Satisfaction with Parliament-Council agreement on payment deadlines, contents of final compromise

Brussels, 25/04/2000 (Agence Europe) - Following several years of negotiations, the directive on late payments, on which the Council and European Parliament (EP) reached agreement last week, should finally allow for a legislative safeguard to be introduced to one of the scourges of business life in Europe (see EUROPE of 19 April, p.8). The CSU member of the EP, Ingo Friedrich, who led the parliamentary delegation in the conciliation procedure with the Council, welcomed the results secured, notably observing that the interests of small and medium-sized companies would now be better defended.

In a press release, he stressed the directive's importance, recalling that one case of insolvency in four in the European Union was caused by late payments, and that "450,000 jobs are thus lost each year". The Euro-MP welcomed in particular the decision to impose a 7% interest rate over and above the ECB rate in case of late payments. He considers that Parliament has obtained satisfaction on a number of issues, especially the taking on board of the public sector, deadlines and rates, as well as the definition, in the "anti-abuse clause", of agreements having a globally negative impact.

The major aspects of the directive, which were precisely those that the debate focused on right up to the last minute, are the following:

• The reference payment deadline, applicable when there is no written contract, has been taken to 30 days. Any delay on that deadline, even if provided for in the contract, may give rise to a claim for damages if it is "grossly unfair to the creditor" (anti-abuse clause"). Many late payments are indeed attributable to public authorities and large companies taking advantage of their position of strength to acquire liquidity at little cost. The directive therefore aims to prohibit abuse of freedom contract to the disadvantage of the creditor. Such abuse may be observed when an agreement mainly serves the purpose of procuring the debtor additional liquidity at the expense of the creditor, or where the main contractor imposes on his suppliers and subcontractors terms of payment which are not justified on the grounds of the terms granted to himself. Organisations having a legitimate interest in representing SMEs may then take action before the Courts of competent authorities.
• The interest rate due by the debtor, when late in his or her payment, corresponds to the interest rate applied by the European Central Bank, plus at least 7 points (the Council proposed 6 points and the European Parliament 8).
• The public sector and private sector are on an equal footing in the Directive, which had not been clearly established before conciliation negotiations began. For the definition of "public authorities", the text refers to four Community directives on public procurement.
• The notion of "retention of title" enabling a company that has not been paid to claim its goods back even if they has been transformed, is admitted in the directive. Member States not recognising this notion in their national law are not however obliged to comply.

The conciliation procedure between the EP and Council was opened on 9 March. Discussions were held within several "trilogue" meetings (EP-Council-Commission). The agreement, announced by the EP last week, has not yet been officially confirmed by the Council but should soon be through an exchange of letters. To be definitively adopted, the directive, still needs to be formally approved without debate at a meeting of the Council and by the EP's plenary session. It will take effect the day of its publication in the Official Journal. Member States will then have two years in which to transpose it into national legislation, and the Commission will make an initial assessment of the directive two years later.