The opportunities and threats of the new EU late payment directive

What is the Directive?

On 16 March 2013, the 27 Member States must transpose the Directive into law

What is in the Directive?

It is designed to combat late payment in commercial transactions to ensure the proper functioning of the internal market by:

  • Harmonising and limiting payment terms
  • Entitling suppliers to claim compensation and
  • interest in the event of late payment

Key considerations are:

  • It relates only to commercial transactions between organisations
  • Flexibility can be agreed between contracting parties

What does the Directive do?

  • Payment terms capped at 60 days for purchases made by businesses, 30 days for purchases made by the public sector
  • Acceptance and verification delays capped at 30 days
  • Late payment interest at 8% above base rate
  • A minimum late payment fee of €40

What local variations can be applied?

  • A higher rate of interest for late payment
  • Inclusion of contracts concluded by 16 March 2013
  • Reduced period for acceptance and verification
  • A lower maximum payment term
  • Higher payment term limits for certain Public Sector purchases
  • Provisions for dealing with down payments already made