Late Payment: EBC calls for clear enforcement in EU Payment Observatory event

On Wednesday 17 April, EBC was invited to speak at a webinar organised by the EU Observatory of Payments in Commercial Transactions (EU Payment Observatory) on enforcement measures regarding late payment. The webinar was organised in the context of the publication of the Observatory’s latest thematic report on enforcement.

Following some welcoming words and introductory remarks by Antonella Correra, Policy Officer at DG GROW, the Centre for European Policy Studies (CEPS) presented the thematic report entitled “Enforcement measures combating late payments in commercial transactions”. The report concludes that the enforcement mechanisms linked to late payments can be improved, pointing notably at the next key findings:

The creditors’ rights to a flat-rate compensation of EUR 40 for recovery costs and a statutory interest rate, as provided in the current Directive, are very often not claimed;
This reluctance is often more pronounced when there is an imbalance of power in the relationship, notably when the creditor is an SME, and the debtor is a significant source of the creditor’s income;
Public authorities could better lead by example with regard to late payments; implementing systems to track G2B invoices, like the one in Italy, is highlighted as a good practice;
Good practices, such as enforcement authorities (in France, Poland, and Spain for the transport sector), expansion of arbitration mechanisms, and the automatic application of interest and recovery costs, should be further explored for policy recommendations.

A panel discussion followed, moderated by EISMEA, where EBC exchanged with the Office of Competition and Consumer Protection of Poland, the French Association of Large Companies AFEP.

EBC Senior Policy Officer Spyros Mathioudakis focused on the case of construction SMEs, giving an overview of the different ways whereby the current Late Payment Directive is circumvented in B2B and G2B relations. Such abuses are rooted in the loopholes allowed by the unclear concept of “grossly unfair”, the misuse of the verification period, pay-if-paid and pay-when-paid clauses in B2B, the rejection of payments using accounting details as an excuse or additional red tape by Public Authorities, or even discounts for prompt payment in B2B.

Considering the structural shortcoming of the current framework, he noted the importance of a clear legal framework that allows for straightforward enforcement. Limited tools such as interest and a 40€ compensation only intervene after late payment has occurred, and are often left unclaimed by small companies who fear a disruption of business relations. These situations lead to disputes between two parties, instead of the issue being treated as a market malfunction from actors who do not pay on time. He added that the existing Polish and French enforcement systems by dedicated authorities should be further explored as useful examples, with potential to reduce costs for SMEs, alleviate and complement the judicial system, and help foster a prompt payment culture in the EU.

EBC actively participates and contributes to the work of the EU Payment Observatory. The Observatory is an initiative of the Commission, steered by DG GROW and the EISMEA Agency, aiming at delivering transparency on payment discipline at EU level by monitoring payment performance both in the public and private sectors and across industrial ecosystems.

Construction SMEs and crafts continue to advocate for a strong EU legal framework on Late Payment that allows for robust enforcement of rules. In this vein, EBC reiterates its call towards Members of the European Parliament to support the compromises reached – by IMCO Rapporteur Ms. Thun und Hohenstein in the expected vote in the last plenary session of the European Parliament on 23 April, to trigger improvements needed by construction SMEs and crafts.