Disgorgement of Profits in Belgian Private Law
© Springer International Publishing Switzerland 2015Ewoud Hondius and André Janssen (eds.)Disgorgement of ProfitsIus Comparatum – Global Studies in Comparative Law810.1007/978-3-319-18759-4_5
5. Disgorgement of Profits in Belgian Private Law
Ghent University Law School, Universiteitstraat 4, BE-9000 Ghent, Belgium
The traditional rendition of Belgian law does not list disgorgement as a remedy. In reality, however, disgorgement is ordered in certain circumstances, but it is generally not recognized as such. For example, case law on personality rights and intellectual property rights contains examples where courts, under the banner of loss compensation, in fact set damages at a level higher than the actual losses to force the wrongdoer to hand over his profits. Also, non-compliance penalties are set at a level to provide an incentive to obey a court order, requiring the amount to be equal to the profits that can be made by ignoring the order. On the other hand, some instances of primary proprietary rights to profits can alternatively be understood as examples of disgorgement as a remedy for infringements of rights. Examples are the right of an owner to the fruits a male fide possessor realizes from his property and the right of the solvens to the income the bad faith accipiens has earned from an undue payment. In the view of the national reporter, Belgian private law apparently includes a (hidden) general principle that gives the holder of a subjective right a claim for disgorgement of profits realized by another person who in bad faith infringed the exclusive authority of the rightholder. This general principle has not (yet) been explicitly recognized by the courts, but it helps to understand what courts are actually doing in cases that cannot be explained under standard rules of civil liability.
KeywordsAgentBad faithCivil liabilityCompensationCompliance penaltyConfiscationDamagesDuty to accountGood faithDisgorgementFraudFruitsInfringement of rightIntellectual property rightLossMoral damagesPersonality rightProfitProprietary claimUndue paymentUnjust enrichment
Professor of Law, Ghent University Law School (Center for the Law of Obligations); Licentiate in Law (Ghent University, 1983), Licentiate in Economics (Ghent University, 1985), LL.M. (Yale Law School, 1986), PhD in Law (Ghent University, 2009).
While loss compensation is considered to be a “horizontal system” called civil liability, based on general principles applicable to all legal relations independently of their legal qualification,1 the standard narrative of Belgian private law does not contain a similar chapter on disgorgement of profits, providing an overview of the conditions under which this remedy is available.2 However, if one searches Belgian legal reality for gain-based remedies, they can be discovered here and there, even though they tend to be camouflaged under the (misleading) banner of compensation (civil liability) or as a material rule of law giving the claimant a primary right to the profits, and hence not presented as a remedy (proprietary claims).
No Disgorgement in Theory
Belgian civil liability is based on three constitutive elements: (a) a loss, (b) a fact recognized as a basis for liability – such as negligence or breach of statutory or regulatory duty3 for the fault-based liability of Article 1382 of the Belgian Civil Code (“CC”) – and (c) causation, showing that the loss was caused by the fact that serves as the basis for the liability. A loss is a negatively valued difference between the actual situation the harmed party is in and the hypothetical position it would have been in if the fact would not have occurred.4 Establishing the existence of a loss is a necessary condition: without a loss, no claim in civil liability arises.5
Civil liability results in an obligation to “undo” the loss.6 The injured party is restored into the situation it would have been in if the event would not have occurred.7
In principle, the harmed party has a right to specific restoration,8 but it is also obliged to accept such restoration if it is offered.9 In case of reputational harm, for instance, the imposed remedy often takes the form of apologies or a retraction of the wrongful insult or the unwarranted accusation, or the publication of the court’s decision.10
In practice, however, civil liability almost always results in damages. Still, the Belgian standard theory of liability considers damages to be a subsidiary remedy, only available if specific restoration is not possible in fact or would place an extremely unreasonable burden on the person held liable, so that by claiming this remedy, the victim would abuse its right to restoration.11 In this view, damages are functionally a substitute for specific restoration and thus must be “equivalent” to restoration, usually referred to as “integral compensation” (restitutio in integrum). The damages compensate the loss and nothing but the loss.12
In setting damages, courts are not supposed to take into account other elements such as the seriousness of the wrong, whether a party is insured, or the fact that the tortfeasor obtained a gain.13 Belgian law does not know punitive damages.14 The idea is that civil liability is not supposed to punish the wrongdoer.15 Integral compensation means that the loss is not only the minimum but also the maximum a judge can grant.16 So in determining the amount of damages, the court has to deduct the profits the injured party has gained from the loss he suffered.17 The idea is that civil liability is not supposed to enrich the injured party.18 The combination of these principles seems to leave no room for any gain-based damages.
There is one rule in Belgian private law – which itself is not an element of liability law as such, as it has a much more general application – that when applied in a liability dispute causes the rules of liability law to result in a disgorgement.19 Under liability law, if a loss is caused both by a tort committed by a third person and a wrong committed by the victim itself, the burden of the loss is split among them: in such a case, third party liability is limited to part of the loss, which is called “divided liability”.20 However, this result is considered inacceptable when the third party committed an intentional wrong taking advantage of the negligence of his victim. In such a case,21 the highest court, specifically invoking the general principle fraus omnia corrumpit, ruled that a person that has committed an intentional wrong is precluded from invoking the negligence of the injured party in order to have the damages he owes reduced: one should not be able to profit from one’s fraud or dishonesty with the aim of hurting another or gaining a profit in an illegitimate manner.22
No Specific Rules for Violations of Competition Law
Belgian law does not contain specific rules with respect to the private enforcement of competition law.23 Therefore, questions relating to the annulment of agreements between companies or decisions of associations of companies that restrict competition, injunctive relief in the form of a cease and desist order against restrictive practices or abuses of a dominant position, or private pecuniary remedies in cases of violations of competition rules are to be answered on the basis of the general principles of private law.24 As Belgian law considers any violation of a statutory or regulatory behavioral rule to constitute a wrong in the sense of Article 1382 CC,25 the claimant only has to prove the violation of competition law and the fact that he has suffered a loss as a consequence of this violation.26 As mentioned, the remedy under these general rules is purely compensatory in nature.27
The Belgian general rules28 allow for courts to follow the guidelines that were issued in the Oxera Study29 as well as those included in the Practical Guide the European Commission has published.30 In particular, Belgian civil liability allows the so-called passing on defense, reducing the damages owed to the injured party if that party has been able to pass the higher price it paid to its supplier on to its own customers. The principle of integral damages requires the court to take into account not only the loss but also any gains the injured party may have realized because of the loss occurring event,31 and in establishing the actual loss, the court has to take into account all developments relating to the loss, even if they took place after the loss occurrence.32
Almost no actual court decisions have been reported.33 Based on general principles, however, I see no basis under Belgian law for awarding a party injured by an anti-competitive practice anything more than full compensatory damages. I also have not observed any indication that Belgian courts in such cases would be prepared to impose any remedy which in effect would result in a disgorgement of profits.34
Hidden Disgorgement Possible in Practice (but Rare)
Deciding on the extent of the loss is a question of fact,35 to be answered by the trial court. The Belgian highest court for civil disputes (Cour de Cassation – Hof van Cassatie) has no jurisdiction to establish facts or to review the factual findings of lower courts: it only can reverse and remand judgments of lower courts that contain procedural errors or errors on questions of law.36 So while the highest court will reverse a judgment if it awards higher damages than the loss it established,37 it cannot intervene if a lower court were to award damages equal to the loss it establishes, but in reality has valued this factual loss at an inflated amount.
In principle, the courts have to establish the loss as it occurred (in concreto). However, if the pecuniary equivalent of this loss cannot be determined, the court is allowed to estimate the damages ex aequo et bono and award a lump sum.38 This creates a margin within which a trial court can in reality set damages at a higher level than the actual loss in order to punish the wrongdoer39 or to force him to in effect disgorge the whole or part of his illegitimately obtained gains, without presenting it as such.
This is most clearly possible in cases awarding moral damages, compensation for losses that do not consist of a reduction of the pecuniary situation of the victim.40 Under Belgian civil liability, moral losses are fully compensated.41 The highest court has ruled that moral damages only serve to compensate for pain or any other moral suffering, and in particular cannot be used to punish the wrongdoer.42 However, courts can only estimate moral damages ex aequo et bono.43 In doing so, they can set the damages at a higher level than the actual loss, by holding the losses to be higher than they are in reality. Such a decision is a finding of fact, which is as such “cassation proof”.
Even though most moral damages awarded by Belgian courts can be characterized as relatively low, one cannot escape the impression that sometimes courts set the amount not merely based on the suffering by the victim, but also on the seriousness of the wrong.44 Moral damages aim to compensate for suffering and pain, and it can easily be reconciled with the compensatory nature of civil liability to justify higher damages by pointing out that the intensity of suffering is in fact influenced by the seriousness of the wrong.45 Hence, courts can and sometimes do take the type of wrong and the intentions of the wrongdoer into account when setting moral damages.46 Most cases involving amounts of damages more probably linked to the profits made by the wrongdoer, involve the infringement of personality rights, and they will be dealt with infra.47
Non-Compliance Penalties Can in Fact Disgorge Profits
Some Belgian scholars object to supercompensatory damages because in their view such a remedy would create an “unjust” enrichment of the injured party.48 Framing it that way, the descriptively correct statement that civil liability does not give an injured party a right to more than compensation, is turned into a broader normative principle that would exclude an injured party from having any right to anything different or more than compensation on any another basis. By generalizing such a principle outside the realm of civil liability law, the appearance is created that private law in general would never allow an injured party to obtain a “windfall profit” from an occurrence.
This, however, is descriptively not correct, as courts for instance can and do impose a non-compliance penalty, to be paid when the court’s order is not complied with.49 Such a penalty has to be paid to the claimant,50 and in no way reduces that person’s right to full compensation of losses suffered.51
Although such civil penalty is not possible for orders for the payment of a sum of money,52 and therefore liability decisions seldom include such penalties,53 one can find judgments based on liability including a non-compliance penalty if they award specific restoration. Most such cases involve orders of a person that has infringed a personality right of the victim to refrain from further infringements, or involve the court ordering the publication of the judgment as a form of specific restoration of the loss consisting of reputational harm suffered by the injured party because of the wrongful act of the person held liable.54
It is clear that courts in practice tend to set the penalty high enough for it to have a dissuading effect. Although this is almost never specifically stated in the court’s reasoning, this means that the gains the wrongdoer can expect from refusing to comply are taken into account.55 Civil non-compliance penalties in this way can and in reality very often do function as a form of disgorgement of profits realized by ignoring a court order, with the aim of providing an incentive to abide by the court’s decision.56
Confiscation of Proceeds of a Criminal Offence
Belgian criminal law contains a general system of so-called “special confiscation”.57 Traditionally, this sanction was applicable to goods directly resulting from the criminal offence.58 In cases involving the more serious types of criminal offences – felonies and misdemeanors, called “crimes” or “misdaden” and “délits” or “wanbedrijven” – such confiscation is always mandatory; in cases involving the least serious types of offences – infractions, called “contraventions” or “overtredingen” – such confiscation is only ordered if specifically provided by statute.59
Over the last decades, this system has been extended to all advantages obtained because of the offence,60 so that not only the direct product of the crime itself (productum sceleris) but more general any advantage gained because of the offence (lucre sceleris) can be taken from the convicted offender.61 Strictly speaking, such a “taking” is really an obligation of the convicted offender to disgorge his profits from the offence. This type of confiscation can be ordered in any criminal conviction, but only if it is claimed by the public prosecutor.62
The proceeds of special confiscation go to the Belgian State. However, the confiscated goods can be given to the civil party – a victim of the committed offence – if this person has a proprietary claim on these goods based on civil law.63 Criminal special confiscation itself, therefore, does not grant civil parties any claims on illegally gained profits.
Proprietary Claims for Profits
In traditional Belgian doctrine, some forms of disgorgement are conceptually not understood to be a remedy for certain wrongs, but seen as a proprietary claim of a rightholder under a material rule of law.
Fruits of Property
Belgian property law states that the owner of a good also becomes the owner of its fruits.64 This rule does not only apply to natural fruits of plants and in a broader sense the young of animals or increase in livestock, but also to so-called “civil fruits”, such as for instance interest on capital or rental income from an asset. The person contributing the labor that has made it possible to produce these fruits is only to be compensated for his costs.65
However, while the owner can always revindicate his good, the same is not true for the fruits. Only a possessor mala fide is obliged to give the fruits he produced to the owner of the good.66 A bona fide possessor can keep the fruits he has produced up to the moment he discovered his possession was tainted, at which moment he ceases to be in good faith.67 With respect to fruits, the bona fide possessor is thus legally treated in the same way as an usufructuary.68
Although the traditional theory or narrative of Belgian law presents this as a rule of material property law, including in the concept of property a ius fruendi, understood as a property right in the fruits, it can also be understood as a remedy: any person who in bad faith uses someone else’s property to produce a gain, can be forced to hand over (disgorge) the “civil fruits” (profits) realized through this illegitimate use.69 Apparently, this disgorgement of profits is available to the owner against someone else in bad faith trying to realize gains by using his good and thereby infringing his subjective right of ownership, specifically aimed at preventing such bad faith infringement to be lucrative, and possibly providing the owner with a windfall profit.70 Against a possessor in good faith realizing the same profits, the owner has no such claim.
Interest on Undue Payment
One can recognize a similar remedy in the rules relating to undue payments.71 According to the basic principle, the accipiens – i.e. the person who has received a payment by error – is bound to make restitution to the solvens – i.e. the person from whom he has unduly received it.72 However, the accipiens bona fide does not have to pay interest and can keep the fruits gained from the undue payment.73 The accipiens mala fide, on the other hand, is not only required to return the undue payment itself, the capital, but also has to pay interest and hand over the fruits he has gained from the day of payment.74 Again, if one looks at it from our analytic perspective, this is an example of a remedy of disgorgement of profits (fruits or interests) imposed when a person in bad faith infringes on the rights of another, to make sure this person does not earn any gains from its bad faith.75
Cases on the Border: Civil Liability or Proprietary Claims?
In some circumstances, it is theoretically debatable whether the sum awarded by a court is to be considered a form of compensation based on liability or a proprietary claim to profits based on a subjective right. In these cases, mostly involving infringements of intellectual property rights or personality rights, one can see courts and doctrine struggling with remedies that seem opportune and appropriate in the given circumstances but that do not really fit theoretically into the frame of civil liability. Although most courts and literature continue to treat these cases under the umbrella of civil liability, I have suggested that they can be better understood as examples of bad faith infringements of subjective rights, giving the rightholder not only a claim to compensation based on civil liability but also a remedy consisting of disgorgement of profits based on the infringed right itself.76
Infringement of Intellectual Property Rights
The Belgian rules on intellectual property contain several remedies against infringements. Apart from injunctive relief,77 the rightholder can claim damages, and in case of bad faith infringement,78 he can claim civil confiscation or some form of disgorgement of profits.
The statutory provisions on intellectual property rights explicitly state that the rightholder can demand compensation for the losses he has suffered from an infringement,79 a claim he under Belgian law also has based on the general principles of civil liability.80
An infringement of an intellectual property right can cause different types of losses.81 First, there is the lucrum cessans, i.e. the profits the rightholder normally would have gained from the exploitation of his right but that now are no longer available to him because the infringer appropriated opportunities that should have been exclusively enjoyed by the rightholder. Second, there is the damnum emergens, usually consisting of the costs the rightholder had to make in investigating and prosecuting the infringement and potentially also the reputational harm he suffers as a consequence of the infringement.82 Third, there can be moral losses.
According to the general principle of liability, the awarded damages have to equal the actual losses (“integral compensation”).83 The extent of the loss has to be judged in concreto.84 However, in practice it can be very hard to exactly establish the extent of the losses. Therefore, damages in cases of infringement of intellectual property rights are very often set as a lump sum.85 Several judgments have awarded damages set at a multiple of the normal or usual license fee, considered necessary to avoid it being lucrative to systematically infringe on intellectual property rights, knowing that one will not always be caught and therefore still be better off if one only risks having to pay the avoided fee.86 Some courts have explicitly stated that they set the amount of damages so that the infringer will not be able to keep gains from his infringement.87
However, the highest court has recently reaffirmed the general principle that damages cannot be set higher than the actual loss. It ruled that awarding 25 % on top of the avoided licensing fee to finance the global battle against violations of intellectual property or to provide for an incentive to seek the permission of the rightholder, is not consistent with Belgian civil liability law.88 But as already pointed out, the trial courts sovereignly establish the facts and thus the extent of the loss.89 Therefore, nothing keeps a court from for instance finding that the actual losses of the company whose copyright on professional software that had been illegally copied and used by the employee of another company amounts to much more than the originally avoided license fee,90 thereby using the concept of compensation to in effect impose some form of disgorgement of profits.
Civil Confiscation: Optional Disgorgement
The infringer in bad faith can be forced to hand over any goods infringing the intellectual property right (“civil confiscation”). If these goods are no longer in his possession, the court can award the rightholder a payment equivalent to the price the infringer has received in return for these goods.91
Civil confiscation is to be distinguished from the possibility courts have to order the transfer of the infringing goods to the rightholder as a form of compensation, in which case the rightholder has to compensate the infringer if these goods have a higher value than his losses.92 Under civil confiscation, the value of the confiscated goods is counted towards the damages owed,93 but the rightholder never has to compensate the infringer if the value he receives through civil confiscation is higher than the losses he suffered because of the infringement.94 The amount the court can award in cases of infringement in bad faith based on the civil confiscation provisions is therefore “noticeably greater” than the amount in damages based on civil liability, applicable in case of infringement in good faith.95
The similarity between this civil confiscation and the rule on fruits of general civil law property discussed earlier96 is striking: the infringing goods can be considered to be “fruits of the intellectual property”, and only the possessor in bad faith is required to hand them over to the owner, the rightholder. A possessor in good faith has to compensate the rightholder for his losses based on civil liability if he infringed the intellectual property right, but he does not have to hand over the “fruits” he realized.
Disgorgement of Profits (or Is It Loss Compensation?)
In case of bad faith infringement, the statutory provisions on intellectual property rights also provide that the court can order the disgorgement of all or part of the profits realized by the infringer.97 The aim of this remedy, which following the example of German law was first introduced in the former Benelux Uniform Trademark Act and subsequently kept in the Benelux Convention on Intellectual Property (Trademarks and Designs) and then generalized for all intellectual property rights – but unfortunately, as shall be shown, in a distorted manner – is to avoid that the wrongdoer who willingly and knowingly infringes someone else’s intellectual property right would be able to keep his gains even after having been held liable by a civil court.98
In the structure of the Belgian statute on intellectual property rights, this specific remedy is placed in a provision that in its first paragraph clarifies how the court can establish the amount of (compensatory) damages in cases where the exact extent of the loss cannot be determined. The statutory provision also explicitly states that the court can order this type of disgorgement “by way of compensation of the losses”, suggesting that this remedy is not really a true disgorgement of profits.99
However, if this were the correct understanding of this statutory provision, it is difficult to explain why this remedy is limited to cases of bad faith. Under Belgian law, any infringement of an intellectual property right is a wrong100 and therefore under civil liability gives a right to full restoration, which can always take the form best fit for the circumstances. Understood as nothing more than a specific manner of estimating damages for actual losses, this provision is therefore completely superfluous.101 The only rational explanation why this particular remedy would be limited to bad faith infringements is that this form of “damages” would possibly be greater than the losses, as it is based on the illegitimate profits made.102 This alternative interpretation would also bring the Belgian statute on intellectual property in line with the provision on disgorgement of profits in the Benelux Convention on Intellectual Property (Trademarks and Designs),103 which allows for disgorgement of profits in cases of bad faith infringements as a separate remedy, independent of compensation.104
Infringement of Personality Rights
An area where some deviation from general civil liability principles can be observed going into the direction of some form of disgorgement of profits under the guise of damages,105 is the field of personality rights.106 Although such rights are not statutorily defined or protected in Belgium,107 they are recognized by most authors as being part of existing positive law,108 as the highest court recognizes them to be based on the general principle of law that prohibits the intrusion into someone else’s personality.109
Restoration in case of an infringement of a personality right in Belgium often takes the form of damages.110 Analysis of the case law shows that although plenty of judgments continue to apply the general principles of civil liability, requiring the showing of specific losses caused by a wrongful act for liability to attach and imposing an obligation to pay damages equal to losses suffered, some systematic deviation from this pattern can be discerned.
First, in many cases the infringement of the personality right is in itself considered to be a sufficient basis for liability.111 Some scholars have defended this, arguing that the infringement of a subjective right is as such a wrongful act.112 That this theory correctly reflects practice, is witnessed by the fact that often courts require showing that harming someone’s reputation – which is not a subjective right but a mere legitimate interest, only protected by civil liability – was done in a wrongful way for liability to attach,113 but do not require such showing when the privacy of a person is infringed or his name, image114 or voice are exploited without his permission.115 As opposed to his reputation or good name, a person’s privacy, name, image and voice are protected by a personality right, and the infringement of this right is in itself a wrong.
While the traditional view remains that the private law protection of personality rights once they are infringed is limited to the remedies offered by civil liability,116 some authors have argued that the personality right itself can serve as a basis for a claim of damages.117 Under this theory, damages can be awarded without the requirements of civil liability having been met. And indeed, while some courts explicitly state that the infringement of the personality right is a wrong on which civil liability can be based, there are plenty of court decisions that go straight from the establishment of the fact of the infringement to the conclusion that damages are due, without referring to a tort and without even mentioning Article 1382 CC.118
An infringement of a personality right can cause pecuniary losses, for instance when the infringement results in a loss of opportunity for the rightholder to earn income from exploiting the aspect or expression of his personality that the wrongdoer used without his permission.119 Because in practice many court decisions award a lump sum, they do not give much insight in the elements that in fact determine the height of the damages, so we cannot verify if the profits the wrongdoer realized were taken into account.120 Occasionally, however, a court hints that the amount of damages awarded was in fact based on the profits the wrongdoer had been able to realize thanks to the illegitimate use of an aspect or expression of the personality of the rightholder.121
An infringement of a personality right can also cause moral losses, such as psychological suffering or discomfort, physical pain or emotional distress.122 As was already mentioned, such damages are set as a lump sum, as there is no way to exactly establish the pecuniary equivalent of such losses.123 A historically very important author on Belgian civil law has written that the mere fact that a subjective right of a person was infringed or not respected constitutes a moral loss, irrespective of any other interest of the rightholder being hurt.124 While nowadays few authors still invoke such a general principle,125 it is generally agreed that in case of infringement of personality rights, the rightholder feels his value as a person diminished by the negation or dismissal of his legal power of self-determination.126 However, there remain authors that object to this automatism and who protest against this conflation of the concepts of wrong and loss.127
Some authors have argued that the claim for damages in case of infringement of a personality right can be based directly on the right itself and does not need to be based on civil liability, so that the requirement under liability of an actual loss is not applicable here, allowing the courts to award damages while the injured party in fact did not suffer a loss.128 In effect, the conceptually different constituent elements of civil liability, fault and loss, are “merged” into one single requirement in cases involving personality rights, consisting of the infringement of the right. Based on this sole requirement, some courts impose a remedy of damages.129
While up to the seventies, such awards tended to be very low and courts in fact only awarded nominal damages to allow for the principled establishment that a wrong had occurred but did not use the instrument of civil liability to try to create incentives to promote the recognition of personality rights,130 analysis has shown that since the eighties and definitely since the mid-nineties,131 Belgian courts have been more willing to award higher amounts of moral damages in cases of infringements of personality rights.132 Specifically, it must be noted that such moral damages are regularly higher than the amounts Belgian courts award for the loss of a loved one or a next-of-kin. As it is hard to accept that the actual moral loss that a person suffers from the infringement of a personality right is much graver than the grievance and emotional distress one suffers when losing a parent, partner or child, one cannot help but feel that the courts in fact base the amounts of damages in cases of infringement of personality rights also on other elements than the extent of the actual loss.
Most often, commentators have interpreted the high awards as attempts of courts to punish for the wrong, independent of its consequences.133 Occasionally, however, one can find court decisions awarding high moral damages not so much as a reaction to the seriousness of the wrong but rather to tackle the profits the wrongdoer has realized by negating the exclusive rights of the injured party.134 But even if this is the case, it is clear that Belgian courts are very timid in applying this method. In general, they refrain from imposing high damages, even if this would be necessary to have the wrongdoer disgorge the profits he realized through the negation of a personality right of the injured party.135
As a matter of theory, the consensus seems to remain that even if one accepts the theory that the remedy in case of infringement of personality rights is not based on civil liability but can directly be based on the personality right itself, this does not change the character of the remedy available, which in the eyes of most authors and courts remains compensatory and therefore not aimed at disgorging profits as such.136
No Disgorgement Based on Unjust Enrichment (Actio de in Rem Verso)
Claims based on unjust enrichment are relatively rare in Belgium.137 As opposed to several other legal systems, Belgian law contains no explicit statutory recognition of this action. It is based on case law, going back to a decision of the highest court of 27 May 1909.138 Since the eighties, the highest court specifically refers to it as a general principle of law.139
As opposed to a claim based on liability, this action is only available if the defendant has been enriched.140 On this basis one might expect that the claim would result in a duty to disgorge profits. However, this action just as much requires the claimant to be impoverished.141 The mere infringement of a subjective right of the claimant by itself is under the standard rendition of Belgian law not considered to be an impoverishment, so the claimant has to show that he suffered a disadvantage that has pecuniary value.142 Without such disadvantage, no action based on unjust enrichment is available, so under Belgian law143 this action cannot truly be considered to be a disgorgement of profits.144
The remedy in case of unjust enrichment may at first sight look like disgorgement, as it is usually referred to as restitution. However, the sum awarded can never exceed the loss suffered, so the claimant can receive no more than compensation.145 Unjust enrichment is therefore often referred to in Belgian literature as “patrimonial shift without legal cause”, stressing that it is the value that shifted from the defendant to the claimant that has to be restored, not the enrichment as such.146 As a result, unjust enrichment under Belgian law is an alternative to civil liability to obtain compensatory relief, damages, in cases where no fault can be established. As it is understood today, it is not a basis for disgorgement of profits without this amount serving to compensate the claimant for an actual loss suffered.147
An Agent’s Duty to Account: Disgorgement
Under a contract of agency, the agent is bound to account for his management, and to return to the principal everything he received because of his assignment, even if what he received was not owed to the principal.148 This rule represents the basic principle that agency can never become a source of enrichment for the agent in his relations to third parties.149 If apart from the agreed remuneration an agent were to obtain any other personal gain because of the way he performs his tasks or uses the power of attorney he has received under the agency agreement, he is not only bound to report this gain but he is also required to hand over these profits to the principal. This means that a principal can force his agent to disgorge his profits if he has used his powers for his personal gain in violation of their agency agreement.
Does Belgian Law Contain a (Hidden) General Rule on Disgorgement of Profits?
Based on an analysis of the examples of disgorgement spread throughout positive law, I have proposed a theory that Belgian private law apparently includes a general principle of law that gives the holder of a subjective right a claim for disgorgement of profits realized by another person because of his bad faith infringement of the exclusive authority the subjective right grants to its holder.150 This remedy is clearly available in cases of infringement of property rights to physical goods, as the possessor in bad faith has to turn over the fruits he produced. This remedy can also be recognized in the statutory provisions on intellectual property rights, which allow for civil confiscation of “fruits” of the intellectual property right and thus disgorgement of profits in cases of bad faith infringements. This concept can also help understand what a lot of courts actually are doing in cases of infringement of personality rights that can be economically exploited.
It is too early to tell whether this theory will find any support in Belgium. I hope that this comparative project might shed some light on the question whether the hidden general horizontal principle I think to have recognized in Belgian private law can also be found in other legal systems.151
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