On commission agents, liens and the new lien law

The "Act of July 11, 2013 amending the Civil Code as regards collateral security over movable property and abolishing various provisions in this regard" (in short: The (New) Pledge Act) has already been the subject of many works.

The Act - after many postponements - finally went into effect on Jan. 1, 2018.

In this contribution, we look at the changes made by the (new) Pledge Act to the commission agent's lien that had already existed since May 5, 1872.

In short: nothing.

In other words, if the commission-expeditor still has a particularly effective and familiar means of enforcing payment of his invoices/costs against his principal/customer, provided the commission-expeditor at least still has the right of disposal of the goods.

If the principal/client does not pay voluntarily, the commission agent may attempt to recover its funds through the pledge redemption procedure for the time being. See further.

1. Lien and privilege (Pledge and Commission Act May 5, 1872).

The commission agent enjoys a special privilege under Article 14 of the Pledge and Commission Act of May 5, 1872 .

Article 14 of the Act of May 5, 1872 states:

"Every commission agent, by the mere forwarding, deposit or consignment of merchandise, is privileged in value for all loans, advances or payments made by him as commission agent, whether before the shipment of the merchandise or during the time it is in his possession.".

The commission agent's privilege applies to principal, interest, commission, expenses, loans and in other words to any claim arising from the performance of the commission agreement. It is irrelevant whether these were incurred for the shipment of the goods or while the goods were in his possession, provided, however, that the commission agent's goods still in his possession has.

A contractual extension of a lien can only be opposable to third parties if it corresponds to the economic reality of regular and continuous commercial relations between the parties. The purpose of such extension of the lien should be situated in the context of a broader economic nexus between claim and goods. Indeed, the handling of goods at a port and in the context of regular commercial relations is a continuous matter. The goods taken as security do not serve only for the claim arising from the handling or treatment in respect of these particular goods that have already been returned. In these circumstances, a conventional extended lien is opposable to the principal of the commission agent as well as third parties.

The commission agent shall be deemed to have the goods in his possession to have them when they are at his disposal in his warehouses or ships, at customs or in a public warehouse, or when they have been placed in his possession before their arrival by a bill of lading or by a bill of lading. The privilege expires as soon as the commission agent loses possession of the goods because he surrenders the goods to a third party without coming into possession of a title representing the goods, or when he hands over this title to his principal or third party. This is also the case when he loses possession of the goods or title by fraud.

2. The (new) Pledge Law.

It was envisaged that the (new) Pledge Act would radically amend the pledge, retention of title and lien law. For example, the pledge and retention of title would henceforth be registered in the National Pledge Register (https://pangafin.belgium.be/).

However, the Pledge and Commission Act of May 5, 1872 would not ultimately be amended.

Thus, Article 102 (new) Pledge Law states:

"In Book I of the Code of Commerce, Articles 1 to 10 of Title VI, as amended by the Act of May 5, 1872, are hereby repealed except insofar as necessary for the purposes of Article 11 of the same title."

Specifically, Articles 2 (how possession is determined) and Articles 4 to 10 (pledge redemption procedure, see below) still continue to apply to the "pledge to secure the legal privilege of commission agents (or their lenders."

Since Article 15 of the Pledge and Commission Act of May 5, 1872, was also not repealed, the commission agent's privilege over the final proceeds following a pledge redemption can be considered a special privilege that takes precedence over all other privileges:

"When the merchandise has been sold and delivered on behalf of the principal, the commission agent shall recover the amount of his claim from the proceeds of the sale in priority to the principal's creditors."

This also finds support in Article 58 (new) Pledge Law:

"Art. 58. Superpriority

A lien based on a lien for a claim to preserve the property takes precedence over all lienholders.

Subject to subsection 1, the unpaid seller who has reserved title, the privileged seller and the subcontractor's privilege shall take precedence over the lienholders on such property. "

Or put another way, the same applies to the commission agent as it has since 1872, see below.

3. Pledge silvering.

In the face of non-paying clients / customers, the commission agent has an extremely efficient remedy at his disposal: the lien (possibly) followed by the pledge redemption procedure.

The procedure of pledge redemption is described in Art. 4 of the Law of May 5, 1872 and can be summarized as follows:

1. Dunning of the debtor by bailiff's writ.

The reminder should include all sums, costs, interest, etc. for which the commission agent wishes to obtain payment. If there are ongoing storage charges, it is also best to include them.

The reminder must also contain a draft petition that will be filed with the President of the Enterprise Court, if payment is not made, at least the submission of observations, within two (free) days after sending the reminder. It should be noted that the two free days apply regardless of whether the debtor is in Belgium or abroad.

2. Petition Chairman Enterprise Court.

If the notice is not acted upon, the petition previously communicated - in draft form - shall be filed at the registry of the President of the Enterprise Court.

The order subsequently issued by the President of the Enterprise Court will have to be served by the judicial officer. If no opposition is lodged within 3 days of service of the order, the order will be final and deemed to have been rendered at last instance. Importantly, the period for notification or service of the order is also not adjourned on account of the waiver (see above article 55 of the Judicial Code). It is also important that service on the principal/debtor of the commission agent on whose behalf the pledge is sought within the meaning of art. 8 and who is not domiciled in the area of the Corporate Court or who has not made a choice of domicile there, is made at the registry of the Corporate Court. Or alternatively, in many cases the service of the order on the principal/debtor does not even come to the attention of the principal/debtor.

In its order, the court appoints a bailiff who will take charge of the sale of the goods, and draw up an official contract of sale for this purpose.

3. Opposition to the decision.

The opposition to the order authorizing pledge redemption should be initiated before Enterprise Court.

4. Pledge silvering.

After the decision becomes final, the goods can be sold.

4. Assistance Bannister Lawyers.

Our firm has initiated several pledge redemptions for the benefit of its clients in recent years.

In case you would like more information about the possibilities for your company, and would like to obtain an estimate of chances of recovery and costs, please contact Mr. Christophe Van Mechelen.