1. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 1 Directive 2000/35/EC: combating late payment in commercial transactions General principles

2. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 2 Combating late payment in commercial transactions  8 August 2000, Directive 2000/35/EC of the European Parliament and of the Council on combating late payment in commercial transactions was published in the Official Journal.  8 August 2002, the Directive entered into force (EU + EEA members – Iceland, Norway & Liechtenstein).  1st May 2004, the Directive entered into force in the ten new Member States. 1st January 2007, also in Romania and Bulgaria.

3. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 3 Why a Directive? One out of four insolvencies is due to late payment And this means…  450 000 jobs lost each year,  outstanding debts worth EUR 23.6 billion lost every year through insolvencies.

4. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 4 Why a Directive? Need to act The SME dimension: - SMEs are compelled to grant long-lasting supplier credit, - late payment leads to unfair results for small and medium- sized economic agents.

5. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 5 Why a Directive? Need to act The Internal Market dimension: -Average statistics: 21% of all undertakings would export more if their foreign customers were to pay more quickly (Netherlands 37%, Ireland 48%) -Late payment is an obstacle to the proper functioning of the Internal Market (Art. 14 EC).

6. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 6 Features of Directive 2000/35/EC Scope: It applies to all payments made as remuneration for commercial transactions: those taking place just only in one country as well as intra-community transactions; transactions between undertakings; or between undertakings and public authorities.

7. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 7 Features of Directive 2000/35/EC Scope: “Undertaking” means any organisation acting in the course of its independent economic or professional activity, even where it is carried on by a single person.

8. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 8 Features of Directive 2000/35/EC When a payment becomes a late payment: If the date or period for payment is not fixed in the contract, interest automatically becomes payable 30 days following the date of receipt of the invoice or the date of receipt of the goods or services.

9. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 9 Features of Directive 2000/35/EC Statutory interest & interest rate: Unless otherwise specified in an agreed contract, the penalty interest rate is the one set up by the European Central Bank plus, at least, 7 percentage points.

10. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 10 Features of Directive 2000/35/EC Statutory interest & interest rate: Penalty interest due for late payments is calculated on a daily basis (simple interest).

11. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 11 Features of Directive 2000/35/EC Reminder: Directive 2000/35/EC harmonises neither the payment period at 30 days, nor the statutory interest. The contracting parties can actually agree contractually to conditions below the minimum requirements set out in the Directive or more stringent delays.

12. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 12 Features of Directive 2000/35/EC Such an agreement would only be unacceptable if it is determined to be “grossly unfair” by a national court.

13. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 13 Features of Directive 2000/35/EC Legitimate interest: Organisations officially recognised as, or having a legitimate interest in, representing small and medium-sized enterprises may take action according to the national law concerned before the courts or before competent administrative bodies on the grounds that contractual terms drawn up for general use are grossly unfair.

14. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 14 Features of Directive 2000/35/EC Interest rate out of the Euro Zone: The rate is set by the national central bank. F.i.: In the UK, the rate is set at the official dealing rate of the Bank of England.

15. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 15 Features of Directive 2000/35/EC Other rights: Creditors can also claim full compensation for all relevant recovery costs incurred when trying to obtain payment from their customers. These recovery costs are, for example, administrative costs, procedural costs and third-party costs.

16. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 16 Features of Directive 2000/35/EC Other rights: The Directive allows the seller to retain title to the goods until payment is completed, if that is explicitly agreed before delivery.

17. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 17 Features of Directive 2000/35/EC Recovery procedures: Member States must ensure that an enforceable title can be obtained within 90 calendar days of the lodging of the creditor’s action, provided that the debt or aspects of the procedure are not disputed. National legislation, regulations and administrative provisions have to apply the same conditions for all creditors who are established in the European Community.

18. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 18 European institutions The European Commission has undertaken to apply the terms of Directive 2000/35/EC to its own contracting procedures.

19. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 19 Review on the effectiveness of European Community legislation on combating late payments Article 6.5 of Directive 2000/35/EC stipulates that: «The Commission shall undertake two years after 8 August 2002 a review of, inter alia, the statutory rate, contractual payment periods and late payments, to assess the impact on commercial transactions and the operation of the legislation in practice. The results of this review and of other reviews will be made known to the European Parliament and the Council, accompanied where appropriate by proposals for improvement of this Directive.»

20. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 20 Review on the effectiveness of European Community legislation on combating late payments (1) This study started on January 2006 and was finished on December 2006. In this review, data from the ten new Member States have also been taken into account, after two years of having put into force this legislation to fight late payment. It can be found online at: http://ec.europa.eu/enterprise/regulation/late_payments/further_reading.htm

21. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 21 Review on the effectiveness of European Community legislation on combating late payments (1) Overall conclusions of the report: All of the tools provided by the Directive except possibly the retention of title clause are relevant and useful. The Directive as a whole could benefit from greater coherence and this is one of the reasons for limited impact expectations and effectiveness.

22. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 22 Review on the effectiveness of European Community legislation on combating late payments (2) An Impact Assessment study on the recommendations presented in the 2006 study has been started in September 2007. It will be finished by June 2008 and will lead, if necessary, to a consultative procedure aiming at the amendment of this piece of legislation.

23. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 23 Related legislation (1) The European enforcement order for uncontested claims Regulation (EC) No 805/2004. Thanks to the introduction of minimum standards, the instrument allows the free movement of decisions, out-of-court settlements or authentic instruments concerning uncontested claims in all the Member States. It is no longer necessary to use an intermediate procedure in the Member State of enforcement prior to recognition and enforcement. The Regulation is applicable from 21 October 2005.

24. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 24 Related legislation (2) The European order for payment procedure Regulation (EC) No 1896/2006 sets up a simplified system for collecting uncontested debts between member States. Regulation 1896/2006 will apply from December 12th, 2008.

25. DG Enterprise and Industry Unit C4 - Internal Market and Simplification 25 Related legislation (3) Proposal of 15 March 2005 for a Regulation of the European Parliament and of the Council establishing a European Small Claims Procedure COM(2005) 87 final. This Regulation will apply in civil and commercial matters, whatever the nature of the court or tribunal, where the total value of a monetary or non-monetary claim excluding interest, expenses and outlays does not exceed EUR 2 000 at the time the procedure is commenced.