The European Parliament voted on 21 October on the proposal to fix the standard deadline for paying bills to 30 days. The new rules should ensure that small firms no longer face financial problems due to the late payment of bills by public authorities or companies and bolster solvency, innovation and jobs.

As a general rule, the deadline for both public and private sectors to pay a bill for goods or services will now be 30 days, unless otherwise stated in the contract. If both parties agree, it is possible to go up to 60 days, a maximum period which can only be extended if expressly agreed by the creditor and the debtor in the contract and provided that it is not grossly unfair to the creditor.

For public-to-business payments the general deadline is also 30 days, and if the two parties wish to extend the payment period, this has to be expressly agreed and objectively justified in the light of the particular nature or features of the contract. Parliament fought hard to ensure that under no circumstances may the deadline for public authorities to pay a bill exceed 60 days.

As a special case, Member states may choose a payment deadline of up to 60 days for public entities providing healthcare. This is because of the special nature of bodies such as public hospitals, which are largely funded through reimbursements under social security systems.

Negotiations over the Late Payments Directive

After the proposal put forward by the Commission to tackle moroseness, the Parliament has pushed for over a year to secure more stringent and clear-cut rules on payment periods. Parliament's negotiators aimed to avoid loopholes and to ensure that any exceptions to the general deadline are restricted to special circumstances, elements which were part of the agreement reached between the Parliament and the Council on the late payment Directive mid-September.

Also, Parliament pushed Council to accept a statutory interest rate on overdue payments of the reference rate plus at least 8%. The creditor is also entitled to obtain from the debtor, as a minimum, a fixed sum of 40 Euro, as compensation for recovery costs.

The agreement now needs to be formally adopted by the Council. Afterwards, the new Directive will enter into force 20 days after its publication in the OJEU and Member States will then have two years to implement the new measures.