The European Parliament’s Committee on Internal Market (IMCO) has chosen to impose strict payment deadlines on both public authorities and private enterprises: this deadline will be 30 days, with the possibility of extending it to 60 days under certain conditions. The vote, held on 28 April, relates to the recast of the directive on combating late payment in commercial transactions. The report by Barbara Weiler (S&D, Germany) was adopted by 30 votes in favour, none against and six abstentions.

With regard to transactions between enterprises, the additional deadline (in excess of 30 days) must be defined in the contract and could go beyond the 60-day limit as long as this extension does not cause “unjustified damage” to one of the parties. The rule is stricter for public authorities: exceeding the 30-day limit would require specific justification and the maximum deadline of 60 days would be insurmountable. The payment deadline is nevertheless harmonised to 60 days for public authorities operating in the health sector. The rapporteur insisted on this exception, which is justified by the specific nature of these establishments, such as public hospitals, financed to a large extent by reimbursements via a social security system.

The submission of private enterprises to these deadlines was the subject of a compromise between the Parliament’s political groups. It is, however, contrary to the European Commission’s initial draft, which defined maximum deadlines solely for public operators. MEPs considered this differentiation between public and private to be unjustified.

The text approved by the IMCO committee abolishes the flat rate compensation of 5% of the invoice total, which would have been required in the event of late payment, plus interest. This abolishment is offset by an increase in the legal interest due upon the expiry of the deadline: the rate would correspond to the rate of reference, marked up by at least nine percentage points (instead of seven points, as proposed by the Commission). Furthermore, the creditor will be required to pay €40 in compensation for the recovery of administrative fees incurred.

SMES BETTER PROTECTED

“Let us not forget that the fate of small and medium-sized enterprises is the main reason for this directive,” recalled Barbara Weiler. The European Builders Confederation (EBC) – the voice of construction crafts and SMEs in Europe – “strongly welcomes this vote since it shows a strong position by the European Parliament on the need to protect SMEs from unfair late payments”. There is, however, one drawback: the EBC strongly regrets and denounces the suppression of the provisions on additional penalties in case of late payments and calls on the Parliament to reconsider this position and take into account the “positive discussions about gradual sanctions up to 3% instead of a flat rate 5%”. “It is important to note that MEPs decided to send a signal to public administrations, which must have less derogatory powers in payments of public procurement contracts,” notes EBC. The organisation now calls on member states to take into account the IMCO committee’s position. On this point, Weiler noted, during a press conference following the vote, that the Spanish EU Presidency “is not making progress on the dossier”.

Background

The proposal submitted by the European Commission in April 2009 (COM(2009)126) aims to improve the financial situation of European enterprises, in particular SMEs. It is in line with the Small Business Act. The emphasis is on late payments by public administrations, which “undermine the credibility of the policies undertaken and contradict the declared objectives of setting up a stable and predictable environment for enterprise activity and encouraging growth and employment”.