Fighting Late Payments
Many payments in commercial transactions between businesses or between businesses and public authorities are made much later than agreed. This is very costly for businesses. Directive 2000/35/EC [112 KB] was adopted to combat late payment. It will be replaced in 2013 by the new Directive 2011/7/EU.
General principles of Directive 2000/35/EC
The Directive only applies to transactions between undertakings or between undertakings 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.
The new Directive 2011/7/EU
The new Directive will have to 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.
- 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.
Late Payment Information Campaign
The European Commission is organising the Late Payment Information Campaign in the 27 Member States and in Croatia from October 2012 to December 2014. The aim of this campaign is to increase awareness amongst European stakeholders, in particular SMEs, and within public authorities on the new rights conferred by Directive 2011/7/EU.
These events will also provide a forum for the exchange of best practices and help businesses to tackle late payment issues. While addressing the business environment, the information campaign will focus in particular on SMEs, as they are most affected by the current culture of late payment across the EU.
Click here for more information on the campaign
Interesting websites in Member States
- Reference documents on fighting late payment
- European e-Justice Portal
- European Judicial Atlas in Civil Matters
- European Judicial Network in civil and commercial matters
- Other related EU legislation