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Wednesday, October 20, 2010
European Parliament Approves 30-day Deadline to Pay a Bill

The standard deadline for paying bills will be 30 days under a deal with the Council endorsed by Parliament in plenary session on Wednesday.

The new rules should ensure that small firms no longer face financial problems due to the late payment of bills by public authorities or companies.

As a general rule, the deadline for both public and private sectors to pay a bill for goods or services will now be 30 days. Parliament's negotiators aimed to avoid loopholes and to ensure that any exceptions to the general deadline are restricted to special circumstances.

"This directive will pave the way for a whole new payment culture. We have aimed to ensure that the rights of the smaller companies are enforced in order to improve liquidity and create a better climate for investments into new jobs", said Parliament's rapporteur Ms Barbara Weiler in the debate on Tuesday evening. She stressed that Member States should not wait up to two years to put the new rules into effect, but begin transposing them into their national laws as of January 2011.

For business-to-business payments the general deadline is 30 days unless otherwise stated in the contract. If both parties agree, it is possible to go up to 60 days. The payment period may be extended beyond 60 days only if "expressly agreed" by the creditor and the debtor in the contract and provided that it is not "grossly unfair" to the creditor.

For public-to-business payments the general deadline is 30 days. If the two parties wish to extend the payment period, this has to be "expressly agreed" and "objectively justified in the light of the particular nature or features of the contract". Parliament fought hard to ensure that under no circumstances may the deadline for public authorities to pay a bill exceed 60 days.

Member states may choose a payment deadline of up to 60 days for public entities providing healthcare. This is because of the special nature of bodies such as public hospitals, which are largely funded through reimbursements under social security systems.

Parliament pushed Council to accept a statutory interest rate on overdue payments of the reference rate plus at least 8%. The creditor is also entitled to obtain from the debtor, as a minimum, a fixed sum of € 40, as compensation for recovery costs.

The verification period for ascertaining that the goods or services comply with the contract terms is set at 30 days. This period may be extended in the case of particularly complex contracts, but only if expressly agreed and provided it is not grossly unfair to the creditor. Parliament secured an undertaking that verification periods may not be used as a loophole to delay payment unnecessarily.

The agreement now needs to be formally adopted by the Council. The new directive enters into force 20 days after its publication in the EU Official Journal. Member States will then have two years to implement the new measures.

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