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Late business payments: MEPs want deadlines

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MEPs believe that deadlines for paying bills in the business world should be laid down by law for both the private and public sectors. Yesterday Euro-MPs approved amendments to a planned EU directive designed to tackle the problem of late payments.

"Let's not forget that the plight of small and medium sized firms is the main reason for this directive", said Barbara Weiler, the MEP responsible for guiding the legislation through Parliament. The cash-flow problems faced by small firms are biting harder than ever in the current crisis and can even tip companies into bankruptcy. This recast version of an existing directive on combating late payments aims to give more protection to businesses and the jobs they create.

Thirty days to pay a bill

The Internal Market Committee wants all invoices to be paid within 30 days, whether the transactions are between public sector operators and private companies or between private firms (business-to-business). In both cases, the period could be extended to 60 days. In business-to-business transactions, the extra period would have to be stipulated in the contract and could even be more than 60 days provided the extension does not cause unjustified damage to either party. For public bodies the rules are stricter: special justification is required to delay payment beyond 30 days, while the 60-day deadline cannot be exceeded at all.

However, MEPs envisage some flexibility for public health institutions and public medico-social institutions, which would have 60 days as their standard deadline for paying bills to private contractors. This is because of the special nature of bodies such as public hospitals, which are largely funded through reimbursements under social security systems.

Parliament's political groups struck a compromise on the question of imposing payment deadlines on private companies. This was not in the Commission's draft directive, which only envisaged imposing payment deadlines on public sector operators. MEPs felt it was unjustified to differentiate between public and private sectors.

Interest and compensation

The committee voted to scrap the standard compensation figure of 5% of the bill, which only public bodies would have to pay according to the Commission's draft. Instead they voted to increase the statutory interest rate payable if a payment is late, to the reference rate plus at least nine percentage points (instead of seven points as proposed by the Commission). In addition, creditors would receive €40 in damages to cover administrative costs.

Next steps

The Internal Market Committee adopted the report by Barbara Weiler (S&D, DE) by 30 votes to 0, with 6 abstentions. The plenary vote is scheduled for May or June in Strasbourg. The date will depend on whether an agreement can be reached at first reading between Council and Parliament.

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