THE EU COMMISSION'S NEW PROPOSAL FOR The Current DIRECTIVE ON COMBATING LATE PAYMENT

The European Commission has come forward with a proposal to revise the current European Directive 2011/07/EU on combating late payments in commercial transactions because it believes that it is insufficient to tackle the problem of late payments.

The Commission has presented proposal EUR-Lex - 52023PC0533 - EN - EUR-Lex (europa.eu), which replaces the current Directive and addresses issues related to late payments in the EU. About half of the 18 billion invoices issued annually are paid late, which has negative consequences for liquidity, cash flows, growth and competitiveness of companies, especially SMEs. The factors that cause payment deadlines to be exceeded include insufficient preventive measures, inadequate deterrents and insufficient enforcement and recovery mechanisms as well as fair payment conditions.

In the House of Representatives, the Minister of Foreign Affairs (on behalf of the working group Assessment of New Commission proposals (BNC)) submitted a document containing a summary and possible consequences for Dutch practice; Fiche; Verordening inzake bestrijding van late betalingen in handelstransacties.

In the proposal, the European Commission formulates three specific objectives: preventing late payments; facilitating timely payments; and strengthening both companies and enforcement and recovery mechanisms.

The proposal contains nine measures that should contribute to these objectives;

1. Shortening the maximum legal payment term from 60 to 30 days for all commercial payments transactions, both from governments to companies and between companies themselves.
2. Limiting the verification procedure to a maximum of 30 days.
3. Making available to SMEs tools and training on credit management, financial literacy and digital skills training by Member States.
4. The interest rate is to be harmonized, and interest is automatically due in the event of exceeding the payment term.
5. Increasing the compensation for recovery costs if the payment term is exceeded from 40 to 50 euros.
6. EU Member States should designate authorities responsible for enforcing the regulation, conducting investigations on one's own initiative or in response to complaints, which have the power to impose administrative sanctions and publish the names of offenders.
7. In public procurement, contracting authorities must check whether payment is made to the main contractor and has been passed on to the direct subcontractors.
8. Member States must set up a national mediation system to resolve payment disputes in commercial transactions.
9. Member States should ensure that adequate and effective means exist to prevent unfair contractual terms and practices and to address them.

The Commission's impact assessment supports combining different policy options into one package, which is expected to lead to a 35% reduction in late payments. Policy measures focus on negotiation phases, compliance with payment deadlines and strengthening recovery mechanisms, and the Commission emphasizes that integrated measures are more effective than isolated application.

What does the Netherlands think of this proposal?

From the "Fiche; Regulation on combating late payments in commercial transactions' shows the following:

• A positive reception of the Commission proposal, recognition of problems with late payments and the vulnerability of SMEs.
• Objections to the obligation for Member States to appoint a supervisor and in favor of alternative measures.
• Support for shortening the maximum payment term to 30 days, while maintaining freedom of negotiation between large companies themselves and SMEs themselves.
• Call for clarity about period when interest is due and adjustment of the definition of the payment term.
• Support for limiting verification procedures to 30 days, with room for exceptions for large, complex infrastructure works.
• Support for the provision of tools and training to SMEs.
• Positive attitude towards harmonization of the interest rate and increase in liquidated damages.
• Objections to the proposal to make public clients responsible for checking payments to subcontractors.
• Support for the setting up of national mediation systems for payment disputes.
• Support for clarifying void contractual terms regarding statutory interest and damages.
• Asking for further clarification when measures against unfair contractual terms are considered "adequate and effective".

What are the expectations of this proposal?

General support for the proposal appears to be present among Member States, but the position of individual countries regarding specific measures is still unknown. During the consultation, some Member States expressed a preference for a Directive over a Regulation.

The European Parliament's position is still unknown, and further consideration of the proposal has yet to take place. The expectation is, however, positive.