KBzine: the original kitchen and bathroom industry e-news - since 2002
28th January 2021

We strongly recommend viewing KBzine full size in your web browser. Click our masthead above to visit our website version.

Leader Extension (20/09/2010)

It's not often that I agree with anything the European Union does and I consider membership to be an enormous waste of money that could be spent so much more wisely, yet very occasionally it comes up with something rather useful...

Monday saw an agreement between European Parliament and Council negotiators on new rules to ensure that small firms no longer face financial problems due to the late payment of bills by public authorities or companies. MEPs also secured important concessions on the general payment and verification periods, the capping of payment periods by public authorities and the interest rate payable if payments are made late.

This new legislation updates the existing EU Late Payments Directive. The standard deadline for both public and private sectors to pay a bill for goods or services will now be 30 days. The Commission's initial proposal in practice left the deadline open for debtor and creditor to agree, but Parliament's negotiators succeeded in persuading Member State representatives to accept an EU-wide 30-day rule.

Four key points were settled in the negotiations:

1. 60 days capping for public authorities: Only in exceptional circumstances can the payment period be longer than 30 days. Payment can never be delayed beyond 60 days for public authorities and special justification is necessary for any extension of the payment period.

2. Interest rate and compensation: The statutory interest rate payable if a payment is late will be the reference rate plus 8%. MEPs initially pushed for a 9% interest charge. The 8% surcharge is a compromise with the Council, which wanted 7%. Parliament and Council agreed to a fixed sum of €40 as compensation for recovery costs, rather than the complicated multi-level compensation payment system that had been favoured by the Commission.

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

4. A clear-cut verification period: 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 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 approved by the full Parliament and is likely to be put to a plenary vote at the October session in Strasbourg.

I hope it's passed as I hear of too many tradespeople and other small businesses struggling to maintain cashflow because their clients have a policy of making them wait for their money, knowing they're unlikely to make a fuss for fear of being replaced by another contractor or supplier who might be in a better position to wait.

17th September 2010