COMMON POSITION (EC) No 36/1999

adopted by the Council on 29 July 1999

with a view to adopting Directive 1999/.../EC of the European Parliament and of the Council of ... on combating late payment in commercial transactions

(1999/C 284/01)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 95 thereof,

Having regard to the proposal from the Commission(1),

Having regard to the opinion of the Economic and Social Committee(2),

Acting in accordance with the procedure laid down in Article 251 of the Treaty(3),

(1) Whereas in its resolution on the integrated programme in favour of SMEs and the craft sector(4), the European Parliament urged the Commission to submit proposals to deal with the problem of late payment;

(2) Whereas on 12 May 1995 the Commission adopted a recommendation on payment periods in commercial transactions(5),

(3) Whereas in its resolution on the Commission recommendation on payment periods in commercial transactions(6), the European Parliament called on the Commission to consider transforming its recommendation into a proposal for a Council directive to be submitted as soon as possible;

(4) Whereas on 4 June 1997 the Commission published an action plan for the single market, which underlined that late payment represents an increasingly serious obstacle for the success of the single market;

(5) Whereas on 17 July 1997 the Commission published a report on late payments in commercial transactions(7), summarising the results of an evaluation of the effects of the Commission's recommendation of 12 May 1995;

(6) Whereas heavy administrative and financial burdens are placed on businesses, particularly small and medium-sized ones, as a result of excessive payment periods and late payment; moreover, these problems are a major cause of insolvencies threatening the survival of businesses and result in numerous job losses;

(7) Whereas the differences between payment rules and practices in the Member States constitute an obstacle to the proper functioning of the internal market;

(8) Whereas this has the effect of considerably limiting commercial transactions between Member States; this is in contradiction to Article 14 of the Treaty as entrepreneurs should be able to trade throughout the internal market under conditions which ensure that transborder operations do not entail greater risks than domestic sales; distortions of competition would ensue if substantially different rules applied to domestic and transborder operations;

(9) Whereas the most recent statistics indicate that there has been, at best, no improvement in late payments in many Member States since the adoption of the recommendation of 12 May 1995;

(10) Whereas the objective of combating late payments in the internal market cannot be sufficiently achieved by the Member States acting individually and can, therefore, be better achieved by the Community; this Directive does not go beyond what is necessary to achieve that objective; this Directive complies therefore, in its entirety, with the requirements of the principles of subsidiarity and proportionality as laid down in Article 5 of the Treaty;

(11) Whereas this Directive should be limited to payments made as remuneration for commercial transactions and does not regulate transactions with consumers, interest in connection with other payments, for example payments under the laws on cheques and bills of exchange, payments made as compensation for damages including payments from insurance companies;

(12) Whereas the fact that the liberal professions are covered by this Directive does not mean that Member States have to treat them as undertakings or merchants for purposes not covered by this Directive;

(13) Whereas this Directive only defines the term "enforceable title" but does not regulate the various procedures of forced execution of such a title and the conditions under which forced execution of such a title can be stopped or suspended;

(14) Whereas late payment constitutes a breach of contract which has been made financially attractive to debtors in most Member States by low interest rates on late payments and/or slow procedures for redress; a decisive shift is necessary to reverse this trend and to ensure that the consequences of late payments are such as to discourage late payment;

(15) Whereas there may exist certain categories of contracts where a longer payment period in combination with a restriction of freedom of contract or a higher interest rate can be justified;

(16) Whereas this Directive should prohibit abuse of freedom of contract to the disadvantage of the creditor; this Directive does not affect national provisions relating to the way contracts are concluded or regulating the validity of contractual terms which are unfair to the debtor;

(17) Whereas the consequences of late payment can be dissuasive only if they are accompanied by procedures for redress which are rapid and effective for the creditor; in conformity with the principle of non-discrimination contained in Article 12 of the Treaty, those procedures should be available to all creditors who are established in the Community;

(18) Whereas Article 4 of this Directive requires that the recovery procedure for unchallenged claims be completed within a short period of time in conformity with national legislation, but does not require Member States to adopt a specific procedure or to amend their existing legal procedures in a specific way,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Scope

This Directive shall apply to all payments made as remuneration for commercial transactions.

Article 2

Definitions

For the purposes of this Directive:

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; "undertaking" means any organisation acting in the course of its independent economic or professional activity, even where it is carried on by a single person;

2. "late" payment means exceeding the contractual or statutory period of payment;

3. "enforceable title" means any decision, judgment or order for payment issued by a court or other competent authority, whether for immediate payment or payment by instalments, which permits the creditor to have his claim against the debtor collected by means of forced execution; it shall include a decision, judgment or order for payment that is provisionally enforceable and remains so even if the debtor appeals against it.

Article 3

Interest in case of late payment

1. Member States shall ensure that:

(a) interest in accordance with point (d) shall become payable from the day following the date or the end of the period for payment fixed in the contract;

(b) if the date or period for payment is not fixed in the contract, interest shall become payable automatically without the necessity of a reminder:

(i) 30 days following the date of receipt by the debtor of the invoice or an equivalent request for payment,

or

(ii) if the date of the receipt of the invoice or the equivalent request for payment is uncertain, 30 days after the date of receipt of the goods or services,

or

(iii) if the debtor receives the invoice or the equivalent request for payment earlier than the goods or the services, 30 days after the receipt of the goods or services,

or

(iv) if a procedure of acceptance or verification, by which the conformity of the goods or services with the contract is to be ascertained, is provided for by statute or in the contract and if the debtor receives the invoice or the equivalent request for payment earlier or on the date on which such acceptance or verification takes place, 30 days after this latter date;

(c) the creditor shall be entitled to interest for late payment to the extent that:

(i) he has fulfilled his contractual and legal obligations,

and

(ii) he has not received the amount due on time, unless the debtor is not responsible for the delay;

(d) the level of interest for late payment ("the statutory rate"), which the debtor is obliged to pay, shall be the sum of the interest rate of the main refinancing facility of the European Central Bank (ECB) in the form of two-week-tenders at fixed interest rates in force on the first ECB business day of the half-year in question ("the reference rate"), plus at least six percentage points ("the margin"), unless otherwise specified in the contract. For a Member State which is not participating in the third stage of economic and monetary union, the reference rate referred to above shall be the equivalent rate set by its national central bank. In both cases, the reference rate in force on the first central bank business day of the half-year in question shall apply for the following six months.

2. For certain categories of contracts to be defined by national law, Member States may fix the period after which interest becomes payable to a maximum of 60 days provided that they either restrain the parties to the contract from exceeding this period or fix a mandatory interest rate that substantially exceeds the statutory rate.

3. Member States shall ensure that an agreement on the date for payment or on the consequences of late payment which is not in line with the provisions of paragraphs 1 and 2, either shall not be enforceable or shall give rise to a claim for damages if, when all circumstances of the case, including good commercial practice, are considered, it is grossly unfair to the creditor. If such an agreement is determined to be grossly unfair, the statutory terms will apply, unless the national courts determine different conditions which are fair.

Article 4

Recovery procedures for unchallenged claims

1. Member States shall ensure that an enforceable title can be obtained, irrespective of the amount of the debt, normally within 90 calendar days of the lodging of the creditor's action or application at the court or other competent authority, provided that the debt or aspects of the procedure are not disputed. This duty shall be carried out by Member States in conformity with their respective national legislation, regulations and administrative provisions.

2. The respective national legislation, regulations and administrative provisions shall apply the same conditions for all creditors who are established in the European Community.

3. The 90-calendar-day period referred to in paragraph 1 shall not include the following:

(a) periods for service of documents,

(b) any delays caused by the creditor, such as periods devoted to correcting applications.

4. This Article shall be without prejudice to the provisions of the Brussels Convention on jurisdiction and enforcement of judgments in civil and commercial matters(8).

Article 5

Transposition

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive before ...(9). They shall forthwith inform the Commission thereof.

When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.

2. Member States may maintain or bring into force provisions which are more favourable to the creditor than the provisions necessary to comply with this Directive.

3. In transposing this Directive Member States may exclude:

(a) debts that are subject to insolvency proceedings instituted against the debtor,

and

(b) contracts that have been concluded prior to ...(10).

4. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

5. The Commission shall undertake for at least the first three years after ...(11) an annual review of, inter alia, the statutory rate to assess the impact on commercial transactions and the operation of the legislation in practice. The results of this review and of other reviews will be made known to the European Parliament and the Council.

Article 6

Entry into force

This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.

Article 7

Addressees

This Directive is addressed to the Member States.

Done at ...

For the European Parliament

The President

For the Council

The President

(1) OJ C 168, 3.6.1998, p. 13 and OJ C 374, 3.12.1998, p. 4.

(2) OJ C 407, 28.12.1998, p. 50.

(3) Opinion of the European Parliament of 17 September 1998 (OJ C 313, 12.10.1998, p. 142), Council common position of 29 July 1999 and Decision of the European Parliament of ... (not yet published in the Official Journal).

(4) OJ C 323, 21.11.1994, p. 19.

(5) OJ L 127, 10.6.1995, p. 19.

(6) OJ C 211, 22.7.1996, p. 43.

(7) OJ C 216, 17.7.1997, p. 10.

(8) Consolidated version (OJ C 27, 26.1.1998, p. 3).

(9) 24 months after this Directive enters into force.

(10) 24 months after this Directive comes into force.

(11) 24 months after this Directive comes into force.

STATEMENT OF THE COUNCIL'S REASONS

I. INTRODUCTION

1. On 24 April 1998, the Commission submitted a proposal for a Directive of the European Parliament and of the Council combating late payment in commercial transactions.

The proposal was then based on Article 100a of the Treaty (and is now based on Article 95 of the Treaty), and the co-decision procedure applies (qualified majority requested).

2. The European Parliament adopted its opinion in first reading on 17 September 1998.

The Commission then submitted an amended proposal.

3. The Council fixed its common position in accordance with Article 251(2)(3) on 29 July 1999.

II. OBJECTIVE

The objective of the coming Directive is, inter alia, to combat late payment by harmonising the interest that shall become payable, after the payment period has expired. The Directive also requires that the recovery procedure for unchallenged claims be completed within a short period of time in conformity with national legislation, but does not require Member States to adopt a specific procedure or to amend their existing legal procedures in a specific way. It goes without saying that this Directive fully respects the principle of contractual freedom.

III. COMMENTS

A. GENERAL REMARKS

The Council tried to improve the situation of the creditor in the three areas where the need for harmonised rules is the most urgent. These are the period after which interest shall become payable, the level of interest payable on arrears and the need of recovery procedures for unchallenged claims to be completed normally within 90 days. In the other areas covered by the proposal of the Commission, the Council could not confirm the need or even possibility of harmonisation. This concerns the retention of title (Article 4 of the amended proposal of the Commission), a special procedure for claims for amounts up to EUR[nbsp ]20000 (Article 6 of the amended proposal of the Commission) and special rules for the public sector (Articles 7 and 8 of the amended proposal of the Commission).

With regard to the amendments proposed by the European Parliament and which were not retained by the Commission in its amended proposal(1) (Amendments 5, 6, 17, 23, 25, 27, 29, 33, 34) the Council decided not to retain these amendments also for the abovementioned reasons.

The Council focused its examination of the amended proposal on the amendments proposed by the European Parliament which were retained by the Commission.

The detailed account of the results of the discussion within the Council is set out hereafter in paragraph B (comments on the articles).

B. COMMENTS ON THE ARTICLES

The texts referred to in the following paragraphs concern the amended proposal of the Commission.

(i) Article 1

(Scope)

Article 1 remains nearly unchanged. The Council merely inserted a clarification that only payments are meant that are made as remuneration for commercial transactions.

(ii) Article 2

(Definitions)

Amendments 9, 10, 11, and 13

Article 2 now contains definitions of "commercial transactions", of "late payment" and of "enforceable title". The first two definitions are now more concise, but they were kept largely unchanged in substance. The definition of "enforceable" title did not appear in the amended proposal of the Commission. The Council inserted this definition to clarify the scope of Article 5. The definitions of "retention of title", "public authority" and of "public procurement" have become superfluous. These definitions were needed for the application of Articles 4, 7 and 8 of the amended proposal of the Commission, which the Council could not accept and which have been deleted. European Parliament Amendment 9 is partially covered in the definition retained by the Council in its common position. However, Amendments 10, 11 and 13 could not be retained.

(iii) Article 3

(Interest in case of late payment)

Amendments 14, 15 and 17

The Council could follow the main points of Article 3 of the amended proposal of the Commission. These consist of the following. An interest rate shall become payable without the necessity of a reminder after a certain period of time has expired. The level of interest has been defined by reference to a statutory rate and a margin. The contracting parties should have the freedom to stipulate other payment periods and interest rates, if they think this would be more appropriate to their contractual relations.

The Council could not confirm the proposed length of the period of time and certain details of the proposed provision. The Council agreed after an intensive discussion that a period of 30 days after the receipt of an invoice or an equivalent request for payment would be reasonable. The Council shared the concerns of the Commission and the European Parliament about a possible abuse of the freedom of contract with regard to the period of time for payment. The Council decided that the anti-abuse mechanisms provided for in the amended proposal of the Commission could be simplified and would in this way be much more affective. Contractual clauses, which are grossly unfair to the creditor shall not be enforceable or shall give rise to damages, unless the national judge determines different conditions which are fair.

The Council decided to take into consideration special situations in some Member States. In these situations the 30-day rule combined with the freedom of the parties to stipulate other rules in their special contract sometimes does not work in a satisfactory way. There are cases, where one of the parties is so dominant that the other party is de facto unable to negotiate a balanced contract. In other cases one party may lack sufficient professional expertise to use its freedom of contract properly. This is the reason why the Council inserted a rule, which allows Member States to extend the period after which interest becomes due to up to 60 days, under the condition that the respective Member State in its national legislation either reduces the freedom of contract and prevents the parties to foresee a further extension of the 60-day period in their contract or instead provides for a significantly higher interest rate.

In the end the Council could not accept the provision in Article 3(1)(j) of the amended proposal of the Commission. This provision would oblige Member States to enable the creditor to claim not only interest but also compensation for all other damage incurred as consequence of late payment. Only a few Member States were prepared to accept such a broad approach. Several Member States requested instead the reinsertion of a simpler provision obliging Member States to ensure that the creditor is entitled to claim reasonable compensation for debt collection costs. These Member States argued that the interest rate fixed in Article 3(1)(d) of the common position would not strengthen sufficiently the position of the creditor and a new subparagraph (e) should be inserted that would be limited to debt collection costs only. Other Member States disagreed with this view and pleaded against such a provision arguing the fact that any text dealing with compensation would introduce several legal uncertainties into the text of the Directive.

Taking into account the above, European Parliament Amendments 14, 15 and 17 could not be retained.

By way of political compromise the Council decided not to insert a compensation clause, but, on the other hand, fix the margin at a substantially higher lever. In the previous discussion the opinions among the Member States had diverged from a 2 % margin to an 8 % margin. The Council finally agreed on a 6 % margin.

The Commission, by way of compromise, accepted these amendments and alternations.

(iv) Article 4 (deleted)

(Retention of title)

Amendments 18, 19 and 21

The Council could not accept Article 4 of the amended proposal of the Commission on the retention of title. Member States had strong doubts, that such a clause would really accelerate payments. They felt, that the retention of title was rather an instrument to protect the creditor against the risks of the debtor's insolvency. They also feared that clauses on the retention of title, especially an extended clause on this issue would interfere with their national property and insolvency law, which the Directive should leave unaffected. The Commission finally accepted the absolute lack of majority to maintain this in the Directive. This article was thus deleted from the common position. Therefore, European Parliament Amendments 18, 19 and 21 do not apply.

(v) Article 5

(Recovery procedures for unchallenged claims)

The Council experienced strong difficulties with the text of Article 5, in particular relating to the original wording contained in the amended proposal of the Commission. The Council's Legal Service examined this article and took the view that this was not within the competence of the Community. Nevertheless, the Council felt that this provision was essential to the Directive and therefore should not be deleted. Thus, to take into account the opinion of the Council's Legal Service, the wording was amended in the sense that Member States are not obliged to introduce into their national law of civil procedure a new special procedure for the recovery of undisputed debts nor to amend their existing legal procedures in a specific way. They only have to ensure that an enforceable title for such debts can normally be obtained within 90 days.

It is recalled that Parliament did not submit any amendment to this article.

(vi) Article 6 (deleted)

(Simplified procedure for disputed claims up to the amount of EUR[nbsp ]20000)

Amendments 22 and 23

The Council could not accept Article 6 of the amended proposal of the Commission. This article would have obliged Member States to introduce into their national law of civil procedure a new procedure. In the view of the Council's Legal Service this would have exceeded the Communities legal competencies. Member States also could not see the need for such a new procedure and considered a provision dealing with recovery procedures for disputed claims out of place in a directive dealing only with payments that are late. The intended structure of such a procedure was also considered unclear . Under such conditions, the provision did not gather support within the Council. Thus this article was deleted from the common position. Therefore, European Parliament Amendments 22 and 23 do not apply.

(vii) Articles 7 and 8 (deleted)

(Special provision for public procurement)

Amendments 24, 25, 26, 27, 28 and 33

Articles 7 and 8 of the amended proposal of the Commission provided for special rules for public procurement. The Council was firmly convinced, that there was no justification for such special rules and that the general rules should apply to both the public and private sector. The Council also pointed out, that the limits between private and public commercial transactions have become blurred because of the growing number of privatisations. Finally the Council did not see a satisfactory solution for the problem of subcontractors. The special rules should, following the original proposal, apply only to the direct contractors of the public authorities. The contractors themselves were not obliged to offer the same conditions to their subcontractors. In Article 7 of its amended proposal the Commission introduced such an obligation, which would have led to the result that a huge part of the private sector would have been subject to the special rules for public procurement. The Council decided that it was much simpler and much more convincing to improve the general rules and to renounce the special rules for the public sector. However, it should be stressed that an anti-abuse clause was included in Article 3 of this Directive. The Commission finally accepted this decision. Taking into account the above these two articles were deleted from the common position.

Therefore, European Parliament Amendments 24, 25, 26, 27, 28 and 33 do not apply.

(viii) Article 9 (deleted)

(Committee)

Amendments 29 and 34

Article 9 of the amended proposal of the Commission provided for a committee procedure, which would have allowed the Commission to raise the interest rate and the amount, up to which the simplified procedure for disputed claims should apply. Since the latter procedure did not gather support within the Council, the Committee procedure became superfluous. With regard to the interest rate, the Council decided that, given the importance of the question, the normal legislative procedure should apply for any change in the interest rate. Thus, this article was deleted from the common position. Therefore, Amendments 29 and 34 do not apply.

(ix) Article 10

(Transposition)

Amendment 31

The Council agreed on a longer transposition period. In addition the Council agreed on two exceptions, that the Member States should be able to introduce. First, Member States should be allowed to maintain special rules for the handling of payments in case of the insolvency of the debtor. Second, Member States should have the possibility to exclude contracts of the scope of their implementing legislation, which had been concluded prior to the expiry of the transposition period.

It is recalled that European Parliament Amendment 31 was fully taken into account in new Article 5(2) (former Article 10(2)).

(1) Doc. 12571/98.