Changes from report parliamentary committee draft to plenary report

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

▸7 unchanged paragraphs

on the proposal for a regulation of the European Parliament and of the Council on combating late payment in commercial transactions

(COM(2023)0533 – C90338/2023 – 2023/0323(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2023)0533),

– having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90338/2023),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

Added– having regard to the opinion of the European Economic and Social Committee of 17 January 2024,

Added– having regard to the opinion of the Committee of the Regions of 31 January 2024,

– having regard to Rule 59 of its Rules of Procedure,

Changed– having regard to the report of the Committee on the Internal Market and Consumer Protection (A90000/2023),(A9-0156/2024),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 1

AddedRecital 2: (2) Many payments in commercial transactions between economic operators or between economic operators and public authorities are made later than agreed in the contract or laid down in the general commercial conditions or by law, although the goods are delivered or the services provided.

AddedRecital 3: (3) Late payments and payments deferred beyond the periods established by law directly affect liquidity and predictability of cash flows, thus increasing working capital needs and compromising profitability, when the creditor needs to obtain external financing because of late payment. This affects competitiveness, reduces, leads to redundancies, increases the likelihood of insolvencies and bankruptcies and is a critical barrier for growth, also considering that inflation reduces the real value of credits over time. The damaging effects of late payments spread along supply chains, as the payment delay is often passed onto suppliers. Small and medium sized enterprises (SMEs), and in particular micro-enterprises, which rely on regular and predictable streams of cash, are heavily affected by those negative consequences. Late payment thus represents a problem for the Union economy because of its negative economic and social consequences. The risk of such negative effects strongly increases in periods of economic downturn when access to financing is more difficult.

AddedRecital 6: (6) Directive 2011/7/EU of the European Parliament and of the Council40 lays down rules to combat late payment in commercial transactions. In 2019, the European Parliament identified several shortcomings of that Directive. The SME Strategy for a sustainable and digital Europe41 called for ensuring a ‘late-payment-free’ environment for SMEs and strengthening the enforcement of Directive 2011/7/EU. In 2021, the Fit for Future Platform highlighted critical issues in the implementation of that Directive in its opinion. The main shortcomings identified in these initiatives are related to: the ambiguous provisions on ‘grossly unfair’ regarding the deadlines for payment in business to business transactions (B2B), the unfair payment practices and the deadlines for the procedures of acceptance and verification; the flat fee compensation; the asymmetry of rules for payments terms between G2B and B2B transactions; the asymmetries in bargaining power between large and more powerful debtors and small creditors; the lack of a maximum payment term for commercial transactions in B2B transactions; the lack of monitoring of compliance and enforcement; the absence of tools to combat the asymmetries of information; as well as tools for creditors to take action against their debtors, and the lack of synergies with the public procurement framework.

AddedRecital 10: (10) Transactions with consumers, payments made as compensation for damages and obligations to pay that can be cancelled, postponed, or waived under or in relation to insolvency proceedings or restructuring proceedings, including preventive restructuring proceedings under Directive (EU) 2019/102342 of the European Parliament and of the Council, should be excluded from the scope of this Regulation. However, payments made in performance of obligations stemming from insurance contracts should be covered by this Regulation. In particular, payments made in transactions between insurance companies and undertakings in exchange for the delivery of goods or the provision of services for remuneration, including as a compensation to other third parties, should fall within the scope of this Regulation.

AddedRecital 11: (11) Late payment constitutes a breach of contract which is financially attractive to debtors, due to low or no interest rates charged on late payment, or slow procedures for redress. A decisive shift to a culture of prompt payment, including one in which the exclusion of the right to charge interest for late payment is null and void, is necessary to reverse this trend and to discourage late payment. Consequently, contractual payment periods should be limited to 30 calendar days both in B2B transactions and G2B transactions, where the public authority is the debtor. This shift is also needed to limit the so-called ‘fear factor’ that micro and small undertakings suffer when they have a credit with bigger companies and that often brings such creditors to accept longer payment periods than they are comfortable with against the promise of future business. At the same time, additional flexibility should be granted to the undertakings so they can benefit from the freedom of contract and negotiate a longer payment period up to 60 calendar days. This extended payment period should be possible when it is mutually beneficial for the creditor and the debtor. Electronic invoicing can also be a helpful tool in shortening the payment period, as it would help creditors to prove the date of receipt of the invoice in the event of doubt or dispute.

AddedRecital 11 a (new): (11a) Against this background, it is necessary to acknowledge the existence of certain business models and industry practices within the retail sector which aim to keep slightly longer payment periods. As these practices reflect low rotation and seasonality of certain product categories, as well as unique operating cycles of some slow-moving cultural goods, such as toys, jewellery, sporting equipment or books, and are mutually beneficial for the creditors and the debtors, it is desirable to allow a limited flexibility in this matter so that the contracting parties can benefit of up to 120 calendar days payment period.

Recital 12: (12) The procedures of acceptance or verification for ascertaining the conformity of the goods or services provided with the requirements of the contract, as well as verification of the correctness and conformity of the invoice, are very useful tools in many commercial transactions, in particular to protect the interests of the seller and to avoid unnecessary legal disputes between the parties. This Regulation does not seek to limit the use of these tools. However, these procedures are often used to delay intentionally the payment period. In the context of establishing the payment period, their inclusion in the contract should therefore be objectively justified by the particular nature of the contract in question or by certain of its characteristics43. It should therefore be possible to provide for such procedure of verification or acceptance in a contract only when provided for in national law where necessary, due to the specific nature of the goods or services. To avoid that the procedure of acceptance or verification is used to extend the payment period, the contract should clearly describe the details of such procedure, including its duration. For the same purpose, the debtor should initiate the verification or acceptance procedure immediately upon reception from the creditor of the goods and/or the services that are the object of the commercial transaction, regardless of whether the creditor has issued an invoice or equivalent request for payment. In order not to jeopard…

Change 2

ChangedRecital 18: (18) Fair compensation of creditors for the recovery costs incurred due to late payment is necessary to discourage late payment. These costs should include the recovery of administrative costs and compensation for internal costs incurred due to the late payment, should be adapted to the value of the invoice in question and should be cumulated with interest for the late payment for every single commercial transaction that has been paid late as determined by the Court of Justice48 .Justice48. The fixed minimum sum of compensation for the recovery costs should be determined without prejudice to national provisions according to which a national court may award compensation to the creditor for any additional damage regarding the debtor’s late payment.

Change 3

RemovedRecital 21: (21) Abuse of freedom of contract to the disadvantage of the creditor should be avoided. As a result, where a clause in a contract or a practice relating to the date or term of payment, the payment or rate of interest for late payment, the compensation for recovery costs, extending the duration the procedure of verification or acceptance or preventing the moment of sending the invoice is not in conformity with this Regulation, it should be null and void or, respectively, prohibited. In the same vein, certain practices leading to the abuse of freedom of contract to the disadvantage of the creditor, should also be prohibited. Making assignments of credit to third parties or using an executive order issued by a court, by a creditor, should not be prevented or restricted by the debtor.

AddedRecital 18 a (new): (18a) This Regulation upholds contractual freedom and the implementation of Article 16 of the Charter of Fundamental rights concerning the freedom to conduct a business. For this purpose, this Regulation leaves to the contracting parties the choice of contractual relations, as well as the type of contract and its modalities. Choice of different types of contracts, including consignment contracts, where the invoice is issued at an agreed point of time after the delivery of goods, is not restricted in any way. In the case of consignment contracts or other similar types of contract the deadlines specified in this Regulation should be applicable after receipt of the invoice. As this Regulation emphasises on the payment period after issuing the invoice, thus contributing to the improvement of the payment culture overall, and merely ensures that agreements on the payment period do not abuse the freedom of contract to the disadvantage of the creditor, it should be possible for the parties to benefit from the freedom of contract and consent to their preferred type of agreement;

RemovedRecital 26: (26) To facilitate and ensure compliance with this Regulation, Member States should designate independent authorities responsible for its enforcement, which perform their duties and tasks in an objective and fair manner and ensure equal treatment of private undertakings and public authorities. Those enforcement authorities should carry out investigations on their own initiative, act on complaints, and be empowered, among other things, to impose sanctions and publish their decisions on a regular basis. In addition, for more effective enforcement, Member States should use digital tools in order to facilitate this process. The Commission should control whether the enforcement authorities carry out the tasks conferred to them by this Regulation in an effective manner.

AddedRecital 21: (21) Abuse of freedom of contract to the disadvantage of the creditor should be avoided. As a result, where a clause in a contract or a practice relating to the date or term of payment, the payment or rate of interest for late payment, the compensation for recovery costs, extending the duration the procedure of verification or acceptance or preventing the moment of sending the invoice is not in conformity with this Regulation, it should be null and void and in any case prohibited. In the same vein, certain practices leading to an abuse of freedom of contract that is to the disadvantage of the creditor should also be prohibited. The debtor should not be able to prevent or restrict assignments of credits to third parties, or the use by the creditor of an executive order issued by a court.

RemovedRecital 26 a (new): (26a) In order to increase transparency and improve enforcement of this Regulation, new requirements with regard to reporting obligations on payment practices by large undertakings should be introduced.

AddedRecital 22: (22) To enhance the efforts to prevent the abuse of freedom of contract to the detriment of creditors, organisations officially recognised as representing creditors or organisations with a legitimate interest in representing undertakings should be able to take action before national courts or administrative bodies in order to prevent late payments and to end contractual terms and practices that are null and void.

AddedRecital 23: (23) To guarantee full payment of the amount due, it is important to ensure that the seller retains the title to goods until they are fully paid for, if a retention of title has been expressly agreed between the buyer and the seller before the delivery of the goods. To take into account the specificities of certain goods characterised by their slow rotation, retention of title can also be used by sellers to provide extended credit to their buyers in a manner that remains consistent with this Regulation, as for example in consignment sales.

AddedRecital 24: (24) To ensure correct application of this Regulation, it is important to provide transparency regarding the rights and obligations as laid down by this Regulation. To ensure that the correct rates of interest are applied, it is important that they are made public by the Member States and the Commission. In order to contribute to the achievement of the objective of this Regulation, Member States should increase awareness of the remedies for late payment among undertakings through publications and campaigns and should foster the spread of good practices.

AddedRecital 25: (25) The sanctions for late payment can be dissuasive only if they are accompanied by procedures for redress which are rapid and effective for the creditor. Expedient recovery procedures for unchallenged claims should therefore be available to all creditors who are established in the Union, in accordance with the principle of non-discrimination set out in Article 18 of the Treaty on the Functioning of the European Union (‘TFEU’).

AddedRecital 26: (26) To facilitate and ensure compliance with this Regulation, Member States should designate independent authorities responsible for its enforcement, which perform their duties and tasks in an objective and fair manner and ensure equal treatment of private undertakings and public authorities. Those enforcement authorities should carry out investigations on their own initiative, act on complaints, including anonymous complaints or notifications, and be empowered, among other things, to impose sanctions and publish their decisions on a regular basis. In addition, for more effective enforcement, Member States should use digital tools in order to facilitate this process. The Commission should assess how the enforcement authorities carry out the tasks conferred to them by this Regulation.

AddedRecital 27: (27) To ensure easy and accessible means of redress, Member States should promote the voluntary use of effective and independent alternative dispute resolution mechanism to solve payment disputes in commercial transactions. Member States could designate their respective chambers of commerce and industry as bodies responsible for alternative dispute resolution, provided that they can demonstrate impartiality and independence from the parties. As parties may engage in negotiations to reach an amicable settlement regarding disputed debts, such settlements may involve the adjustment of interest and compensation claims, provided they are in compliance with principles of fairness and do not unduly disadvantage the creditor.

AddedRecital 27 a (new): (27a) In view of the need to enhance transparency and accountability in commercial transactions, and in line with the objectives of promoting responsible financial management and fair business practices, it is imperative to introduce specific reporting obligations for contracting authorities as described in Article 2(1) of Directive 2014/24/EU. Contracting authorities should report annually on their payment practices, providing detailed insights into the promptness of their payments. A structured approach to reporting is necessary to foster greater transparency in payment practices and to assist in identifying areas where improvements are needed. The reporting obligation should include the disclosure of amounts, in euros, paid within various time frames after the payment deadline set out in this Regulation. The detailed reporting should include categorising payments made in intervals of 1 to 30 days, 31 to 60 days, 61 to 90 days, and beyond 90 days after the stipulated payment deadline, and the average time taken to pay an invoice should be part of the report. To ensure that the information is not only used for regulatory compliance but also serves as a tool for public scrutiny and encourages best practices in payment disciplines, the reports should be made publicly accessible and should be submitted in an electronic format to the relevant Member State enforcement authority.

AddedRecital 28: (28) Invoices trigger requests for payment and are important documents in the chain of transactions for the supply of goods and services, inter alia, for determining payment deadlines. It is important to promote systems that give legal certainty as regards the exact date of receipt of invoices by the debtors, including in the field of e-invoicing where the receipt of invoices could generate electronic evidence and can also help to improve compliance with VAT obligations, and which is partly governed by the provisions on invoicing contained in Council Directive 2006/112/EC49 and Directive 2014/55/EC50 of the European Parliament and the Council.

AddedRecital 28 a (new): (28a) The gradual introduction of compulsory e-invoicing can reduce payment times, increase payment control and encourage the digital transition of SMEs. National authorities should support SMEs by ensuring adequate infrastructure and support.

AddedRecital 29: (29) Effective access of undertakings, especially of micro-enterprises and SMEs, to credit management, including financing services, and financial literacy training can have a significant impact in reducing payment delays, maintaining optimal cash flows, reducing the risk of default and increasing the potential for growth. Nevertheless, micro-enterprises and SMEs often lack the capacity to invest in such training, while very limited trainings and training material focusing on enhancing micro-enterprises and SMEs’ knowledge of credit and invoice management are currently available. It is therefore appropriate to provide that Member States need to ensure that invoice management, credit management tools, including factoring and financial literacy trainings are available and accessible to micro-enterprises and SMEs, including on the use of digital tools for timely payments and financing services.

AddedRecital 29 a (new): (29a) Recognising the critical impact of late payment practices on the European Union's economic environment and in order to enhance transparency, compliance, and best practices, the Commission should establish the European Observatory of Late Payments (‘the Observatory’). The Observatory should be a key element in monitoring, analyzing, and sharing insights on payment behaviors across the Union with a primary function to monitor both timely and delayed payment practices, gathering and disseminating expertise, identifying best and potentially harmful practices, and evaluating the effectiveness of enforcement authorities in their regulatory roles. The Observatory's focus should be on providing the Commission with ongoing advice and expertise crucial for understanding and shaping the evolution of payment and late payment practices within the Union. To facilitate comprehensive monitoring and effective functioning, Member States should communicate essential information to the Observatory, including lists of goods and services subject to specific payment procedures, aggregated data from relevant articles, and details regarding enforcement actions and outcomes. The Observatory, chaired by the Commission and composed of a balanced representation of experts and stakeholders, should issue annual reports, opinions, and contributions pertinent to implementing and enforcing this Regulation. The outputs should reflect the state of payment practices and offer guidelines and recommendations…

AddedRecital 29 b (new): (29b) To assess and ensure the effectiveness of this Regulation, the Commission should comprehensively evaluate its implementation and impact through a comprehensive report. Given the dynamic nature of commercial transactions and the evolving market conditions, the report should be a crucial tool in understanding the Regulation's effectiveness and identifying areas for improvement. The Commission, based on the findings of the report, should be prepared to accompany it with a legislative proposal if considered to be necessary and appropriate, ensuring that the Regulation remains relevant, effective, and aligned to promote fair and efficient payment practices within the Union. Therefore, four years after the entry of this Regulation into force, and subsequently every three years, the Commission should submit a report to the European Parliament and the Council, which will maintain transparency, evaluate the progress, and make necessary adjustments to the Regulation. The report should examine the impact of the scope of this Regulation, focusing on its effects across specific sectors and business models, and provide insights into how the Regulation influences diverse commercial landscapes. The report should evaluate the impact of measures implemented, especially those related to payment periods, on enhancing cash flow and liquidity in the market to shed light on the practical effectiveness of these measures in improving financial dynamics. The report should also assess the effecti…

AddedRecital 30: (30) Certain provisions in this Regulation are linked to the provisions in Directive (EU) 2019/633 of the European Parliament and of the Council51 . The relationship between Directives 2011/7/EU and (EU) 2019/633 is explained in recitals (17) and (18) and Article 3(1) of Directive (EU) 2019/633. As this Regulation replaces Directive 2011/7/EU, it should not affect the rules laid down in Directive (EU) 2019/633, including the provisions that are applicable to payments made in the context of the school scheme52 , value-sharing agreements53 and certain payments for the sale of grapes, must and wine in bulk in the wine sector54. However, this Regulation does not prevent the Member States from introducing or maintaining national provisions applicable in the agricultural and food sector which provide for stricter payment terms, or different calculation of payment periods, dies a quo and verification and acceptance procedures for suppliers of agricultural and food products that are more favourable to the creditor.

AddedRecital 31: (31) The objectives of this Regulation are to combat late payment in commercial transactions, in order to ensure the proper functioning of the internal market, thereby fostering the competitiveness of undertakings and in particular of micro-enterprises and SMEs. Those objectives cannot be sufficiently achieved by the Member States, as implementing national solutions would likely result in a lack of uniform rules, fragmentation of the single market and higher costs for companies trading across borders. Therefore, those objectives can be better achieved at Union level. The Union may therefore adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary to achieve those objectives.

Recital 32: (32) To provide sufficient time for all relevant actors to put in place the arrangements needed to comply with this Regulation, its application should be deferred. However, to ensure better protection of the creditors, commercial transactions that are to be paid after the date of entry into force of this Regulation, shall be subject to its provisions, even if the relevant contract was signed before its date of application. In the case of micro-undertakings which encounter the biggest challenges in terms of cash flow, the application of this Regulation in situations where they are debtors should be deferred for a further 12 months.

Change 4

RemovedArticle 2 – paragraph 1 – point 3: (3) ‘late payment’ means payment of the amount due that is not made within the contractual or statutory payment period as set out in Article 3;

AddedArticle 1 – paragraph - 1 (new): -1. The aim of this Regulation is to combat late payment in commercial transactions, in order to ensure the proper functioning of the internal market, thereby fostering the competitiveness of undertakings and in particular SMEs.

RemovedArticle 3 – paragraph 2: 2. A procedure of acceptance or verification may be exceptionally provided for in national law only where strictly necessary due to the specific nature of the goods or services, subject to approval by the Commission. In that case, the contract shall describe the details of the procedure of acceptance or verification, including its duration.

AddedArticle 1 – paragraph 3 – point b: (b) payments made as compensation for damages;

RemovedArticle 3 – paragraph 3: 3. Where the contract provides for a procedure of acceptance or verification, in accordance with paragraph 2, for the purposes of this Regulation, the maximum duration of that procedure shall not exceed 30 calendar days from the date of receipt of the goods or services by the debtor, even if such goods or services are supplied prior to the issuance of the invoice or an equivalent request for payment. In this case, the debtor shall initiate the procedure for acceptance or verification immediately upon reception from the creditor of the goods and/or the services that are the object of the commercial transaction. The payment period shall not exceed 30 calendar days after such procedure has taken place. / Notwithstanding the first subparagraph of this paragraph, a procedure of acceptance or verification lasting longer than 30 days may be provided for in national law. However, such longer duration is without prejudice to the provisions on the payment period referred to in this Article.

AddedArticle 1 – paragraph 3 – subparagraph 1 a (new): Notwithstanding point (b), payments made in performance of the obligations stemming from insurance contracts are covered by this Regulation.

AddedArticle 1 – paragraph 4: 4. This Regulation shall not affect the provisions laid down in Directive (EU) 2019/633.

AddedArticle 2 – paragraph 1 – point - 1 (new): (-1) ‘commercial transactions’ means transactions between undertakings or between undertakings and public authorities which lead to the delivery of goods or the provision of services for remuneration;

AddedArticle 2 – paragraph 1 – point 2: (2) ‘public authority’ means any contracting authority, as defined in Article 6(1) of Directive 2014/23/EU, Article 2(1), point (1), of Directive 2014/24/EU or in Article 3(1) of Directive 2014/25/EU regardless of the subject or value of the contract;

AddedArticle 2 – paragraph 1 – point 3: (3) ‘late payment’ means a payment of an amount due that is not made within the contractual or statutory payment period as set out in Article 3;

AddedArticle 2 – paragraph 1 – point 7: (7) ‘procedure of acceptance or verification’ means the procedure for ascertaining the conformity of the goods delivered or services provided, with the requirements of the contract, as well as the verification of the correctness of the invoice and its conformity with those requirements;

AddedArticle 2 – paragraph 1 – point 8: (8) ‘debtor‘ means any natural or legal person or any public authority that owes a payment for a good delivered, or to be delivered, or a service provided, or to be provided;

AddedArticle 2 – paragraph 1 – point 9: (9) ‘creditor‘ means any natural or legal person that delivered, or is obliged to deliver, goods to a debtor or provided, or is obliged to provide, services to a debtor.

AddedArticle 2 – paragraph 1 – point 9 a (new): (9a) ‘large undertaking’ means an ‘undertaking’ as defined in Article 3, point (4), of Directive 2013/34/EU;

AddedArticle 2 – paragraph 1 – point 9 b (new): (9b) ‘slow-moving goods’ means goods in the retailer’s possession, from actual supply by the manufacturer or the wholesaler to final retail sale, for more than 60 days on average;

AddedArticle 2 – paragraph 1 – point 9 c (new): (9c) ‘seasonal goods’ means goods the demand for which increases, in a significant manner, regularly at certain times or seasons of the year;

AddedArticle 3 – paragraph 1: 1. In commercial transactions, the payment period shall not exceed 30 calendar days, from the date of the receipt of the invoice or an equivalent request for payment by the debtor, provided that the debtor has received the goods or services in accordance with contractual agreement. Where the date of the receipt of the invoice or the equivalent request for payment is uncertain, the payment period shall not exceed 30 calendar days from the date of receipt of the goods or services. This period shall apply both to the transactions between undertakings and between public authorities and undertakings.