WSG Article: Getting the Deal Through – Construction 2011 - Belgium

ALTIUS/Tiberghien
September 24, 2010 - Belgium

Getting the Deal Through – Construction 2011 - Belgium
by Lieven Peeters and William Timmermans

Getting the Deal Through – Construction 2011

Questionnaire

1. Joint ventures

Must foreign designers or contractors enter into a joint venture with a local contractor to
design, build and be paid for their work? Does the law require that the local
contractor control the joint venture?

Foreign designers or contractors do not need to enter into a joint venture with a Belgian contractor to design, build and/or be paid for their work or services in Belgium. Should they wish to enter into a joint venture with a Belgian contractor, for instance to benefit from their
experience of the local market, it is not required by Belgian law that the
Belgian contractor controls the joint venture.

Usually, a joint venture is set up as a Temporary Company (“société
momentanée” / ”tijdelijke handelsvennootschap”). Under Article 48 of the Company Code, the Temporary Company does not require specific formalities. This Temporary Company does not have a legal personality, which means that third parties can recover their
debts against the Temporary Company directly from the partner companies to the
joint venture.

2. Foreign pursuit of the local market

If a foreign designer or contractor wanted to set up an operation to pursue the local market (an office, supervisory as well as support staff) what are the key
concerns they should consider before they took such a step?

They should consider several
issues, such as the tax status, the employment regulations (which are quite
onerous – see questions 4 and 5 below), and the social security contributions
they will have to pay, as well as the need for licensing (see question 3 below).

In any case, before deciding
to work on a project in Belgium,
foreign contractors should ensure they are fully informed about the legal,
insurance, tax, employment and administrative issues relating to the project.

3. Licensing procedures

Must foreign designers and contractors be licensed locally to work and, if so, what are the
consequences for working without a licence?

Contractors

For public tenders regarding works contractors must comply
with several conditions, such as technical and financial capacity and
professional integrity. If they can prove that they comply with all these
conditions, they can obtain a license (“agrément”/”erkenning”) on a voluntary basis.

Contractors with
such license do not need to prove fulfilment of these requirements each time they
apply for public tenders.

There is no longer any link between the lack of
registration (“enregistrement”/”registratie”) and the risk that the principal would become jointly liable for tax or social security debts of the contractor, as a result of the judgment of the Commission v. Belgium case (judgment of 9 November 2006, case C-433/04). Further challenges against the requirement of registration of contractors in public procurement matters (case C-74/09) and for a reduced VAT rate (case C-13/10)
are currently pending before the Court of Justice of the EU.

The principal can now easily verify online whether or not the contractor owes any social security or tax payments, in which case he would need to withhold a part of its payments in order to avoid a (capped) joint and several liability for the tax or social
security debts of the contractor.

Contracting with non registered contractor may render the contract ineligible to receive some government
subsidies.

Architects

The title of architects is
protected in Belgium
since the Act of 20 February 1939.

Working as an architect is
subject to two conditions:

Holding a degree in architecture from a recognised
Belgian school or university.

Architects from other
EU or EEA Member States may be authorized if they have a degree, a certificate
or another title listed in the schedule 1b of the Act of 20 February 1939, as
modified by the modifications introduced by the Commission’s communication in
application of Article 21,7 of the Directive 2005/36/EC of the
European Parliament and of the Council of 7 September 2005 on the recognition
of professional qualifications.

Architects from a
country which is not part of EU or EEA can be authorized if there are
reciprocal recognition agreements between Belgium and the other country. They
can also obtain permission to work in Belgium by means of a Royal Decree.

Being a registered Member of the Belgian Architects’
Association.

Registration is btained after two years’ training with an architect with ten years’
experience. Foreign architects can be exempted from this if they can prove they
have more than two years’ experience.

Working as an architect in Belgium without
fulfilling these two requirements is sanctioned by criminal charges and fines.

4. Labour requirements

Are there any aws requiring a minimum amount of local labour to be employed on a particular construction project?

There are no requirements under Belgian law to employ a minimum amount of local workers on a particular construction project. This being said, non-EU workers should obtain a work
permit and a residence permit before being able to work in Belgium, unless they can invoke one of the legal exemptions in the Royal Decree of 9 June 1999. Belgian work
permits can be quite difficult to obtain because the system is designed to
protect Belgian workers in the Belgian labour market.

5. Local labour law

If a contractor directly hires local labour (at any level) for a project, are there any legal
obligations towards the employees that cannot be terminated upon completion of
the employment?

To answer this question, two distinctions must be made under Belgian law: (i) regarding the employer’s obligations during the employment contract, and (ii) termination rules of an
employment contract:

(i) During the employment : If the employer respects all of its obligations
under Belgian law (e.g. working hours, minimum wages, holidays and holiday pay,
etc.) those employer’s obligations will stop at the end of the employment
relationship. If, however, the employer fails to respect them, it will face
claims from its former employees for compensation and salary arrears after having
terminated the employment contracts;

(ii) At termination : For contracts for an indefinite period, the
mandatory notice periods are generally longer than in other countries,
especially if the employee has many years of service or a substantial salary. To
avoid this, it is advisable to conclude, in writing, a fixed-term employment
contract or an employment contract for a specific work on site. These contracts
will normally end when the project ends or the work is completed. At
termination date, no notice is needed, nor compensation paid. However, the
disadvantage is that, if the employer wants to terminate the relationship
before the term, it should pay a compensation corresponding to the employee’s
salary up to the agreed termination date (limited to twice the amount the
employer would have to pay in case of termination of a contract for an
indefinite period).

6. Health and safety regulation

Are there any specific health and safety rules regulating the construction industry?

Building sites should comply
with the requirements of the Belgian Health & Safety At Work Act dated 4
August 1996 and of the Royal Decree of 25 January 2001 on Mobile or Temporary Sites.

This legislation requires a safety co-ordinator to be appointed for each building site of a certain size. The safety co-ordinator should draw up a health and safety plan prior to the
start of the works. During the works, it should submit regular reports on the
health and safety aspects and it should ensure that health and safety rules are
taken to protect the employees, the sub-contractors and any third party present
on the site. When the site’s works are completed, it should deposit a
“post-intervention file” , which should contain a set of plans and information
on the structural elements of the building and the specifications of the
products and materials used.

7. Close of operations

If a foreign contractor that has been legally operating decides to close its operations,
what are the legal obstacles (if any) to closing up and leaving? (At
the end of a project will there be termination payments assessed against a
foreign contractor?)

Assuming that “closing its operations” implies not further employing the people concerned, there are, as such, no legal obstacles for a foreign contractor to close down its operation,
but the following issues must be taken into consideration:

· the contractual obligations (e.g. payment of
sub-contractors, taxes, etc.);

· the employer’s obligations in case of closure,
combined with a collective dismissal: Belgian law requires strict information
and consultation procedures and payment of specific compensation, in case the
legal conditions for the application of the legislation are fulfilled; and

·
the specific Belgian rules for the termination of
employment contracts, including those in the Employment Contracts Act of 3 July
1978 and the ones which may also result from any Collective Labour Agreements
concluded at sector level.

Note that, if the contractor
is a Belgian company, the winding-up formalities can range from a few months up
to a few years and will be under control of the Commercial Court.

8.
Standard forms of construction contracts

What
standard-contract forms are used for construction and design?

No standard forms are in
use.

When the owner is a private
person or company, the parties to the design or construction contract are
completely free to draft it to suit their requirements, subject to compliance
with statutory rules that are of public order or mandatory.

For public entities,
there is normally a public tender process, governed by the public procurement
rules. The general terms and conditions for contracts with public authorities are
set out in the Annex to the Royal Decree dated 26 September 1996 (the “GTC”).
Contracting authorities are allowed to derogate from the GTC in their
specifications under specific conditions.

9.
Price escalations

In typical
construction contracts, who assumes the risk of material price escalation and
shortages?

A contract can be agreed at
a fixed price. In this case, pursuant to Article 1793 of the Civil Code, the
contractor cannot change the price and thus bears the risk of price increases.

Of course, the parties can
also decide to include a price review formula in their contract. Restrictions for these formulas find their
basis in the 1976 Economic Recovery Act: (i) revisions must be limited to 80%
of the agreed price; (ii) they can only be linked to the relevant indices for
the work and/or services performed under the agreement (e.g. index of wages or
raw-material costs); and (iii) the share
of the indices in the formula should correspond to their actual share in the
cost of the work or services.

Any price review formula
that does not comply with these rules is absolutely null and will not be upheld
by the Belgian courts.

For all public works
contracts, the tender documents must include a price revision formula
compatible with the 1976 Economic Recovery Act. This formula must refer to the
evolution of wages and social contributions and may also refer to the evolution
of other costs, such as raw-materials. For public supplies and public services
contracts, public authorities may (but are not obliged to) include a price
revision formula in their tender documents (See: Article 13 of the GTC).

10. Competition

Do local laws
provide any advantage to domestic contractors in competition with foreign
contractors?

Belgian law makes a
distinction between those from Belgium
or other EU or EEA
Member States
and those from outside the EU or EEA.

In addition, as a Member State
of the European Union, Belgium
is subject to European Union law. The principles of freedom of establishment
(Article 49 of the Treaty of the Functioning of the EU) and free movement of
services (Article 56 of the Treaty of the Functioning of the EU; Directive
2006/123/EC on services in the internal market) are central to the EU internal
market. Member States may only restrict access to their domestic market to
contractors from other Member States where specific circumstances are justified
by over-riding public-interest reasons, for instance on grounds of public policy,
public security or public health; and where they are proportionate. The EU law
on public procurement does also apply.

11. PPP and PFI

Is there a formal
statutory and regulatory framework for PPP (public-private
partnership) and PFI (private finance
initiative) contracts?

There is no general
regulatory framework for PPP contracts under Belgian law.

These contracts are covered
by the public procurement rules for works, services and supplies. These rules
are set out in the Public Procurement Act of 24 December 1993 (and its
implementing decrees), which will be replaced by the Act of 15 June 2006.

Also, PPP contracts are
subject to the general terms and conditions for contracts with public
authorities, as set out in Annex 1 to the Royal Decree dated 26 September 1996
(the “GTC”). The GTC apply to (almost) all contracts for works, supplies and
services and are not adapted to the particular structure and characteristics of
PPP contracts. It is important to note that all derogations from the GTC have
to be listed in the tender documents and that some derogations need an explicit
motivation in the tender documents. Extending the delay of payment of the
public authorities is not allowed.

Currently, most PPPs are set
up by the Regions, by some cities and by other large public authorities.

In the Flemish Region, there
is a particular Regional statute on PPPs of 18 July 2003. This statute mainly
deals with public domain issues but does not provide for a general legal
framework for PPP contracts.

The Flemish Region has also
set up a knowledge centre for PPPs. This centre has edited a DBFM manual,
containing clauses for a DBFM contract that can be used under Belgian law. This
manual is non-binding, but is an interesting tool for authorities, contractors
and investors.

12. Payment of fees

How may a
contractor secure the right to payment of its costs and fees from an owner? May
the contractor place liens on the property?

According to Article 27.5 of
the Belgian Mortgage Act of 16 December 1851, any claims by building
contractors and architects are given preference over claims of other creditors against
the owner of a property, limited to the amount of the increase in value they
have brought to the property. However, making such a claim requires 2 valuation
reports (before and after the work) by a court-appointed expert, and so it is
never used in practice.

The contractor’s agreement
can provide that (i) payments are made as work progresses, and (ii) if any
payment is not made on time, the contractor is entitled to stop work until payment.
The contractor could also ask the owner for a bank guarantee, or to agree to a
lien on the property to the benefit of the contractor.

However, in general, it is
more likely that the owner will ask the contractor to provide bank guarantees
against the risk of insolvency (as building contractors frequently go
bankrupt). Such bank guarantees usually cover 5% up to 10 % of the value of the
contract and they are usually released for 50 % at the provisional acceptance
of the building and for 50% at the final acceptance of the building by the
owner.

13. Tort claims and
indemnity

Do local laws
permit a general contractor to be indemnified against all acts, errors and
omissions arising from the work of a subcontractor, even when the general
contractor is negligent?

The general contractor can
ask for an indemnity against all acts, errors and omissions arising from the
work of sub-contractors. The burden of
proof of the sub-contractor’s fault lies on the contractor.

Note that any negligence by
the contractor that can be proven will be taken into consideration if it caused
or influenced the sub-contractor’s failure. If it appears that the fault of the
sub-contractor would not have occurred, or would have been less important,
without the contractor’s negligence, this will diminish or maybe even exclude any
compensation award based on the fault of the sub-contractor.

It is to be noted that under
any circumstance, the general contractor will remain liable to the principal
for the works of the subcontractors (Court of cassation, 27 February 2003). The
principal on the other hand does not dispose of any recourse against the
subcontractors except, under specific conditions, for tort claims (Court of
cassation, 7 December 1973).

14. Liability to
third parties

Where a
contractor constructs a building that will be sold or leased to a third party,
does the contractor bear any potential responsibility to the third party? May
the third party pursue a claim against the contractor despite the lack of
contractual privity.

Articles 1792 and 2270 of
the Belgian Civil Code impose on the contractors and architects a ten-year
liability for severe construction defects in the building. This warranty is a
contractual liability, but the subsequent purchasers of the property can also
pursue claims against the contractor / architect based on it (articles 1122,
1135 and 1615 of the Belgian Civil Code). In this case, the purchasers are
exercising the prerogatives of the seller, and not a personal right.

To the contrary, (other) third
parties to the construction contract are not entitled to launch a liability
action based on articles 1792 and 2270 of the Belgian Civil Code. In case of
defects in a building, the relevant actions are the general extra-contractual
liability (articles 1382-1383 of the Belgian Civil Code) or the warranty from
the lessor towards a tenant pursuing a claim for defects to the leased building
(article 1721 of the Belgian Civil Code).

15. Insurance

To what extent
may a contractor obtain insurance to cover its contractual risks? (Please describe the eventualities that may
be insured against.)

The most commonly-used
insurance policies for the construction sector in Belgium are:

·
Construction All Risks (“CAR”) insurance (“Alle Bouwplaats-Risico’s – A.B.R.” / “Tous Risques Chantiers – T.R.C.”): it
insures against, amongst others, damages to the plant and machinery, damages
caused by force majeure (“Act of
God”), theft and accidents on the site. Other risks can be specified in the
insurance policy, such as the damages to or by third parties (generally
neighbours). Note that the general insurance exclusions (e.g. war, revolution,
strike and lock-out, etc.) apply as well as specific exclusions listed in each
policy.

For
public works sites, the specifications usually require the contractor to take
out a CAR policy. For private sites, the CAR policy is generally taken out by
the property’s owner or the developer, but the parties can also decide that it
will be taken out by the contractor.

·
Ten-Year Liability insurance: it insures
against the liability of the architects, engineers and consultants,
contractors, sub-contractors and developers under the ten-year warranty (i.e.
liability for construction or structural defects).

Architects are
compelled by their professional rules to be covered by such a policy. For the
other intervening parties, the policy is usually taken out by the property’s
owner, the developer or the contractor.

Damage caused by
fire or natural disasters is usually excluded.

·
Professional Liability insurance: such policy
covers named individuals against claims for professional liability from a
contracting or a third party.

Architects are
compelled by their professional rules to be covered by such insurance. It usually
excludes damage caused by criminal activity by the insured or fines for
contractual delays.

16. Insolvency and
bankruptcy

Where major
projects have been interrupted or cancelled, do the local laws provide any
protection for unpaid contractors who have performed work?

Belgian law provides no
particular protection for unpaid contractors (except as for the preference
discussed in question 12 above). Therefore, unless they have a guarantee, they
will be paid pro rata from the proceeds, if any, of the sale of the debtor’s
property, which are split between the creditors in proportion to the amount
owed by the debtor.

Note that the bankruptcy of the
principal does not automatically terminate the construction contract, unless
the contract so specifies. If nothing is specified, the Receiver or Liquidator
may choose to terminate or continue the contract (Article 46 of the Bankruptcy
Act of 8 August 1997). The contractor can force, via a notice, the receiver or
liquidator to take a decision in that respect, in the absence of which the
contract is considered terminated.

Receivers or liquidators
usually decide to continue a contract if this could generate a profit for the
estate of the bankrupt entity that could be used to pay off creditors.

Prior to the bankruptcy
proceedings, a party can request a judiciary reorganisation (Act of 31 January
2009). The purpose of this act is to give to a debtor a suspension of its
payments so as to try to (i) reach an amicable agreement with all of its
creditors, (ii) reach a collective agreement with a majority of the concerned
creditors on the reorganisation plan, or (iii) transfer the enterprise under
judiciary control.

The judiciary reorganisation
does not automatically terminate the contract, even if provided for by the
contract (Article 35 of the Act of 31 January 2009). Also the presence of
contractual defaults of the debtor which were made prior to the granting of the
judiciary reorganisation are not a ground for termination of the contract,
insofar as the debtor has repaired the shortcomings within 15 days of the
notice of default issued by the creditor.
Next to that a debtor in judiciary reorganisation can stop executing the
contract provided that (i) it informs the creditor and, (ii) the non-execution
is necessary to propose a reorganisation plan to all the creditors or to make
the transfer of the enterprise under judiciary control possible.

17. Contracting with
government entities

Can a government
agency assert sovereign immunity as a defence to a contractor’s claim for
payment?

Article 1412bis of the Belgian
Judicial Code (“BJC”) sets out the rules as to the limited immunity from
execution for public legal entities.

This immunity from execution
is subject to the following principles:

-
goods owned by public legal entities can be seized
if these public legal entities have issued a statement to that effect,
mentioning which goods can be subject to seizure; or

-
if this statement does not exist or if the sale of
the goods mentioned in the statement is not sufficient to pay off creditors,
the creditors can seize goods that are ‘obviously not useful’ to the
performance of the public legal entities’ mission or to the continuity of the
public service.

As to the first principle,
public legal entities are free to prepare and to modify a statement of their
goods that can be seized.

As to the second principle,
the creditor has submit to the court’s consideration that a good is ‘obviously
not useful’ to the performance of the public legal entities’ mission or to the
continuity of public service. Case law shows that courts rely on such criteria
as the allocation (current or future) of the goods, the fact that the seizure
may have an impact on the continuity of public service, and whether the good is
directly useful to the performance of the mission or to the continuity
of public service.

For example, it is usually
considered that bank accounts of a public legal entity cannot be considered as
‘obviously not useful’ to the performance of its mission or to the continuity
of public service, whereas seizure of paintings or of a closed down airfield
have been allowed where those goods did not have any specific allocation.

18. Bribery

If a contractor
has illegally obtained the award of a contract, for example by bribery, will
the contract be enforceable?

Belgian law distinguishes
between private and public corruption.

Private corruption (Article 504bis of the Belgian Criminal Code (“BCC”) : A person is guilty of (private)
corruption if it proposes (active corruption) to a person who is director,
manager, agent or employee of a legal entity or - for a person who is director,
manager, agent or employee of a legal entity – if it solicits or accepts
(passive corruption) “an offer, a promise
or an advantage of whatever nature, in order to take or not to take an action
of its office or which is made easier by his/her office, without the knowledge
or authorisation of, as the case may be, the Board of Directors or the General
Meeting, of the principal or the employer”.

Private corruption is
generally sanctioned by imprisonment and/or a criminal fine.

Public corruption (Articles 246 to
252 BCC) : So-called “public corruption” covers several types of behaviour by
certain categories of persons, including, amongst others: public officers,
judges, persons exercising a public office in a foreign state or within an
international public law organisation. A
similar distinction can be made between active (public) corruption and passive
(public) corruption.

In addition to imprisonment
and/or criminal fines, the Criminal Code also allows the court to prohibit
those found guilty of public corruption from exercising public office for
between five to ten years.

19. Arbitration

What is the
prevailing attitude towards arbitration of construction disputes? Is it preferred over litigation in the local
courts?

Arbitration clauses are
commonly included in construction contracts, moreover if one of the parties is
non-Belgian.

However, despite the
significant delays involved (2-3 years before obtaining a judgment is common)
trials in court remain the most common way of resolving disputes if attempts to
find an amicable out-of-court settlement fail.

20. Foreign
corruption

Does local legislation prohibit corrupt practices carried out abroad by
persons domiciled in your jurisdiction?

As stated in our answer to
Question 18, corruption by Belgian citizens of public officials in a foreign
state is a criminal offence under Belgian law and is sanctioned in the same way
as corruption in Belgium.

Note that Belgium is part of Convention of Paris on
Combating Bribery of Foreign Public Officials in International Business
Transactions dated 17 December 1997, the Criminal Law Convention on Corruption (Strasbourg
- 27 January 1999) and the UN Convention against Corruption (New York - 31 October 2003).

21. Force majeure and
acts of God

Under local law
are contractors excused from performing contractual obligations owing to events
beyond their control?

Contractors may be excused
from performing their contractual obligations in case of force majeure, as set out in Articles 1147 and 1148 of the Civil
Code.

Two types of force majeure have been identified in
Belgian case law:

·
events without any identifiable human cause (e.g.
earthquake or epidemic);

·
events caused by acts of third parties beyond the
debtor’s control (e.g. strike) or change in government policy (sometimes known
as “fait du prince”).

Two conditions need to be
fulfilled to exempt the contractor from full liability: the event must make it
impossible for the contractor to meet its contractual obligations and the event
cannot be caused by or linked to a fault by the contractor.

22. Dispute
resolution mechanisms

What dispute
resolution procedures are successfully used to solve construction disputes?

Mediation is increasingly
used as time is usually of the essence and the parties wish to maintain good
business relations. However, mediation is not yet possible for public tender contracts.

23. Courts and
tribunals

Are there any
specialised tribunals (official or
industry sponsored) that are dedicated to resolving construction disputes?

Construction disputes may be
introduced before the civil or commercial courts, depending on the status of
the parties. There are no specific courts, but some sections of the civil
courts have become de facto
specialists.

Disputes arising from public
works contracts may also be heard by the administrative courts.

24. Dispute review
boards

Are dispute
review boards (DRBs) used? Are their
decisions treated as mandatory, advisory, final or interim?

Dispute review boards are
not commonly used for domestic construction contracts, but parties are free to
specify their use in contracts, for instance for international contracts.

25. Mediation

Has the practice
of voluntary participation in professionally organised mediation gained
acceptance and, if so, how prevalent is the practice and where are the
mediators coming from?

A mediation procedure was
introduced to the BJC by the Mediation Act of 21 February 2005 to settle civil,
commercial, social and family disputes. It can either be voluntary (i.e.
out-of-court) or imposed by a judge during a judicial procedure.

The mediators in
construction cases are usually professionals (lawyers, architects or other
experts). Where mediation is imposed by a judge, a mediator registered with the
Federal Commission of Mediation should be used (not so in case of voluntary
mediation). The advantage of using a registered mediator is that its decision
can be upheld by the judge, as a judicial decision.

26. Confidentiality
in mediation

Are statements
made in mediation confidential (meaning,
that they cannot be repeated in any formal proceedings such as court
proceedings, arbitration, etc)?

Yes. This is covered by
Article 1728 of the BJC. If confidentiality is not respected, the person who
divulges information will be fined and the confidential material concerned will
be excluded from the admitted evidence. A mediator is also held criminally
liable if it divulges confidential material.

27. Arbitral award

Is there any
basis upon which an arbitral award issued by a foreign or international
tribunal (such as the ICC, an ad hoc procedure under the UNCITRAL rules or a
foreign domestic tribunal) may be rejected by your local courts?

Belgium ratified the
1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards in an Act dated 5 June 1975. Belgium chose to impose a condition
of reciprocity and declared that it will only apply the Convention to the
recognition and enforcement of awards made in the territory of other states
that have ratified the Convention. For arbitral awards made in other
non-ratifying countries or with whom Belgium does not have a bilateral
agreement, Articles 1719-1723 of the BJC apply. Grounds to refuse enforcing an
award are the following: (i) if the arbitral award is still open to appeal (and
the arbitrators did not order provisional enforcement); (ii) if the award
or its execution is contrary to the public policy; (iii) if the dispute could
not be settled through arbitration; or (iv) if there are grounds for the
annulment of the award under Article 1704 of the BJC.

The “more favourable-right
provision” of Article VII of the Convention does apply in Belgium.

28. Governing law and
arbitration provider

If a foreign
contractor wanted to pursue work and insisted by contract upon international
arbitration as the dispute resolution mechanism, which of the customary
international arbitration providers (eg, the ICC) is preferred and why? (Is
there any preference or resistance to hearings being held in a particular
jurisdiction? Is there any preference or requirement as to which national law
would apply to questions pertaining to the dispute?)

When the Belgian arbitration
provider (CEPANI, see http://www.cepina.be/EN/) is not
chosen, parties generally choose ICC.

Belgian parties will strongly
prefer to apply Belgian law. If they choose another applicable law, they will
prefer similar law systems (e.g. French or Dutch law). In any case, the final
choice will always be the result of negotiations between the contracting
parties and often ends in the choice of a “party-neutral” choice of law.

As to the place of the
hearings, when the arbitration provider is CEPANI, hearings will generally be
held in Brussels.
Belgian parties will accept ICC hearings held anywhere in the EU, mostly in the
ICC headquarters in Paris or alternatively in Geneva.

29. International
environmental law

Is your
jurisdiction party to the Stockholm Declaration of 1972 (the Declaration of
the United Nations Conference on the Human Environment)? What are the local
laws that provide for preservation of the environment and wildlife while
advancing infrastructure and building projects? (Please base your answer on
this Declaration if your jurisdiction is a signatory.)

Belgium is a party to
the Stockholm Declaration. The three Regions (the Flemish, Walloon and Brussels
Capital Region) have jurisdiction on environmental matters, except for product
standards, the protection of the maritime environment, the transit of waste and
radiation protection which remained under federal jurisdiction. All three
Regions have adopted their own legislation to protect, maintain and manage the
environment.

Most of EU environmental law
has to be transposed by the Regions and only some parts by the Belgian State. Although EU environmental law tends
to harmonisation, there are relevant differences in environmental law between
the three Regions, particularly with respect to soil pollution.

As for infrastructure and
building projects, principals, developers and contractors must comply with the
appropriate regional legislation on zoning, environmental permits,
environmental impact assessments, Bird and Habitat Directives, etc.

30. Other
international legal considerations

Are there any
other important legal issues that may present obstacles to a foreign contractor
attempting to do business in your jurisdiction?

None other than set forth
herein. In any case, we would always advise foreign contractors to seek
specific local legal advice prior to starting each project, in order to be sure
that all the applicable rules and regulations will be complied with.

31. International
treaties

Is your
jurisdiction a signatory to any investment agreements for the protection of
investments of a foreign entity in construction and infrastructure projects? If
so, how does your model agreement define ‛investment’?

Belgium is part of the
Belgo-Luxembourg Economic Union (BLEU), which has signed bilateral investment
agreements with 77 countries in order to promote and protect investments. These
agreements give investors a guarantee of fair and equitable treatment of their
investments, they specify “most favoured
nations” to prevent discrimination, they offer compensation for deprivation
of property, they guarantee the free transfer of income and they create a legal
framework for resolving investment disputes and for using international
arbitration systems for investors. Finally, they include various social and
environmental provisions.

The definition of
“investment” used is any kind of asset owned or controlled, directly or
indirectly, by any investor of one Contracting Party in the territory of the
other Contracting Party and includes, but is not limited to:

a) movable and immovable
property and other property rights such as mortgages, privileges, pledges,
usufruct and similar rights;

b) shares, stocks, bonds and
other forms of equity in the company;

c) claims and rights to any
performance having an economic value, including any loan made to create
economic value;

d) intellectual property
rights, including, but not limited to, copyright and related rights, industrial
property rights, trademarks, patents, industrial designs and technical
processes, titles protecting plant varieties, know-how, trade secrets, trade
names and goodwill;

e) the rights to any
economic and commercial activity, conferred by law or contract, including
concessions to search for, cultivate, extract or exploit natural resources.

Any changes in the form in
which assets are invested or reinvested shall not affect their quality of
investment.

32. Tax treaties

Has your
jurisdiction entered into double taxation treaties pursuant to which a
contractor is prevented from being taxed in various jurisdictions?

Yes, Belgium has
concluded double tax treaties based on the OECD model convention with most
jurisdictions. A list can be found at http://www.fisconet.fgov.be.

33. Currency controls

Are there
currency controls that make it difficult or impossible to change operating
funds or profits from one currency to another?

There are no currency controls in Belgium (See also under question 31
above).

34. Removal of
profits and investment

Are there any
controls or laws that restrict removal of profits and investments from your
jurisdiction?

Belgium adheres to the
applicable principles and rules of EU-law, including the freedom of capital
movement. This means that there are no important controls or laws on profit
repatriation, though formal requirements may apply.

35. Contractual
matrix of international projects

What is the
typical contractual matrix for a major project in your jurisdiction in terms of
the contractual relationships among the various construction project
participants? (For example, do owners contract directly with contractors or
do they contract through construction managers to trade contractors?)

Several contractual
structures are possible.

Under Belgian law, no person can be both an
architect and a building contractor. This follows from the 1939 Architect’s Act. Any
contracts entered into in breach of this rule are null and void. An architect
can thus not be a sub-contractor of a building contractor. This is an important
element in structuring a Belgian building project.

A first possibility is that the
principal allocates each part
of the project (e.g. design, studies, foundations, roof, sanitary facilities,
etc.) to different contractors.

A second possibility is that the principal enters into
a contract with (i) a general contractor (who will appoint and be responsible
for the sub-contractors), and (ii) an architect who will design the building
and control the works.

A third possibility for the principal is to enter into
a development agreement. The developer will then contract with building
contractors (or with a general contractor) and with an architect. Such development
contracts may take the form of turn-key contracts, DBFM contracts, etc. Because
of the 1939 Architect’s Act, the developer cannot be the actual building
contractor.

* *

Update and trends

Are there any emerging trends or hot topics in
construction regulation in your jurisdiction?

As of 1 January 2011, VAT will be due on the transfer
of land insofar it is being transferred at the same time by the same seller
with a new construction. Until now, a land transfer was subject to registration
duties (and not subject to VAT). The VAT-administration is currently preparing
a “Circulaire” (interpretative note) with respect to the modalities of this
VAT-application.

On 28 June 2010, the law modifying the articles of the
Belgian civil code in relation to co-ownership in order to modernise the
operation thereof and to make the management of co-ownerships more transparent
was published in the Belgian State Gazette.

AUTHOR(S): Lieven Peeters and William
Timmermans, Partners of the Real Estate & Regulatory Department

AUTHOR EMAIL(S): [email protected]
and [email protected]

FIRM NAME: ALTIUS

FIRM ADDRESS: Havenlaan 86 C B414, BE-1000 Brussels, Belgium

TELEPHONE NUMBER: +32 (0)2 426 14 14

FAX NUMBER: +32 (0)2 426 20 30

CONTACT AT THE FIRM: Lieven Peeters

FIRM CONTACT EMAIL: [email protected]

WEBSITE ADDRESS: www.altius.com

Footnotes: