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Late payments

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This Directive aims to encourage enterprises and public authorities to comply with payment deadlines in commercial transactions in order to ensure the smooth functioning of the single market.

ACT

Directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions.

SUMMARY

The Directive is designed to combat late payments in commercial transactions within the European Union by laying down common minimum requirements consistent with the principles of subsidiarity and proportionality. These minimum requirements should be complied with in all of the Member States without prejudice to existing national measures.

Late payments constitute a major obstacle to the free movement of goods and services in the single market and could substantially distort competition. The resulting administrative and financial burdens impede cross-border trade. Small and medium-sized enterprises (SMEs) and the craft sector are most vulnerable here.

The Directive covers all debts incurred in commercial transactions *. It applies to businesses * and public authorities alike.

Interest on late payment is payable from the day following the stipulated payment deadline. The due date for payment is in principle thirty days fromthe 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).

Moreover, an accelerated procedure in the form of an enforceable title * should be available to the creditor for recovery of uncontested debts if he takes legal action against the debtor. This takes effect within a maximum of ninety days of the action being brought.

Key terms used in the act
  • Commercial transactions: transactions between undertakings or between undertakings and public authorities which lead to the delivery of goods or the provision of services for remuneration.
  • Business: any organisation engaged in independent economic or professional activity, even if such activity is carried out by a single person only.
  • Interest rate applied by the European Central Bank to its main refinancing operations: the interest rate applied to such operations in the case of fixed rate tenders. If a main refinancing operation was conducted according to a variable rate tender procedure, this interest rate refers to the marginal interest rate which resulted from that tender. This applies both in the case of single-rate and variable-rate tenders.
  • Enforceable title: any decision, judgment or order for payment issued by a court or other competent authority, whether for immediate payment or payment by instalments, which permits the creditor to have his claim against the debtor collected by means of forced execution; It shall include a decision, judgment or order for payment that is provisionally enforceable and remains so even if the debtor appeals against it.

REFERENCES

ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal
Directive 2000/35/EC [adoption : co-decision COD/1998/0099]08.08.200008.08.2002
Ten new Member States
01.05.2004
OJ L 200 of 08.08.2000
 
Last updated: 07.07.2005
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