EU Directive on Late Payments Information compiled by ICTF ictfworld

1. EU Directive on Late PaymentsInformation compiled by ICTFwww.ictfworld.org

2. Single market for goods Fighting late payments in Europe • Many payments in commercial transactions between businesses or between businesses and public authorities are made much later than agreed, which is very costly for businesses. • Directive 2000/35/EC was adopted to combat late payment. It will be replaced in 2013 by the new Directive 2011/7/EU.

3. General principles of Directive 2000/35/EC • The Directive only applies to transactions between businesses or between businesses and public authorities. • The Directive does not harmonise payment periods, but creates a statutory right to interest 30 days after the date of the invoice, unless another payment period has been negotiated in the contract. • Unless otherwise specified in a contract, the interest rate for late payment is the total of the applicable reference rate and the margin rate: • The applicable reference rate is the European Central Bank's main refinancing rate. Outside the Euro zone the rate is set by the relevant national central bank. The reference rate on 1st January applies until 30 June while the reference rate of 1st July applies until 31 December. • The margin rate is at least 7 percentage points. Member States are entitled to apply a higher rate.

4. General principles of Directive 2000/35/EC - continued • Interest on late payment is payable from the day following the stipulated payment deadline. The due date for payment is in principle thirty days from the receipt of the invoice or, in the absence of an invoice, thirty days from the receipt of the goods or services, unless the contracting parties make an express decision to the contrary. Nevertheless, any agreement on the date of payment must comply with the minimum requirements laid down by this Directive unless it is grossly unfair. The time limit can be a maximum of sixty days for certain contracts specifically determined by national legislation. • Beyond this time limit, the creditor is entitled to claim interest for late payments. The legal rate applicable is the interest rate applied by the European Central Bank to its main refinancing operations, plus a minimum of seven percentage points. In any event, compensation for recovery costs should be reasonable. • The transfer of the ownership of goods may also be deferred until the actual payment, if the contract expressly provides for this ("retention of title" principle).

5. The new Directive 2011/7/EU • The new Directive will be transposed into national law by 16 March 2013 at the latest.  • The provisions of the new directive include, among others:  • Harmonisation of period for payment by public authorities to businesses: Public authorities will have to pay for the goods and services that they procure within 30 days or, in very exceptional circumstances, within 60 days. • Contractual freedom in businesses commercial transactions: Enterprises will have to pay their invoices within 60 days, unless they expressly agree otherwise and if it is not grossly unfair. • Enterprises will automatically be entitled to claim interest for late payment and will also be able to obtain a minimum fixed amount of €40 as a compensation for recovery costs. They can claim compensation for all remaining reasonable recovery costs.

6. The new Directive 2011/7/EU • The statutory Interest rate for late payment will be increased to at least 8 percentage points above the European Central Bank’s reference. Public authorities are not allowed to fix an interest rate for late payment below. • Member States may continue to maintain or to bring into force laws and regulations which are more favourable to the creditor than the provisions of the new Directive.

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