Late Payment: ECJ considers Member States have to guarantee timely payment by public authorities

On 28 January, the Grand Chamber of the European Court of Justice ruled that Italy had violated Directive 2011/7/EU on combating late payment in commercial transactions, because it failed to ensure that its public authorities complied with payment periods not exceeding 30 or 60 days, as laid down in the Directive.

With its judgement, the Court rejected the Italian argumentation that the “Late Payment Directive” does not require Member States to guarantee effective compliance by their public authorities with the periods laid out. Instead it highlighted that Member States are in fact responsible to ensure that their public authorities pay on time, because the Directive clearly intended to increase obligations on Member States, considering the great number of commercial transactions in which public authorities are the debtors of undertakings and the negative consequences that late payments create for enterprises.

EBC welcomes the Court ruling as an important clarification on the duties Member States have with regard to the timely payment of their public authorities at the national, regional and local level, and counts on this being a wake-up-call for other Member States. In fact, unacceptably long payment terms and late payment continue to present a serious and extensive problem in both, business-to-business relations and in contracts with public authorities, despite the recast of the Directive in 2011.

Therefore, EBC advocates for a revision of the “Late Payment Directive” , demanding to end the legal leeway frequently used by enterprises and public authorities and to establish a zero tolerance policy regarding long payment terms and late payment.