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::: THE NEW EUROPEAN DIRECTIVE to combat late payment of invoices
legislation by Filippo Cafiero
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A particularly common practice
in commercial transactions in EU
Member States.
Just over ten years since the fi rst
measures were introduced, the
new European Directive 2011/7/
EU dated 16 February was published
on the Offi cial Journal of the European
Union a few weeks ago (on 23rd
February 2011). This Directive gives
Member States two years in which to
adopt national laws implementing its
principles. This means that – as far as
Italy is concerned – the current Legislative
Decree n° 231/02 needs to be
replaced. As many already know, this
law foresees the application of interest
for late payment of commercial
transactions, more specifi cally 7 percent
above the European Central Bank
“reference rate”. The guiding principle
behind the new Directive has, therefore,
already been translated into law
and, what is more, implemented, so
this new Directive does not actually introduce
anything new. What it does do,
however, is to confi rm the principle,
as well as more accurately specifying
and defi ning the manner and terms
of certain aspects that were previously
ambiguous, such as relations with Public
Administration, or that proved to be
ineffective. In fact, the European Parliament
has expressly asked that the
European Lawmaker and, indeed, the
individual European governing authorities
should formally take note of the
widespread practice in EU countries
of late commercial payment and the
need to discourage this with precise,
targeted measures, including the increasing
phenomenon of late payment
by Public Administrations. The new intention
of the Directive has thus been
made evident. It is expressly worded
to provide relief for businesses with
cash flow problems and, therefore,
to foresee shorter payment times by
both private concerns and the Public
Administrations. Indeed, considerable
sums are owed to businesses by PAs:
just think of all those public tenders
and service agreements. Moreover,
the new Directive also expressly takes
into account the effect on private enterprise
of the current payment terms
and conditions for commercial transactions,
even now. In other words, the
way that businesses are forced to use bank loans to make up for a lack of
liquidity and the inevitable reduction
in their competitiveness as a result of
being unable to make investments.
Likewise the costs and energy spent
in debt recovery as a result of late payment.
The principles that the Member
States are now expected to implement
in their national legislation
within two years from publication
of the new Directive should observe
and guarantee the following:
a) business to PA transactions: payment
terms should not be more
than thirty or sixty days, depending
on the different conditions foreseen
in Article 4 of the Directive;
b) business to business transactions:
the payment period established in
a contract shall not be more than
sixty calendar days, unless expressly
agreed otherwise in the contract
and provided that this is not grossly
unfair for the creditor in accordance
with Article 7 of the Directive
(hence businesses have the right to apply interest for late payment immediately
after expiry of said terms
without needing to give any prior
notice of non-performance or other
similar notice reminding the debtor
of his obligation to pay);
c) agreements that foresee payment
by instalments: should any instalment
not be paid by the due date,
the interest and damages foreseen
by the Directive shall be calculated
exclusively on the basis of the unpaid
amounts;
d) interest for late payment: this is expressly
called “statutory interest due
for late payment” and shall amount
to at least eight percentage points
above the ECB reference rate;
e) with regard to damages for businesses
owing to the cost of debt
recovery: businesses shall have the
right to apply not only the statutory
interest due for late payment,
but also to claim a minimum fixed
sum of 40 Euros from the debtor,
without the need to send any reminders.
Moreover, in addition to
this fixed sum for internal debt recovery
costs, businesses may also
claim reasonable damages for all
such costs that exceed said amount.
These costs may also include the
expense of having instructed a lawyer
or a debt collection firm.
Obviously, Member States may keep or
adopt any more favourable provisions
for the creditor that exceed those
needed to comply with the new Directive.
However, Member States must
make sure, in any case, that there is
full transparency concerning the rights
and obligations arising from the Directive,
by making public the applicable
statutory interest due for late payment
in their own areas of competence. The
European Commission, on the other
hand, shall publish on appropriate
websites full information on the statutory interest due for late payment applied
in all Member States.
::: Will all this breathe new life into
business?
Frankly speaking, it appears hard to
see how things are likely to change on
the basis of the reasoning and effects
of these new principles, even if non
payment by PAs at the moment (and
not just in Italy) is a matter of grave
concern for business. Not only is late
payment one of the main reasons for
the economic difficulties of businesses
today, but there is often no short-term
escape for them, as it all depends on
the uncertain streams of revenue and
cash holdings of the PAs themselves.
In this context and in the light of the
new Directive, it seems that the only
thing one can do is wait for two years
and hope that, in the meantime, businesses
manage to keep going under
the current rules.
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