New payment term rules to ease the supplier squeeze

Last year the Commission proposed recasting the 2000 late payment directive (2000/35/EC) in a bid to ease the business conditions for small and medium enterprises (SMEs) in the tough economic environment, as they tend to be hardest hit by late payment.

This week the European Parliament voted in favour of the plan, which gives enterprises 60 days to pay unless expressly agreed otherwise and the circumstances would render this ‘grossly unfair’; public authorities will have 30 days to pay for goods they procure, and 60 days in “very exceptional circumstances”.​ The change is expected to open up some €180 billion of liquidity to businesses across all industries in the EU.

Over 99 per cent of the 310,000 food companies in the EU are SMEs, according to the CIAA (Confederation of the Food and Drink Industries of the EU). CIAA President Jesús Serafín Pérez said the agreement “marks significant progress towards overcoming late payments, a major problem for the food and drink industry”.​

European Commission Vice President Antonio Tajani, Commissioner for Industry and Entrepreneurship, said: “Who works must be timely remunerated. This is a basic principle of fairness but plays a crucial role in relation to the solidarity of a company, its treasury, its access to credit and to finance. Therefore the new directive will help the entire European economy.”​

Good contracting codes needed​

The CIAA has also welcomed revision of the text to broaden the scope of unfair contractual clauses to include ´terms´ and ´practices´, relating to the payment conditions in a contract. “While this represents a positive step forward, manufacturers would have preferred to see all aspects of commercial relations included within the scope of the new rules,” said the trade organisation.

“Going forward, the CIAA supports the extension of good contracting codes to cover all commercial relations, beyond prompt payments alone. This would contribute to ongoing discussions at the EU level, looking at the broader issues surrounding contractual relations in the food supply chain, which CIAA trusts will lead to a Europe-wide solution to address unfair practices more generally.”​

Interest rates​

Member states will have to publish interest rates for late payment, but the statutory rate (which public institutions may not go under) is 8 percentage points above the European Central Bank’s reference.

Creditors will also be able to pay a minimum fixed amount of €40 as compensation for recovery costs.

Member states have 24 months from adoption to transpose the recast directive into national laws, and the Commission is encouraging them to do so promptly. They may, it points out, maintain or bring in laws that are more favourable to the creditor if they wish.

New payment term rules to ease the supplier squeeze

New, stronger rules on late payments adopted by Parliament will benefit small food manufacturers caught in a pressurised supply chain, as retailers will have 60 days to pay their suppliers (30 days for public authorities) or may hefty interest.

Last year the Commission proposed recasting the 2000 late payment directive (2000/35/EC) in a bid to ease the business conditions for small and medium enterprises (SMEs) in the tough economic environment, as they tend to be hardest hit by late payment.

This week the European Parliament voted in favour of the plan, which gives enterprises 60 days to pay unless expressly agreed otherwise and the circumstances would render this ‘grossly unfair’; public authorities will have 30 days to pay for goods they procure, and 60 days in “very exceptional circumstances”.​ The change is expected to open up some €180 billion of liquidity to businesses across all industries in the EU.

Over 99 per cent of the 310,000 food companies in the EU are SMEs, according to the CIAA (Confederation of the Food and Drink Industries of the EU). CIAA President Jesús Serafín Pérez said the agreement “marks significant progress towards overcoming late payments, a major problem for the food and drink industry”.​

European Commission Vice President Antonio Tajani, Commissioner for Industry and Entrepreneurship, said: “Who works must be timely remunerated. This is a basic principle of fairness but plays a crucial role in relation to the solidarity of a company, its treasury, its access to credit and to finance. Therefore the new directive will help the entire European economy.”​

Good contracting codes needed​

The CIAA has also welcomed revision of the text to broaden the scope of unfair contractual clauses to include ´terms´ and ´practices´, relating to the payment conditions in a contract. “While this represents a positive step forward, manufacturers would have preferred to see all aspects of commercial relations included within the scope of the new rules,” said the trade organisation.

“Going forward, the CIAA supports the extension of good contracting codes to cover all commercial relations, beyond prompt payments alone. This would contribute to ongoing discussions at the EU level, looking at the broader issues surrounding contractual relations in the food supply chain, which CIAA trusts will lead to a Europe-wide solution to address unfair practices more generally.”​

Interest rates​

Member states will have to publish interest rates for late payment, but the statutory rate (which public institutions may not go under) is 8 percentage points above the European Central Bank’s reference.

Creditors will also be able to pay a minimum fixed amount of €40 as compensation for recovery costs.

Member states have 24 months from adoption to transpose the recast directive into national laws, and the Commission is encouraging them to do so promptly. They may, it points out, maintain or bring in laws that are more favourable to the creditor if they wish.