European Parliament adopts tough rules on b2b payments

Strasbourg, 20 October 2010. The European Parliament today voted in favour of fixed maximum payment delays between businesses and suppliers of 30 days as the norm, and 60 day delays that cannot be exceeded. Delays higher than these draw a fixed interest rate of 8% minimum.

The EP move aims to protect companies in Europe from illiquidity and bankruptcy caused by having to wait too long for customer payments. Debtors will no longer be able to impose long payment periods on their suppliers. The new directive is predicted to increase liquidity of European companies by almost € 180 billion a year.

Jürgen CREUTZMANN (FDP, Germany), ALDE coordinator on the report, welcomes the result: “This is a step forward for all companies, in particular for SMEs. The EP – and also our group – was clearly successful in having key points included.”

The directive can be summarised as follows:

  • Firstly: for transactions between public-sector operators and private companies, all invoices have to be paid within 30 days. Special justification is required to delay payment beyond 30 days, while the 60-day deadline cannot be exceeded under any circumstances.
  • Secondly: for business-to-business transactions all invoices have to be paid within 30 days if nothing else is agreed, otherwise businesses can agree to a period of max. 60 days. This however can be exceeded if expressly agreed and not grossly unfair to the creditor.
  • Thirdly: if these terms of payment are exceeded, recovery costs of at least € 40 plus interests of at least 8 per cent above the ECB reference rate can be billed without prior reminder.