Late Payment: EBC calls for an ambitious revision of the Late Payment Directive

In the context of the consultation to revise the Directive 2011/7/EU on combating late payment in commercial transactions, the European Builders Confederation (EBC) calls for actions to further improve payment behaviour of enterprises as well as public authorities through an ambitious revision based on the principle of zero tolerance regarding long payment terms and late payment.

During her last State of the Union speech, European Commission President Ursula von der Leyen made the revision of the Late Payment Directive (LPD) one of her priorities by including it in the Commission’s “SME Relief Package”.

This necessary revision presents a once-in-a-decade opportunity to correct a long-standing unfair framework that puts construction SMEs and crafts in disadvantage and creates uncertainty and unreliability across the construction value chain and beyond. Indeed, several independent studies have shown that late payment has significant impacts on construction SMEs, as overdue payment or the lack thereof suffocate their liquidity and even lead to bankruptcies and defaults, in an already difficult context of continuous crises phasing the European economy.

Despite the existing framework, we continue to witness sever violation of the acceptable payment period due to the perpetuation of abusive practices both in Business-to-business (B2B) and Public authorities-to-business (PA2B) transactions. EBC therefore calls for an ambitious revision of the Late Payment Directive based on the principle of zero tolerance regarding long payment terms and late payment. To this end, EBC believes stricter legal measures are necessary to further improve payment behaviour of enterprises as well as public authorities and proposes the following actions:

• Define an obligatory maximum period of payment not exceeding 30 calendar days for all commercial transactions
• Apply mandatory interest and compensation charges from the first day of late payment
• Define an obligatory maximum duration of 30 calendar days to ascertain the conformity of services or goods
• Provide a clear definition of what is considered unfair contractual terms
• Ensure subcontractors can directly claim payment from the contracting authority as foreseen in the Public Procurement Directive
• Enforce better legislation on late payment and enforce administrative sanction
• Allow SMEs to offset tax and social security debts against any outstanding amounts owe to SMEs due to late payment by Public Authorities
• Set-up and enable mediation and arbitration measures at the regional and local level
• Reinforce the transparency on payment practices

EBC Secretary General Fernando Sigchos Jiménez stated: “Late payment is a damaging practice that seriously affects the business of construction SMEs and crafts across Europe. A courageous revision of the Late Payment Directive therefore represents a major opportunity to rectify a phenomenon that continues to drain liquidity and human resources and even bankrupt small construction companies. This is why EBC insists on a zero tolerance towards abusive payment behaviour in order not to harm the activity of SMEs in the construction sector, which are fundamental to Europe’s economic, societal, environmental and digital ambitions.”

To read the full EBC position paper on the revision of the Late Payment Directive, click here.