Brussels, 08/08/2002 (Agence Europe) - The Directive on combating late payment in commercial transactions enters into force on 8 August. Adopted in 2000, the Directive will now cover all commercial transactions, whether in the private or public sector. The measure does not harmonise payment deadlines but rather, provides a default mechanism when payment periods are not indicated in the contract. The Directive establishes that there will be a statutory right to interest 30 days after the date of the invoice. Interest payable will be 7% above the interest rates fixed by the European Central Bank (currently at 3.25%). In countries that don't belong to the Euro-zone, interest rates are fixed at the rates set by the central banks. The Directive allows the seller to retain title to the goods until payment is completed, if that is explicitly agreed before delivery. The Community measures also obliges Member States to ensure that the creditor will be able to obtain an enforceable title within a period not exceeding 90 calendar days.
According to a study that accompanied the Draft Directive, unpaid debts amount to EUR 90 bn in the EU every year, causing a loss in interest payments of EUR 10.8 bn. Late payments are most frequent in southern Europe and less so in Scandinavian countries, which have imposed automatic interest rates on late payments since the 1970s. The periods for late payments range from 29 days in Finland, 32 in Sweden, 34 in Denmark to 94 in Greece, 91 in Portugal, 87 in Italy and 74 in Spain. The Community average is 53 days.
The Commission points out that the construction and wholesale industries are amongst the worst payers and large companies are responsible for twice as many late payments than SMEs. According to the Commission the problem boils down to the fact that late payers delay their payments in order to obtain reduced rate loans for which suppliers have to bear the costs. According to a study carried out by Eurofactor and the French Association of Credit Managers at the beginning of the year, 58.5% of companies that confront late payments believe that these late payments are due to the financial difficulties of their customers, 32% to cash flow problems, 14% due to negligence and 7% due to the transition to the Euro.
Companies remain on the whole sceptical about the effects of the Directive, which will not resolve the dependency of sub-contractors on their partners, which could continue to impose long periods for awaiting payments in their contracts. National authorities are some of the worst payers, with an EU average of 74 days before paying, which is even longer in Italy and Spain.
Directorate General Enterprise at the Commission has published a number of documents on the Directive: http: //http://www.europa.euint/comm/enterprise/regulation_payments/index.htm