Partner, Ariga
Distinguished legal experts from Belgium, Spain and Portugal explored their respective legal frameworks, highlighting the nuances, practical implications and comparative aspects of handling changes of circumstances. Despite sharing several common features, the legal frameworks of these countries are not identical.
Mr. Benoît Kohl, President of the CEPANI and Professor at the University of Liège, opened the session by emphasising the notable reform in the Belgian Civil Code regarding the notion of "hardship." The round table then unfolded through three panels, addressing the criteria of application, clause drafting and the effects of changes of circumstances on contracts.
The first panel, moderated by Mr. Kohl, presented the legal frameworks of each country. Ms. Florence George (lawyer; Professor at the University of Namur) highlighted the inclusion of hardship in Article 5.74 of the Belgian Civil Code, moving beyond the traditional confines of force majeure and abuse of right. The Belgian regime now allows contract adaptation subject to certain conditions (i.e., it must be in line with what the parties would have reasonably agreed on) or termination. In case of failure of negotiations, the parties can also seize a judge to adapt or terminate the contract. There is no hierarchy between adaptation and termination of the contract. The new concept raises questions, namely about negotiation obligations and the role of judicial intervention in adapting or terminating contracts (the judge being bound by the ultra petitalimitation) as well as whether the debtor would be able to invoke the change of circumstances if it did not ask the creditor to renegotiate the contract and is in breach of contract.
Ms. Heidi Lopez Castro (lawyer) presented Spain's approach, where since 1940 hardship has been governed by the doctrine of rebus sic stantibus. This doctrine, while not codified, has evolved to address extraordinary and unforeseeable circumstances affecting long-term contracts. It has been developed at the intersection of the principles of good faith, pacta sunt servanda and the disappearance of the cause. Courts apply this doctrine restrictively, requiring an event of extraordinary and unforeseeable nature beyond the control of the parties. Such doctrine has been considered as a subsidiary remedy, which must be requested by a party. One particular aspect is that the parties do not have the duty to renegotiate. As regards the remedy, adaptation seems to be the main and favoured remedy and termination is a subsidiary remedy, with the ultra petita limitation. The Spanish courts are cautious about the application of the doctrine. The 2008 economic crisis justified the application of rebus sic standibus although the criteria of application remained strict. Whether Covid-19 satisfies the change of circumstances criteria has not yet been decided by the Supreme Court.
Ms. Lurdes Vargas (Assistant Professor at Universidade Lusofona, Researcher of CEAD) discussed the conditions under Article 437 of the Portuguese Civil Code for invoking a change of circumstances. The criteria include: an abnormal change; the performance of the obligations affects the principle of good faith and does not fall under the risks inherent to the contract. The injured party has the right to terminate the contract or to adapt it, except when that party was in default at the time the change of circumstances occurred. In addition, courts intervention is not mandatory for invoking this change or seeking remedies. The presentation highlighted the importance of good faith and fairness in contract adjustments, aiming for an equitable distribution of risk between the parties in order to restore balance.
The second panel, moderated by Ms. Vargas, was composed of Ms. Heidi Lopez Castro (Partner, Uria Menéndez, Madrid), Mr. Ignace Claeys (Partner, Eubelius, Brussels; Professor at the UGent), Mr. Alexandre Mota Pinto (Partner, Uria Menéndez, Lisbon) and Mr. Rafaël Jafferali (Partner, Simont Braun, Brussels; Professor at the Free University of Brussels). It tackled several practical questions, including the future challenges of hardship, considerations for clause drafting, examples of change of circumstances, the relevance of international instruments and the burden of proof. The debate also covered the assessment of what constitutes an abnormal or extraordinary event and the evaluation of the risk assumption by the debtor, particularly in complex contracts, along with the causal link between the change of circumstances and the contractual obligations.
The third panel, moderated by Mr. Jafferali was composed of Ms. Dorothée Vermeiren (Partner, Clifford Chance, Brussels), Ms. Lopez Castro, Mr. Sander Van Loock (Associate, Simont Braun, Brussels) and Mr. Antonio Pedro Pinto Moreto (Associate Professor at the Autonomous University of Lisbon, lawyer). It explored various interesting questions, such as the obligation to continue fulfilling contractual duties post-change of circumstances, the possibility of seeking interim relief and provisional measures in court and the arguments for contract adaptation or termination. The panel also indicated that in practice parties have some preference not to empower judges or arbitrators to decide on changes of circumstances, favouring contract termination in the event of unsuccessful negotiations. Finally, the applicability of changes of circumstances to arbitration clauses, especially for a party under financial difficulties (e.g., impecuniosity) was debated, questioning whether such scenarios would invalidate arbitration clauses.
Mr. Denis Philippe (lawyer, Professor at the Catholic University of Louvain) offered concluding remarks, highlighting the restrictive criteria for the application of hardship, and noting that often the parties themselves reject the hardship clause. He emphasised the importance of parties maintaining control over their destiny and suggested the involvement of observers or experts to facilitate dispute resolution. With creativity and careful drafting, hardship clauses can be effectively utilised.
The introduction of the concept of hardship in Belgian law brings both apprehension and excitement, as noted by Mr. Jafferali. The comparative analysis of Belgian, Spanish and Portuguese laws during the round table offered valuable insights for legal practitioners facing the complexities of hardship clauses in contract law.
b-Arbitra is the Belgian Review of Arbitration, issued biannually, with publication of judgments, notes and commentaries on arbitration related topics.
This second edition of 2023 follows celebrations in Brussels to mark ten years of b-Arbitra. As co-editors-in-chief, we want to use this occasion to again congratulate our predecessors Maud Piers, Jean- François Tossens and Annet van Hooft for their vision in creating this review, and for entrusting the undersigned to carry it forward with the invaluable help of the members of our editorial board. We also want to thank CEPANI, our editor Kluwer and the many contributors of the journal for their input. Finally, we want to thank the judges in the specialized arbitration chambers of the competent courts of first instance for sharing their judgments. This allows us to publish more Belgian case law than ever, to the benefit of the Belgian arbitration community and – through Kluwer arbitration – beyond. As co-editors-in-chief, we hope that b-Arbitra may continue to benefit from the same support in the next decade.
In the doctrine section, Koen Van den Broeck, Beatrice Van Tornout and Nicolas Celis explore M&A Arbitration involving climate change issues. This contribution offers an interesting look into how climate change issues will shape M&A transactions and how this may impact arbitration proceedings in this field. Next, Ignace Claeys and Heleen Van Cauwenberge discuss arbitration clauses in general conditions on the basis of six recent judgments from the Courts of First Instance of Ghent and Brussels. The authors explore the question whether and under which conditions such clauses are valid, bearing in mind the changes brought by the entry into force of Book 5 of the Belgian Civil Code. They further analyze the impact when consumers are involved. Last but not least, Benoît Allemeersch and Hannah Carlota Osaer look at the CJEU’s judgment of 2 March 2023 in Norra Stockholm Bygg (C-268/21) regarding GDPR and document production orders in state court proceedings, and explore whether and how the CJEU’s reasoning can be applied to document production in arbitration proceedings.
In the jurisprudence section, we start with three judgments of the Belgian Supreme Court. In the first one, the Court confirmed the legality of so-called “binding third party decisions” (“bindende derdenbeslissing”/“tierce décision obligatoire”). This is a dispute resolution process by which parties decide to settle a dispute by appointing a third party whom they agree will render a decision that binds the parties like a contract. The second one is the landmark Thibelo case, in which the Belgian Supreme Court reversed its own long-standing jurisprudence, when holding that disputes about the termination of exclusive distribution agreements can be settled through arbitration, even where the contract is governed by a foreign substantive law and regardless of whether such foreign law offers similar protection than the provisions of the Belgian Code of Economic Law. In his note, Alexander Hansebout gives a historical overview of Belgian jurisprudence on this matter, analyzes the Supreme Court’s decision in Thibelo as well as the expected impact on the arbitrability of agency disputes and disputes regarding the precontractual phase of commercial cooperation agreements. The third judgment raises important preliminary questions with the CJEU in the context of the application of EU competition law and a CAS award rendered in Switzerland. We then cross the Channel, with the publication of an extract of the famous UK Supreme Court judgment in Halliburton v. Chubb concerning questions of disclosure and impartiality and independence of an arbitrator in case of repeat appointments in related cases where only one party is involved in repeated cases. In his note, Karel Daele critically analyzes this judgment and its impact from an English law perspective and draws the comparison with aspects of Belgian law. Turning back to Belgium, in addition to the six cases that form the basis for the contribution by Ignace Claeys and Heleen Van Cauwenberge, we publish further cases from the Courts of Brussels and Ghent on a variety of issues, including the need for the possibility for external control of compliance with a deadline to render the arbitral award (if any), the conditions for suspension of the enforceability of the award and the question of extension of the arbitration agreement to non-signatory third parties in the framework of enforcement under the New York Convention.
In the documents section, Maud Piers and Hannah Carlota Osaer look both to the past – with a report on the Conference on Blockchain, Metaverse, Web3 in Ghent in May 2023 – and to the future, with a summary of the takeaways and the expected impact of these and other disruptive technologies on the world of international arbitration. Finally, Marijke Roelants reviews the book on Arbitrage, bemiddeling en andere vormen van conflictafhandeling: vandaag en morgen, which collects the contributions of a seminar series on ADR organized by CEPANI and Vlaams Pleitgenootschap, which features various contributions on ADR and Arbitration, including on binding third party decisions, GDPR in arbitration, emergency arbitration and the setting aside of arbitral awards under Belgian law. Fabrice Mourlon Beernaert reviews Steve Griess and Charles Markowicz’s book on conflicts between shareholders.
For more details, please see the table of contents here.
We continue to extend our invitation to Belgian arbitration practitioners to reach out with interesting arbitration related cases. We further encourage anyone who is interested in contributing to b-Arbitra or has comments or suggestions to get in touch at b-Arbitra@wolterskluwer.com.
The Editors-in-Chief
Caroline Verbruggen and Maarten Draye