as it found that the excess profit rulings granted by Belgium were not part of an illegal State aid scheme. Shortly afterwards, the Commission lodged an appeal before the Court of Justice and initiated individual investigations under which the individual rulings are provisionally considered as individual State aid.

Ratification of the Multilateral Instrument: In 2017, Belgium signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). On 26 June 2019, Belgium completed the ratification process. Consequently, a large number of existing bilateral tax treaties concluded by Belgium will be automatically amended when the ratification instrument has also been deposited by the respective treaty partners.

Real Estate

Clean Energy Package: In May, the European Council approved the last of 8 laws which together form the “Clean energy for all Europeans package”. The package provides a comprehensive update to the European regulatory framework for electricity, aimed at facilitating the energy transition, completing the Energy Union and delivering the EU’s commitments under the Paris Climate Accord. It includes rules on a new power market design, renewables, energy efficiency and governance. Its implementation will last until the summer of 2021 (see Year to come). 

Read our report here.

Check out our micro-site here.

Watch our video here.

Offshore wind and CRM: The Electricity Law of 29 April 1999 has been followed by two amendments published in May 2019. One introduces a market-wide capacity remuneration mechanism. The other enables the launch of a competitive tender for new renewable power generation capacity to be built off the Belgian coast, and provides a legal basis for the related support scheme. A detailed procedure for this tender process has yet to be established by the (new) federal government (see Year to come).

Read our client alert here.

Foreign Investment Control: On 1 January 2019, a new control mechanism for foreign investments came into force in Flanders, with the aim of protecting the strategic interests of the Flemish region and the Flemish community. If an action by a “strategic entity” results in foreign participation in or control over that entity which threatens its strategic interests, the Flemish government can undo it.

Optional VAT regime for B2B real estate leases: The Belgian legislator has introduced an optional VAT regime for B2B leases, granting parties to a lease the option to apply VAT to the rent of (parts of) buildings in B2B situations for buildings of which the VAT on the material (re)construction costs has become due at the earliest on 1 October 2018. This allows the landlord to deduct the input VAT paid on the construction and renovation costs relating to the rented building. Previously in Belgium rent was, as a general rule, exempt from VAT with some notable exceptions such as real estate finance leasing, preventing landlords from deducting input VAT. The optional VAT regime has entered into force as of 1 January 2019. 

IP/TMT

Implementation of NIS Directive in Belgium: The Law of 7 April 2019 establishing a framework for the security of networks and information systems of general interest for public safety (NIS Law) implements the Directive on security of network and information systems (2016/1148) (NIS Directive). The NIS Law came into force on 3 May 2019. It obliges specifically designated operators of essential services and all providers of certain categories of digital services to take a number of measures in order to secure their network or information systems and introduces a notification obligation in case of cyber incidents. The NIS Law is supplemented by a Royal Decree of 12 July 2019, setting out the operational details for applying the NIS Law in practice.

Benelux Protocol implementing EU Trade Mark Directive: On 1 March 2019, the Benelux Protocol implementing certain provisions of the EU Trade Mark Directive came into force. This piece of legislation abolishes the requirement for Benelux trade mark applications to be graphically represented, broadens some of the exclusive rights granted to trade mark owners and facilitates taking action against allegedly infringing goods travelling in transit.

Employment

Mobility budget: As from March 2019, employers may grant a mobility budget to employees as an alternative to or an addition to a company car. The budget is different to the “cash for car” system, as the employee will be able to keep a company car and combine the budget with options for sustainable transport and/or a cash amount.

Single permit: On 3 January 2019, new legislation came into force on the employment of non-EU workers coming to Belgium for longer than 90 days. The new procedure is known as the “Single Permit” as there will be one combined application process for both the residence and work permit. The application procedure may now last up to 4.5 months, which is an increase from the previous procedure.

Milestones ahead in 2020

Explore the tabs below to review the key legislation you need to be aware of in 2020

Dispute Resolution

Reform of the Civil Code – Law encapsulating Book III on property law is further discussed: The comprehensive reform of the Belgian Civil Code has been put on hold since the fall of the Belgian government. However, a law encapsulating the reform of the section on property law (Book III) was filed during the Summer and is being further discussed in the Commission of Justice. Book III brings together the various scattered laws on rights in rem, modernises antiquated legal concepts and introduces the concept of volume in property law, allowing for flexibility in complex real estate projects.

Upcoming reform of the Criminal Code: A draft law introducing a new Criminal Code is expected to come into force on 1 October 2020. This recast of the Criminal Code aims at enhancing the readability, consistency and modernity of criminal law concepts. Just as with the current code, the new Criminal Code includes two books; the first book is devoted to definitions and general principles of criminal law while the second book sets out the offences. The reform encapsulates a new sentencing regime with sentences categorised in eight levels, new types of sanctions (such as the closure of facilities, the debarment from public procurement tender, or a pecuniary sanction fixed on the basis of the profit generated by the offence) and a clear distinction between the sentences applicable to legal entities and those applicable to individuals. The second book has been entirely restructured in order to reflect the shift of social values.

Corporate

New Companies and Associations Code – Starts applying to existing companies: In January, the new Belgian Companies and Associations Code will come into effect for existing Belgian companies and (i) the mandatory provisions of the new Code and (ii) the provisions of suppletive law of the Code that do not conflict with the existing articles of associations (AoAs) of those companies will start to apply. Existing companies have until January 2024 to adapt their AoAs to conform to the provisions of the new Code. However, if companies modify their AoAs between January 2020 and January 2024 for any other reason (e.g., a capital increase/decrease), then they must modify their AoAs entirely at that time to adapt to the new Code. It is advisable to start preparing for a change of the AoA, so that an unexpected “in extremis” adaptation to the new Code is avoided. This also avoids the dual application of the former and new legal rules in the same group of (existing) companies.

Watch our video for details on the transitional regime. 

Second Shareholders’ Rights Directive (SRD2): A draft Law implementing the so-called "Second Shareholders’ Rights Directive" (SRD2) is scheduled to be adopted at the beginning of next year. In addition to the changes to the remuneration report and the remuneration policy, the draft Law also provides for new rules on e.g. related party transactions, the organisation of shareholders’ meetings (confirmation of votes and electronic shareholders’ meetings).

Finance

Sustainable Finance:The Sustainable Finance Package developed by the European Commission is steadily taking shape. With the package, the EU wants to foster sustainable investments in the EU through regulation of the financial markets and players. The regulations on EU sustainability benchmarks and on sustainability-linked disclosures apply as of December 2019 and March 2021 respectively, whereas the EU taxonomy regulation, the EU’s classification of environmentally sustainable economic activities, is still under negotiation.

New Companies and Associations Code – Impact on financial transactions: The new Belgian Companies Code applies to all Belgian companies as of 1 January 2020. Market practice in finance transactions is still developing, in particular with respect to bond issues, change of control provisions, corporate authorisations and the use of securities in BV/SRL, but the first trends are starting to emerge. Corporates will be keen to benefit from the Companies Code’s flexibility in their upcoming finance transactions.

Read more in our newsletter.

Competition

Antitrust dawn raids in the retail and pharmaceutical sectors: It remains to be seen whether the BCA will follow up on multiple dawn raids taking place in both the retail and pharmaceutical sectors. After conducting dawn raids in the retail distribution sector mid-May, the BCA announced at the beginning of October that it was “inspecting pharmaceutical companies over suspected antitrust practices that aim to prevent biosimilar medicines from entering the market”. Both sectors are currently under high scrutiny and more investigations may follow.

Exchange of information in associations of undertakings: The BCA has issued a guidance note on the exchange of information between the members of certain undertakings of associations in which the members are competitors. The guidance note focuses on the creation of periodic reviews of the markets, price comparisons, information on future market developments and the creation of price determination tools. This guidance note shows the BCA’s interest in such cases and may be a hint for future investigative priorities into associations of undertakings.

Competition in the digital world: The BCA is eager to contribute to the further development of a digital competition policy for the next European Commission, as set out in a joint memorandum by the Belgian, Dutch and Luxembourg competition authorities. This may also be reflected in the BCA’s future enforcement priorities.

Tax

Phase two of the corporate income tax reform: In 2020, phase two of the corporate income tax reform will come into force. Among others, the standard corporate income tax rate will be reduced to 25% with the additional crisis surcharge being abolished. In addition, the real estate exit tax is being increased to 15% (after being decreased from 16.5% to 12.5% in phase one). Finally, some other measures will become applicable, such as administrative fines and the secret commissions tax, which will no longer be considered as a tax deductible expense.

Excess profit rulings: We are awaiting the decision of the EU Court of Justice with respect to the appeal against the judgment of the EU General Court, which stated that the excess profit ruling system does not constitute an illegal State aid "scheme".

Digital taxation & other anti-BEPS measures: In 2019, within the context of BEPS Action 1 addressing the tax challenges of the digital economy, the OECD proposed a "two pillar" approach. Under pillar one, the OECD proposes a new nexus that would allocate the right for market jurisdictions to tax a residual profit for large consumer-facing businesses. Under pillar 2, the remaining BEPS concerns would be addressed through both an income inclusion rule and a tax on base eroding payments. This approach does not yet represent the consensus view of the different States. Instead, it serves to facilitate negotiations with the aim of reaching an agreement by the first half of 2020

Real Estate

Clean Energy Package: While a small part of the Clean Energy Package came into force at the end of 2018 (Regulation on Governance) and in 2019 (ACER and Risk-preparedness Regulations), 2020 will see the implementation and/or entry into force of the bulk of the package, including the new power market design (new Electricity Regulation and Directive) and rules on energy efficiency and the energy performance of buildings. The new Renewables Directive must be transposed by 2021. Throughout 2020, the Commission will be running implementation dialogues with Member States.

Read our report here.

Check out our micro-site here.

Watch our video here.

Offshore wind and CRM: The (new) federal government is due to establish detailed conditions and procedural rules for the new market-wide capacity remuneration mechanism, and for the competitive tender for new offshore renewable power generation capacity. In addition, it must establish completion dates and a compensation mechanism for each section of the extension to the Modular Offshore Grid, to which the future wind parks will have to connect. With the current political stalemate, timing for all these decisions is uncertain.

Read our client alert here.

TMT

Deadline CCTV notifications: New CCTV systems in Belgium must be notified to the police services via the official website www.declarationcamera.be / www.aangiftecamera.be. The two-year transitional period put in place for existing CCTV will end on 25 May 2020. This means that all existing CCTV that were previously notified to the Data Protection Authority before 25 May 2018 must be notified again to the police services by 25 May 2020 at the latest. Notifications must be kept up to date and must be revalidated by the controllers at least once a year. Controllers must also remember to update the registers to be kept under Article 30 GDPR with specific information about CCTV.

ePrivacy: The EU institutions are still struggling to adopt the draft Regulation on Privacy and Electronic Communications (ePrivacy Regulation) which is due to supplement the GDPR and includes, among other things, specific rules on the use of cookies and electronic marketing. The initial draft was tabled on 10 January 2017 by the European Commission with the aim of coming into effect at the same time as the GDPR. It has however been heavily debated since then. The Committee of Permanent Representatives of the EU (COREPER) rejected the Council's position on the draft ePrivacy Regulation in its meeting of 22 November, which renders the next steps unclear.

Employment

Social elections: In May 2020, new social elections must be held for works councils and committees for prevention and protection at work within a number of companies that reach certain thresholds depending upon the number of employees.

 

2019 has seen significant changes in law at EU level, which will impact your business in the years to come. By watching this video, you can get a sneak peek into:

  • the sustainable finance package, which seeks to integrate environmental, social and governance considerations into the investment process;
  • the banking package, which brings changes to prudential regulation and the resolution of banks;
  • the investment firms review package, which marks a major reform for capital and liquidity rules for investment firms;
  • the clean energy package, which aims to create an integrated energy market;
  • the screening of FDI regulation, which sets minimum standards for national FDI screening.

Contacts for Belgium
For more information, please speak to one of the key contacts below.

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