On 12 September 2023 in Strasbourg, the European Commission presented new rules aimed at tackling the problem of late payments in commercial transactions in Europe. Late payments have a significant impact on small and medium enterprises – for example, according to available statistics, one in four bankruptcies is caused by invoices not having been paid on time. The consequences of these late payments are immense, which is why the Commission is coming up with a new regulation to change the current situation and support European businesses.

The Commission has decided to revise the existing Late Payment Directive because the current EU legal framework for combating late payments has proved inadequate. Analytical studies since 2015 and opinions from the European Parliament in 2019 have pointed to several major shortcomings, including a lack of preventive measures and effective enforcement. The new draft regulation aims to address these shortcomings and ensure a more effective fight against late payments. Moreover, it is directly binding in all Member States and no national action is needed to implement it.

The new proposal introduces a uniform maximum payment period of 30 days for all commercial transactions, including those between businesses and public authorities. This is intended to remove ambiguities in this area and increase legal certainty. The new rule also provides for automatic payment of interest on late payments and increases compensation for late payments.

Another key element of the new Regulation is improved enforcement of the rules. Member States will be required to set up enforcement bodies to monitor and enforce the rules. These authorities will have the power to receive complaints, launch investigations and impose sanctions against defaulting payers, which should increase the efficiency of payment enforcement.

Overall, the proposed new regulation of the Commission on late payments has ambitious objectives: to improve payment behaviour, support SMEs and increase the efficiency of commercial transactions across the European Union. Once adopted, the new rules will apply one year after the Regulation has entered into force, to give Member States and businesses sufficient time to adapt to the new rules.

Author: Veronika Odrobinová, Lucie Nováková