Home News & Events EU NEWS: Consensus reached on ‘Late Payments Directive’ Recast

EU NEWS: Consensus reached on ‘Late Payments Directive’ Recast

Saturday, 02 October 2010 15:05

Announcement has just been made that there exists EU political consensus on the recast of the ‘Late Payments Directive’.

The EU had consented to Directive 2000/35/EC on combating late payments in commercial transactions back in June 29th, 2000 and Member States were obliged to transpose it into their national legislations within slightly more than a two year term by August 7th, 2002. Malta’s transposition took place in July 1st, 2005 by means of Legal Notice 233 of 2005 with certain reservations after accession in May 1st, 2004.

The purpose behind the ‘Late Payments Directive’ is to regulate timeframes within which outstanding bills arising from business-to-business transactions are to be settled by debtors allowing for guaranteed interest should the timeframe be not respected. The relative annual interest applicable is the intervention rate of interest established by the Central Bank of Malta in addition to seven per centum (7%) and this with the specific aim to combat the prevailing trend adopted then by certain traders and which unfortunately still exists to date, to finance their trading undertakings through withheld payments. Delayed payments are deemed by financial advisors to be one of the reasons which could lead to insolvencies.

The recast of the ‘Late Payments Directive’ is expected to address inter alia a basic rule of thirty (30) days payment limit not only applicable to business-to-business transactions but also to public-to-business transactions allowing safeguards for those carrying out transactions with public entities including Government to be able to collect their financial dues. In the case of debts due to traders from the public health authorities, the payment limit rule is proposed to be of sixty (60) days. This latter provision should certainly be upheld as a positive comfort for those Maltese traders who are stilled owned millions of euro from health related commercial transactions with the Government over the past years.