Belgium

Risk assessment

Economy affected by sluggish international context

The Belgian economy, with exports accounting for 85% of its GDP and mainly directed towards the nearby markets, is closely linked to the evolution of international trade and the European economic situation. 2012 was, therefore, not a good year. After a dull start in 2013, activity could begin a hesitant recovery from the spring, driven at first by external demand, then by domestic demand. The positive contribution of foreign trade to growth will, however, remain modest and rely more on the weakness of imports than on export recovery. The main markets (Germany, France, the Netherlands, and the United Kingdom) will not be very strong. Moreover, faced with higher unemployment, the stagnation of real incomes (under an agreement by the social partners, only indexation to inflation will be applied) and the poor return on their investments, households are likely to increase their savings at the expense of consumption. Business investment could stagnate. In addition to considerable unused production capacity, profitability fell in 2012. This was accompanied by a slight worsening of payment behaviour, more pronounced in Flanders than in the rest of the country. The motor industry, construction and the hotel trade are weaker than average sectors. The retail trade could join them, as consumption is weak. Investment in construction is not expected to fare any better regardless of whether it concerns housing or public works, now that the local elections are over.

Consolidation of public accounts contingent on political consensus

The new budget squeeze planned for the 2013 budget should reduce the public deficit, which had already passed the 3% barrier in 2012, to 2.1%. The ultimate objective is to achieve equilibrium in 2015, which will make it possible to stabilise and then reduce the public debt (essentially federal) which is at present close to 100% of GDP, but of which half is held by Belgian residents. This debt, which had reached 134% in 1993, fell back to 84% in 2007, before rising again due to the rescue package for the financial institutions and the widening of the deficit. The objective is, however, subject to conditions: no further recapitalising of the financial institutions or recourse to the significant state guarantees given to the financial sector, which amount to 15% of GDP. Finally, the budget has to be passed by the parliament, where the government of Prime Minister, Elio Di Rupo has the support of a coalition made up of six parties - socialists, liberals, Christian democrats, both Flemish and Francophone - with the exception of the biggest Flemish party who won 38% of the votes in the October 2012 local elections, Bart De Wever ‘s N-VA independence party. The challenge will be to maintain, until the next elections in 2014, the cohesion of the coalition formed with difficulty in December 2011, after a year and a half of an outgoing government in charge of current business at the cost of a new agreement on the devolution of additional powers to the federated entities.

Current account balance nearly in equilibrium despite loss of competitiveness

The current account surplus has continued to decline since the beginning of the last decade before turning into a deficit at the peak of the crisis in 2008-2009. Since then, the current account balance has hovered around equilibrium. This evolution corresponds to that of the trade balance. Exports have suffered from their geographic and technological concentration: 60% of the total goes to the European Union (90% to Germany, France, the Netherlands and the United Kingdom). Linked to Belgium’s role as a European point of entry and exit, exports are in large part composed of intermediate products, such as fuel, chemical products, plastics, iron and steel, closely linked to industrial production and subject to strong competition. Added to these are machinery and cars, which have been hard hit, diamonds, and medicines. Exports have also suffered from a loss of competitiveness linked to a faster increase in production costs than those of competitors. Spending abroad by Belgian tourists is more than offset by the sale of services generated by trade and the presence of the head offices of international groups. The balance of transfers is broadly negative due to the large number of immigrant workers and payments to the European Union budget. The revenue surplus is fuelled by the substantial portfolio investments made abroad in the past, with the help of current account surpluses making the country a net external creditor.

Payment incident index

Insolvency trends

MEANS OF PAYMENT AND COLLECTION METHODS

The bill of exchange is a common means of payment in Belgium.

In the event of default, a protest may be drawn up through a bailiff within two days of the due date whereby the bearer can also initiate proceedings against the bill’s endorsers.

The National Bank of Belgium publishes a list of protests that can be consulted by the public at the office of the clerk of the commercial court and in some business and financial newspapers (the Journal des protêts, the Echo).

Such publication is as an effective means of pressuring debtors to settle disputes because of the possibility that they might be refused credit by banks and suppliers.

Cheques are commonly used, but to a lesser extent than bills of exchange.

Issuing uncovered cheques is a criminal offence. The Belgian public prosecutor's office is frequently willing to press criminal charges for claims over 5,000 EUR.

Uncovered cheques (like protested drafts) are equivalent to an acknowledgement of debt and, when needed, can be used to obtain an attachment order.

Although bank transfers are the fastest means of payment (all major Belgian banks use the SWIFT system), they do not offer a foolproof guarantee of payment as the transaction is very much dependent on the buyer's good faith. They should, therefore, be used where background financial information on the buyer is available to the seller.

Out-of-court settlement begins with formal notice sent to the debtor by recorded-delivery letter or served by bailiff, requesting that the debtor pay within 15 days the outstanding principal, plus past-due interest or application of a penalty clause (clause pénale) stipulated in the terms and conditions of sale.

In the absence of a prior contractual agreement, interest on an unpaid invoice is automatically applicable from the day following the due date at a six-monthly rate set by the Ministry of Finance based on the European Central Bank’s refinancing rate plus seven percentage points (the Act on “combating late payment in commercial transactions” in force since 7 August 2002).

Summary procedures resulting in an injunction to pay for claims under 1,860 EUR fall within the sole jurisdiction of a Justice of the peace. They must be supported by a document drawn up by the debtor pointing to the undisputed nature of the claim. But owing to their excessive formalism and the need for a lawyer’s signature, summary proceedings are little used.

Such action must moreover be preceded by an injunction to pay served by bailiff or sent by recorded-delivery letter with acknowledgement of receipt. And the injunction must include the text of the articles of the Code Judiciaire relevant to the injunction procedure.

If a debtor refuses to settle amicably or fails to respond to a formal demand, the creditor can then initiate ordinary proceedings against that debtor and summon him to appear before the court of first instance or, for overdue commercial payments, the competent commercial court.

For undisputed claims, rulings are usually delivered either immediately from the bench (sur les bancs) or within a month of the final hearing.

Proceedings can take longer for disputed claims sometimes up to two years (especially in the event of an appeal). However, under the Belgian code of civil procedure the judge may set a deadline for the submission of arguments and evidence at the request of the parties.

Since 1^st January 2008, the law on the “recoverability of attorney fees” allows the judge to fix in favour of the winning party, a procedural indemnity determined on a progressive scale according to the amount in default.

This is a basic compensation set by Royal decree and which can be reviewed, in certain limit, up or down by the judge, depending on the complexity of the case.

The “Bankruptcies Act” of 8 August 1997 which came into force on 1^st January 1998 (amended by the laws of 4 September 2002, 20 July 2005, and 6 December 2005) recognises retention of title rights in specific cases and circumstances. For instance, an action for recovery is only admissible if initiated before the registered list of admitted debts is drawn up (procès-verbal de vérification des créances).

Another safeguard benefiting creditors is the right granted to sellers of moveable property stipulated under article 20-5 of the 16 December 1851 “mortgage law” (included in the civil code, Book III).

This right concerns all durable goods employed directly in an industrial, commercial, or craft activity and generally considered as “real estate” by incorporation or economic destination. A creditor may act on this right during a five-year period, a debtor’s bankruptcy notwithstanding, provided he has registered certified true copies of invoices with the clerk's office of the commercial court in the debtor’s district of residence, within fifteen days of delivery of the goods.