Brussels, 08/04/2009 (Agence Europe) - On Wednesday 8 April, the European Commission adopted a proposal to flesh out Directive 2000/35/EC on late payments (see EUROPE 9878). It suggests introducing a 30-day time limit at European level that public authorities would have to comply with when settling their invoices. In a concern to set an example, the Commission has said it would set itself the same objective as of October. This “rash” of late payments amounts to around €1.9 billion in the European Union, the European commissioner responsible for enterprise policy, Günter Verheugen, said. He spoke of the difficulties that arise from late payments affecting the solvency of SMEs, especially in these times of crisis, and which can lead to bankruptcy. One quarter of insolvency cases in Europe can be explained by excessively late payments. The new rules will apply in autumn 2010 at the earliest.
The maximum limit of 30 days recommended for payments made by public authorities runs from the date when the invoice is received or final delivery of goods, supplies or services. Nonetheless, a longer time could be fixed on condition that: (1) the decision is taken by common accord between payer and payee, and that (2) any delay is duly justified by specific circumstances, such as an genuine need to plan payment over a longer time period. According to Mr Verheugen, this possibility only exists when a contract is the subject of several calls for tenders involving the need for staggered payments. Whatever time is fixed, a company will be entitled to call on a public authority for compensation equivalent to 5% of the amount due.
A company will be entitled to ask its client, whether business or public authority, for compensation for costs incurred due to late payment and to recover the amounts not paid. This compensation will depend on the amount of the late payment: €40 for payment unpaid under €1000, €70 for a sum of between €1000 and €10,000, and 1% of the total amount when the late payment is for more than €10,000.
The European Association of Craft, Small and Medium-Sized Enterprises (UEAPME) welcomes the proposal but considers that the Commission could have gone further. The possibility of extending the 30-day time limit for objectively justified reasons is a door open to abuse, the organisation states, calling for a second limit to be introduced of perhaps 60 days. “The decision on whether to apply interest in case of late payments is left to the company. Small businesses will find it hard to apply this rule to contracts with larger enterprises, which will pick and choose suppliers and contractors on the basis of their readiness to forego this clause. Introducing an obligation would have relieved small businesses from this pressure”, says UEAPME General Secretary Andrea Benassi, who went on to regret that the Commission had not introduced relations between SMEs and consumers (“B to C” or “Business to Consumer”) in the scope of the directive. When this question was put to him, Mr Verheugen said he had “not been informed” of this. The Swedish debt recovery company, Intrum Justitia, believes the proposal for a directive is welcome but also lacks ambition. Its says the right to ask for compensation or the payment of interest in the event of late payment will not improve the situation of enterprises in so far as it is widely known that SMEs are very afraid of offending their customers by threatening them with penalties aimed at gaining payment. He went on to regret that “Mr Verheugen did not acknowledge that in the business to consumer payments area huge problems do also exist”. (M.B./transl.jl)