Filenews 16 June 2024 - by Natasha
On 12 September 2023, the European Commission published a package of assistance for small and medium-sized enterprises (SMEs), including a proposal for a Regulation on late payments.
The proposed Regulation "Proposal for a Regulation of the European Parliament and of the Council on combating late payment in commercial transactions" essentially revises the current Directive of 16 February 2011, 2011/7/EU of the European Parliament and of the Council on combating late payment in commercial transactions. The Regulation, unlike the Directive, is directly applicable and applies with the same provisions in all EU Member States.
The proposal introduces stricter measures to tackle late payment in business transactions in the EU. Most importantly, it provides for a single maximum payment period of 30 days for all commercial transactions, including business-to-business (B2B) and government-to-business transactions. Currently, the payment period for these products is set at a maximum of 60 days. The proposal reduces this limit to 30 days.
The proposal imposes automatic payment of interest for late payment until the debt is settled, protecting creditors. The new rules ensure that the creditor cannot waive this right and annul contractual provisions that allow it. Thus, interest on late payments is automatically paid by the debtor.
Concerns and misgivings
The Cyprus Employers and Industrialists Federation (OEB), as the main representative of Cypriot business, expressed concerns and reservations.
As a principle, OEB considers the Proposal for a Regulation on the reduction of the payment time to thirty (30) days too strict and restrictive for the freedom of negotiation between the contracting parties. Although in some cases imposing a deadline may be correct, it is impossible to apply it to all commercial transactions.
Turning the Directive into a Regulation reduces the flexibility of Member States and businesses to conclude agreements they deem appropriate, ignoring the economic conditions of each country. With the current economic instability, rising inflation and interest rates, and reduced liquidity of SMEs, the imposition of such a Regulation may undermine the financial viability of many businesses. It can also lead to higher prices for consumers.
Alternatives
OEB believes that there are other ways to manage late payments, as the implementation of the Regulation as proposed will cause trade disruption and possibly force companies to source goods outside the European Union, which will undermine the competitiveness of European trade and the quality of products imported into Europe.
The adoption of dissuasive arrangements for late payments between partners and the creation of an organised monitoring system responsible for keeping to the credit period are some of the methods that could help to meet the timetables set out in the contracts.
According to reliable statistics, in EU countries the deadline for payment of commercial transactions is 41 days, but the actual payment time is 56 days on average. In the public sector, deadlines are 52 days, while payments are made in 69 days on average. Therefore, a significant improvement is needed in public payments to businesses in order for them to meet their obligations.
Changes by the European Parliament
Following consideration of the European Commission's proposals, the European Parliament has made the following amendments: Payment terms in commercial transactions between public authorities and businesses will be limited to a maximum of 30 days, while in business-to-business commercial transactions, if explicitly agreed, the payment period can be extended up to 60 days from the date of submission of the invoice.
There is also the possibility under certain conditions of extension of up to 120 days for purchases of crude or seasonal goods.
The period for accepting or verifying the goods is set at 30 days, but if the date of submission of the invoice is not clear, the payment period cannot exceed 30 days from the date of receipt of the goods or services.
* Business Development Department Officer (OEB)
