EU Directive On Combating Late Payments In Commercial Transactions

Profession:A & L Goodbody
 
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Introduction

On 29 June 2000, the EU adopted Directive 2000/35/EC on combating late payment in commercial transactions (the "Directive").

The Directive entered into force on 8 August 2000 and must be implemented by the EU Member States (including Ireland) before 8 August 2002. The Department of Enterprise, Trade and Employment, which is responsible for the implementation of the Directive into Irish law, has indicated that implementation is anticipated to take place next year. No draft bill has as yet been published.

If Ireland fails to implement the Directive by 8 August 2002, the Directive will become directly effective from that date. This means that individuals and companies may rely directly on the Directive and that the terms of the Directive may be enforced by Irish courts.

Background

In 1993, the European Commission conducted extensive consultations on the problem of late payments in commercial transactions. The consultations found that there was an increase in the number and seriousness of delays in payments which was causing considerable disquiet, particularly among SMEs. Concerns which were identified by businesses in response to the consultations included implications on cash-flow requirements and administrative costs. As a result, the Commission adopted a Recommendation in May 1995 on payment periods in commercial transactions, calling upon EU Member States to take legal action to combat late payment. The basic aim of the Recommendation was to establish common minimum guarantees for all operators in the EU to help maximize the benefits of the Single Market.

The European Parliament, in its Resolution of 4 July 1996, recommended that the Commission's Recommendation be transformed into a Directive as soon as possible while the Economic and Social Committee, in an opinion dated May 1997, proposed maximum payment periods and interest on late payments by public authorities. On 9 July 1997, the Commission reported that action undertaken by Member States in response to its Recommendation to improve the payment situation between businesses had been very limited. In fact, statistics showed that average payment time had actually lengthened. These findings led to a further extensive consultation process undertaken by the Commission, which resulted in overwhelming support for EU legislation in this area.

Main Points

The most important features of the Directive are as follows:

maximum interest-free credit period of 30 days...

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