Presentation on theme: "The new directive on combating late payment"— Presentation transcript:
1 Directive 2011/7/EU on combating late payment in commercial transactions
2 The new directive on combating late payment A recast of Directive 2000/35/ECScope: all payments made as remuneration for commercial transactions:Between businesses (B2B)Public authorities (PA) and undertakingsDelivery of goods or provision of services for remuneration
3 The revision of directive 2000/35/EC: Why? Despite the Directive, late payment in commercial transactions is still a widespread practice in the EUIn general, payment periods in the public sector are longer than those in private sector contracts.
4 Late payment: the effect on SMEs Late payment represents a significant cost to creditors, especially for SMEs:SMEs are more exposed to variations in cash flowSMEs often rely on a limited number of clientsThe administrative costs of pursuing debts are disproportionately high for SMEsDebtor companies and public authorities paying late get free trade credit
5 Late payment: the effect on SMEs (2) Late payments have a negative impact on intra-EU trade:The inability or unwillingness of the debtor to pay on time is one of the major commercial risks for creditors in cross-border trade, in particular for SMEs. Costs are higher due insecurity.The debtor’s risk to reputation related to late payment is much lower when the creditor is established in another Member State
6 New rules: payment periods Directive 2000/35- Same treatment to all commercial transactions covered by the Directive- does not harmonise payment period-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-New Directive 2011/7/EUDifferent rules:B2B Transactions: not harmonisationPA2B: harmonisation of payment period
7 DIRECTIVE 2011/7/UE: payment period B2B Commercial transactionsIf there is no contract or no agreement on the date of payment: interest for late payment is due after 30 daysDate or period for payment is fixed in the contract? the day following the date fixed which may not exceed 60 days unless otherwise expressly agreed in the contract and provided it is not grossly unfair to the creditorLevel of interest: interest rate applied by ECB+ at least 8%
8 DIRECTIVE 2011/7/UE: payment period 2. PA2B Commercial transactionsPublic authorities will have to pay for the goods and services that they procure within 30 days or, in exceptional circumstances, within 60 days.Level of interest: interest rate applied by ECB+ at least 8%.Public authorities are not allowed to fix an interest rate for late payment below.
9 Directive 2011/7/EU: novelties Enterprises will automatically be entitled to claim interest for late payment and will also be able to obtain a minimum fixed amount of €40 as compensation for recovery costPossibility also to claim compensation for all remaining reasonable recovery costs.
10 Directive 2011/7/UE: novelties Businesses will have more opportunities to challenge grossly unfair contractual clauses and practicesFor example, an agreement between undertakings that expressly excludes interest for late payment will be considered as grossly unfairMore Transparency and awareness raisingMS will have to publish interest rates for late paymentMS are encouraged to establish prompt payment codes
11 Directive 2011/7/UE: novelties Late payment information campaignincreasing the awareness of EU stakeholders on the new rights conferred by Directive 2011/7/UE.September 2012-December 201327 Member States plus Croatia
12 Directive 2011/7UE : novelties Even small amounts of interest for late payment may be charged. The possibility to exclude claims for interest of less than €5 is abolishedMember States may continue to adopt more favourable provisions for the creditor
13 Directive 2011/7/UE: novelties The new measures are optional for enterprises insofar as they acquire the right to take action but are not obliged to do so.The new measures are obligatory for public authorities. They should lead by example and show their reliability and efficiency by honouring their contracts.
14 2000/35/EC 2011/7/EU SAME RULES FOR ALL Non harmonisation of payment period:- No contract: 30 days after receipt invoice or goods-contract: the day after the date stipulate on itDIFFERENT RULES1. Harmonisation for PA: they will have to pay, as general rule, within 30 days2. Freedom of contract for B2B:No contract: 30 daysContract:60 days unless otherwise agreed btw parties and provided it is not grossly unfair to creditorInterest rate for LP:- ECB reference + at least 7%ECB reference+ at least 8%PA can not apply an interest rate below this thresholdEnterprises entitled for interest for late paymentEnterprises entitled for interest for late payment + recovery costsEnterprises better protected against abuses: grossly unfair terms and practicesMore transparency and awareness raising
15 Directive 2011/7/UE: transposition MS will have to transpose it into national law within 24 months: 16 March 2013However…current economic context requires much earlier measures enterprises survive a period of economic difficultiesearly transposition and implementation!!!
17 Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedureEuropean Commission Justice
18 PurposeSimplify, speed up and reduce costs of cross-border litigation concerning uncontested pecuniary claimsPermit free circulation of EOPs throughout MSOptional procedure: Claimant can also pursue claim by using another national procedure
19 Scope of ApplicationCivil and commercial matters in cross-border cases“Cross-border case“: At least one of the parties domiciled or habitually resident in MS other than MS of courtRegulation applies to all MS except Denmark
20 Applying for a EOP Form A: Names and addresses of the parties and their representativesName and address of the courtAmount of claimCause of the action, including a description of circumstances invokedDescription of evidence supporting claimCross-border nature of the caseSubmission: In paper form or by any other means of communication (including electronic ones) accepted by MSPecuniary claim: Must be for specific amount that has fallen due at time when application is submittedJurisdiction: Regulation (EC) No 44/2001 (Brussels I).
21 Examination of an application Court examines as soon as possible (also through automated procedure):- Requirements met (e.g. cross-border nature of case, jurisdiction of court, application form complete, etc.) ?- Claim “appears to be founded and admissible” ?If application form is not complete:Court gives claimant opportunity to complete/rectify application, unless claim is clearly unfounded or application inadmissible. => Form BIf requirements are met for only part of claim:Court may propose that application be amended. => Form C. Claimant is asked to accept or refuse proposed EOP for amount specified by court.=> Claimant accepts : Court issues EOP for part of claim accepted by claimant. Remaining part: national law.=> Claimant does not reply or refuses: Court rejects application.
22 Rejection of an application Court rejects application if it:Does not meet the necessary conditions;Is not founded;Applicant does not return completed or modified application in time;Applicants does not reply within time limit, or refuses the court's proposed amendment.Court informs applicant of reasons for rejection: => Form D (Annex IV). No right of appeal. However, rejection does not prevent claimant from pursuing claim through new application for EOP or using any other procedure available under national law
23 Issuing a European order for payment If conditions for EOP are met: Court issues order as soon as possible(normally within 30 days of lodging application)=>Form EEPO informs defendant: May either pay amount of claim, or contest EPO. To contest, defendant must lodge a statement of opposition (within 30 days of service of EOP).EOP is issued solely on basis of information provided by claimant and not verified by court. EOP becomes enforceable, unless defendant lodges statement of opposition.Regulation abolishes exequatur: EOP recognised/enforced in other MS- without need for declaration of enforceability and- without any possibility of opposing recognition.
24 Opposition to a EOPDefendant may lodge statement of opposition with court that issued EOP within 30 days of service: => Form F. Defendant indicates in statement that claim is contested, without having to specify reasons=> Proceedings continue before competent courts of MS of origin in accordance with rules of ordinary civil procedure (unless claimant has requested that proceedings be terminated in that event)
25 EOP Application COURT may propose that application is amended Requirements only partly metForm not completeCOURT gives claimant opportunityto complete/rectify applicationCLAIMANTapplies for EOP (Form A)Requirements not metClaim not foundedForm not completedCOURT rejects applicationRequirements metClaim „appears foundedand admissible“COURT ISSUES EOP
26 Further procedure Ordinary civil procedure Defendant: Statement of opposition (30 days)Ordinary civil procedure(Unless claimant has requestedtermination)EOPserved on defendantDefendant:No Statement of opposition(30 days)COURT declares EOP enforceable(Form G)
27 European Small Claims Procedure European Commission Justice
28 ObjectivesSimplify, speed up and reduce costs of small claims litigation in cross-border casesEliminate intermediate proceedings (exequatur) necessary to enable recognition and enforcementProcedure available to litigants as optional alternative to national procedures
29 Scope (Art. 2, 3) Civil and commercial matters Value of claim does not exceed 2000 €Cross-border case: At least one party domiciled or habitually resident in MS other than MS of seised court
30 NO APPLICATION TO:Revenue, customs or administrative mattersLiability of State for acts and omissions in exercise of state authority (“acta iure imperii”)Status or legal capacity of natural personsRights in property arising out of matrimonial relationship, wills and succession, maintenance obligationsBankruptcy, proceedings relating to winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedingsSocial securityArbitrationEmployment lawTenancies of immovable property, except actions on monetary claimsViolations of privacy and rights relating to personality, including defamation
31 Commencement of ESCP (Art. 4) ESCP (V)Commencement of ESCP (Art. 4)Claim not within scope of ESCPCOURTInforms claimant accordinglyProceeds in accordance with natio-nal law (unless claimant withdraws)Information provided insufficientlyclear or adequateClaim Form not completed properlyCOURT gives claimant opportunity toSupply supplementary informationWithdraw claimComplete/rectify Claim FormCLAIMANTCompletes Claim FormLodges Claim Form atcompetent courtClaim Form not completed/rectifiedClaim clearly unfoundedApplication inadmissibleCOURTDismisses applicationOTHERWISECOURT PROCEEDS WITH ESCP(ART. 4)
32 ESCP (VI) Conduct of ESCP (Art. 5) DEFENDANT Claims that value of a non-pecuniary claim > 2000 €COURTDecides within 30 days whetherclaim is within scopeDEFENDANTSubmits counterclaimCOURTCounterclaim <= 2000 €: ESCPCounterclaim > 2000 €:National procedural lawCOURTCompletes Answer FormServes Answer Form andcopy of Claim Form ondefendant (within 14 days)DEFENDANTDoes not answer within 30 daysCOURTDelivers judgmentDEFENDANTANSWERS WITHIN 30 DAYSCOURT CONCLUDES ESCP(ART. 5)
33 Conclusion of ESCP (Art. 7) ESCP (VII)Conclusion of ESCP (Art. 7)Delivers JudgmentDemands further Detailsconcerning claim from parties (max. 30 days)COURT(Within 30 days ofreceipt of response)Delivers Judgment(Within 30 Daysof Hearing orafter havingreceived allInformationnecessaryfor Judgment)Takes EvidenceSummons Parties to Hearing (max. 30 days)if considered necessary by court or requestedby a party. The court may refuse request if withregard to circumstances hearing is obviouslynot necessary for fair administration of the case
34 Languages (Art. 6)Claim Form, response, counterclaim, response to counterclaim, description of supporting documents:=> Submission in language of courtAny other document received by court in language other than language of court:=> Court may only require translation if translation appears to be necessary for judgmentIf a party has refused to accept a document because it is not in official language of MS addressed or language addressee understands:=> Court shall inform other party with view to supplying a translation
35 Hearing and Taking of Evidence (Art. 8, 9) ESCP (IX)Hearing and Taking of Evidence (Art. 8, 9)Courtmay hold hearing or take evidence through video conference or other communications technology if technical means are availableshall determine means of taking evidence and extent of evidence necessary for judgment under rules applicable to admissibility of evidencemay take expert evidence or oral testimony only if necessary for judgment. Court shall take costs into accountshould select the simplest and least burdensome method of taking evidence
36 Other Important Procedural Rules Representation by lawyer not mandatoryNo legal assessment of claim required. Court informs parties about procedural questions if necessaryDocuments served by postal service attested by acknowledgement of receiptJudgment enforceable notwithstanding any possible appeal. Not necessary to provide securityUnsuccessful party bears costs of proceedings. However, court shall not award costs unnecessarily incurred or disproportionate to claim to successful partySubject to the provisions of the Regulation, ESCP shall be governed by procedural law of the court
37 Areas of Improvement Knowledge of judges and court staff Information to consumersOrganisation of assistance in filling the formsAssistance in launching and participating in the proceedings2000 euro threshold
38 What we are doing to improve Guide for practitioners and citizensCooperation with ECC-NetNew interactive forms in Europeane-Justice Portal with helpful wizardTraining modules to be provided to Member States to train judges and court officials
39 1 January 2014Report of the Commission reviewing the operation of the ESCP, including limit of 2000 euroAssessment of the procedure as it has operated based on information from the Member StatesProposals for adaptation
40 Proposal for a Regulation creating a European Account Preservation order to facilitate cross-border debts recovery in civil and commercial matters COM (2011)445 final
41 UPCOMING REGULATIONCreating a EU Account preservation order to facilitates cross-border debt recovery in civil and commercial matterTo recover money within EUMore certainty and confidence for creditors
42 Upcoming REGULATIONA Court would issue an order to a bank obliging it to preserve a specific amount owed to a creditorOnly available in cross border casesIt will not provide for the actual payment of the money at the end of litigation: governed by national law
43 Upcoming RegulationAim: avoid debtors to move funds from MS to another or withdraw it to scape enforcement of a court order to pay back money owedCompanies could recover up to 600 million euros a year in debt that is currently written off.
44 Upcoming Regulationcurrently under ordinary legislative Procedure Expected adoption: 2013