Late payments: Commission seeks clarifications from Italy and Slovakia
Today the Commission decided to seek clarifications from Italy and Slovakia on their application and implementation of the EU's Late Payment Directive. The request for information in both cases takes the form of a letter of formal notice under EU infringement procedures.
According to the Commission's
information, Italy is not applying the Directive correctly in practice.
The Commission has received a number of complaints which highlighted the
fact that in Italy the public authorities take on average 170 days to
make payments for services or goods provided, and 210 days for public
works. Moreover, some Italian public bodies use contracts that apply
interest rate terms to late payments which are clearly lower than the
interest rate required by the Directive (which must be at least 8% above
the European Central Bank’s reference rate). The Commission was also
informed that some Italian public bodies postpone the issue of work
progress reports in order to enable them to delay payments that are due
to be made to companies performing public works.
According to the Commission's
information, Slovakia has not implemented the Directive correctly in its
national legislation. In particular, Slovakia provides for a dual
system for late payment interest rates, a fixed one and a variable one.
In the case of a fixed rate, the debtor will have to pay late payment
interest equal to the base interest rate of the European Central Bank
(ECB), increased by 9%. In the case of a variable rate, the debtor will
have to pay late payment interest equal to the ECB base rate, increased
by 8%. If the creditor has not explicitly requested any of the two rates
of late payment interest, the fixed rate takes precedence. The
Commission has doubts on the compatibility of this system with the late
payment directive.
Major obstacle for Single Market
Late payments constitute a major
obstacle to the free movement of goods and services in the Single
Market. They can impede cross-border trade and distort competition.
Every year European businesses go bankrupt waiting for their invoices to
be paid. Late payment has therefore a negative effect on the entire
European economy.
The Late Payment Directive can
be of considerable help to companies, especially small and medium sized
enterprises (SMEs) which constitute 99% of all EU businesses. Adopted in
2011, the Directive responded to a real need to switch to a culture of
prompt payment.
The Directive's correct
implementation and application in practice are particularly important to
the proper functioning of the economy. A correct application of the
Directive should unlock the cash flow to European enterprises and help
them overcome the economic crisis.
EU countries agreed to
incorporate the Directive's requirements into their national laws within
two years of its adoption, ie by the 13th March 2013.
Next steps
Italy and Slovakia have two
months to react to the Commission's warning. If information received by
Member States is regarded as insufficient, the Commission may find
that the Member States are in breach of EU law and must do rapidly
remedy that breach. At that point the Commission would then issue
a "Reasoned Opinion" in accordance with Article 258 of the Treaty on
the Functioning of the European Union. Failure to comply with the latter
can lead to the case being referred to the European Court of Justice
and the eventual imposition of fines.
Background
Directive 2011/7/EU (a recast of
Directive 2000/35/EC) on combating late payment in commercial
transactions aims to remove a major obstacle to the free movement of
goods and services. The Directive contains, amongst others, the
following measures:
-
Harmonisation of the period for payment by public authorities to businesses: public authorities have to pay for the goods and services that they procure within 30 days or, in very exceptional circumstances, within 60 days. It is estimated that correct application of this rule would mean that additional liquidity amounting to almost €180 bn would be available to businesses.
-
Contractual freedom in businesses' commercial transactions: enterprises must pay their invoices within 60 days, unless they expressly agree otherwise and if it is not grossly unfair to the creditor.
-
Enterprises are automatically entitled to claim interest for late payment and in addition will also be able to obtain a minimum fixed amount of €40 as compensation for recovery costs. They can claim compensation for all remaining reasonable recovery costs.
More information:
IP-13-216: SMEs: Damaging late payment culture due to end on 16 March