EU proposes tightening of Late payment regime

13 October 2023.

The EU is proposing tightening up it’s late payment regime.

Although the new regulations won’t apply in the UK, it is interesting for comparisons sake compared with the UK governments inaction.

Key points

1) They propose replacing the current directive (which each state must legislate to apply locally – as the UK did with the The Late Payment of Commercial Debts Regulations 2013 in response to the Late Payment Directive (2011/7/EU) ) with EU regulation which applies equally across the EU.
2) Reducing the maximum terms to 30 days on commercial transactions and removing the right to extend those terms.
3) Late payment interest automatically payable by debtors and a prohibition on waiving the late payment interest.
4) If an invoice is late paid then interest back dates to the date of the invoice. The current drafting of the Proposed Regulation appears to state that late payment interest, if triggered as a result of a late payment, accrues from the later of the date of receipt of the invoice and the date of receipt of the goods or services. So, assuming the parties have agreed a 30-day payment term and the debtor is one day late in making payment, they would owe 31 days’ late payment interest and the parties are not permitted to waive this.