EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 8.4.2009 
SEC(2009) 316 
COMMISSION STAFF WORKING DOCUMENT 
 
Accompanying document to the 
Proposal for a 
 
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
on combating late payment in commercial transactions (Recast) 
   
SUMMARY OF THE IMPACT ASSESSMENT  
     
{COM(2009) 126 final} 
{SEC(2009) 315} 
 
EN 2   EN Agenda planning or WP reference: 2009/ENTR/006. This document commits only 
the Commission's services involved in the preparation of the impact assessment and 
does not prejudge the final form of any decision to be taken by the Commission. 
The Impact Assessment Board delivered  its opinion about the draft impact 
assessment on 17 December 2008 [D(2008) 10479]. All recommendations made by 
the Board were taken into account and the impact assessment was amended accordingly.  
1. P
ROBLEM DEFINITION  
Directive 2000/35/EC was adopted in order to combat late payment in commercial 
transactions. According to the Directive, a late payment interest may be charged when the payment is not made within the c ontractual or legal d eadline. The directive 
provides for a statutory rate but allows th e parties to agree ot herwise. It becomes 
payable from the day following the date or the end of the period for payment fixed in 
the contract, or 30 days following the date of  receipt by the debtor of the invoice or 
an equivalent request for payment if  the payment period is not fixed.  
Despite the Directive, late payments in  commercial transa ctions are still a 
widespread practice in the EU. They do not only occur frequently  in transactions 
between businesses: surveys also show that , in general, the payment periods in the 
public sector are longer than the payment periods in private s ector contracts.  
The roots of late payments in commercial  transactions and the corresponding passive 
attitude of many creditors are diverse:  
(1) The market structure: the level of competition within a market, the market 
power of market participants an d the corresponding fear of harming 
commercial relationships with client s are important factors determining 
whether creditors accept or refuse late payment and whether debtors seek an extension of the period of trade credit. The position of a creditor in a specific 
market will have a large impact on his attitude vis-à-vis late payment and on 
his fear of damaging his commercial rela tionship with the client. For debtors, 
the main reasons for timely payment in  commercial transactions are often 
related to commercial or professional repute or mutual trust in long-term 
commercial relationships.  
(2) The business cycle: changing macroeconom ic conditions are another cause of 
late payment. A business cycle downturn is likely to cause more late payments as firms delay paying their invoices. Also, firms suffer from a 
reduced ability to generate cash from  their operations, and banks may reduce 
credit to firms. However, improveme nt in economic conditions may also 
provoke an increase in late payment for certain firms presented with more investment opportunities and, consequen tly a greater need to find funds.  
(3) Access to finance and budgetary constrai nts: The availability of credit, 
monetary policy, the flow and nature of credit informa tion, the liquidity 
position of the firm and the availability of financial resources from banks may also affect late payment, particularly  for businesses for which bank credit is a 
 
EN 3   EN substitute for supplier financing. Many debtor enterprises and public 
authorities consider late payment an e fficient and cheap way to finance their 
own businesses and activities. For public authorities, late payments to creditors are also an easy, but un justified, way to overcome budgetary 
constraints by postponing payments to the next budgetary period. 
(4) The internal organisation of  creditors and debtors: the financial management 
practice of debtors (including public au thorities) and the credit management 
practice of creditors as well as thei r product and service quality and after-
sales service are important factors in (avoiding) late payment. Creditors in commercial transactions, and especially SMEs, do not necessarily have appropriate credit management system s for preventing or managing late 
payments. 
(5) The absence of effective and efficient remedies: notwithstanding 
Directive 2000/35/EC, many businesses,  and in particular SMEs, do not 
charge interest when entitled to do so. For some creditors, th e cost of taking 
action against late payment is not justified by the financial benefits. In many cases, the expenses of the extra-paperw ork cannot be recovered. Chasing late 
paying clients or charging interest for late payments generates administrative 
costs that many businesses wish to avoid. Furthermore, the final amount of the statutory interest due from a debtor  can only be calculated on the day that 
the creditor is actually paid so the latter must await payment before he can know exactly the amount of interest that  he could charge. In addition, the 
costs of charging interests before the actual date of payment would outweigh 
the financial benefits in most cases. A ll these reasons make that the risk of 
negative consequences in case of late payment on the side of the debtors is 
too low to achieve a tangible improveme nt in payment behaviour. This is 
particularly deplorable in case of p ublic administrations, which do not face 
the same financing constraints as businesses. In addition, several key 
provisions of the Directive are unclear or difficult to implement in practice. For instance, diverse interpretations are conceivable for the calculation of the 
applicable interest rate, the definition of “relevant recovery costs” and the 
possibility of compound interest.  
Late payments in commercial transa ctions have important effects: 
• Late payment represents a significant cost to creditor enterprises. In general, late 
payment strains cash flow, adds financial costs, squeezes investment opportunities 
and fuels uncertainty for many creditor businesses and in particular, SMEs, 
especially in times of limited and expens ive access to finance. The result is that 
their competitiveness and solvency are often compromised.  
• Debtor companies and public authori ties paying late get free trade credit. 
• Late payments have a negative impact on intra-community trade. In most Member 
States, businesses perceive selling goods and services to businesses and 
authorities in another Member States as entailing a higher risk of late payment. 
Among other reasons, the risk of late payment discourages enterprises from 
selling products and services in other Memb er States since it increases uncertainty 
and the cost of doing business. Very l ong payment periods in public procurement 
 
EN 4   EN contracts and late payment by public authorities also discourage economic 
operators to participate in public procur ement procedures. This discouragement 
reduces the capacity of public  authorities to get best value for tax payers' money. 
2. OBJECTIVES  
Any Community initiative aiming at tackling the issue of late payment must 
ultimately: 
• Be conducive to the achievement of the broader and overarching competitiveness 
goals enshrined in the renewed  Lisbon Partnership for Growth and Jobs1; 
• Significantly reduce administrative burdens on business, promot e their cash flow 
and help more people to become entrepre neurs, in accordance with the principles 
of the Small Business Act2; 
• Facilitate the smooth functioni ng and the completion of the  internal market via 
the elimination of related barriers to cross-border commercial transactions.  
The initiative provides also an important  impetus to overcome the current economic 
crisis by contribu ting to the implementation of the European Economic Recovery 
Plan3 and promoting businesses’ cash flow in order to reinforce the competitiveness 
of European enterprises in the long term. 
Concretely, this translates into th e following twin operational objectives: 
(1) Confront debtors with measures that  successfully discourage them from 
paying late; and  
(2) Provide creditors with measures that enable them to fully and effectively 
exercise their rights when paid late. 
3. POLICY OPTIONS  
Besides the baseline option, the following options were examined: 
– Option 2a (non-legislative): The organi sation of awareness raising activities 
targeted at businesses; 
– Option 2b (non-legislative): The organisa tion of awareness-raising activities 
targeted at organisatio ns representing SMEs; 
                                                 
1 Commission Communication: Working together for growth and jobs. A new start of the Lisbon strategy 
- COM(2005) 24. 
2 According to the Communication from the Commission to the Council, the European Parliament, the 
European Economic and Social Committee and the Co mmittee of the Regions - “Think Small First” - A 
“Small Business Act” for Europe, COM(2008)394fina l of 25 June 2008, the facilitation of SMEs’ 
access to finance and the development of a lega l and business environment supportive to timely 
payments in commercial transactions is one of the 10 principles to guide the conception and 
implementation of SME policies both at EU and Member State level. 
3 COM(2008) 800, 26.11.2008. 
 
EN 5   EN – Option 2c (non-legislative): Publicat ion of information on bad debtors; 
– Option 3a (legislative): Full harmonisation of payment periods; 
– Option 3b (legislative): increasing the ”margin” interest rate; 
– Option 3c (legislative): the abol ition of the threshold of €5; 
– Option 3d (legislative): the introduction of a “Late Payment Fee”; 
– Option 3e (legislative): the introducti on of a “Late Payment Compensation”; 
– Option 3f (legislative): Strengthen the ro le of representative organisations. 
Several options, such as the repeal of  Directive 2000/35/EC, the creation of a 
European Fund aimed at providing finance to SMEs at no cost and based on accounts receivable were discarded at an early phase of the screening of the options. 
4. A
NALYSIS OF IMPACTS  
It should be noted that, for some important aspects of th e three first problem causes 
set out in section 1, the EU does not nece ssarily have the power to act. Certain 
problems related to the structure of nationa l or regional markets should be dealt with 
by Member States while, as regards the business cycle, most of the economic policy levers are in the hands of the Member States so that no overall solution for all problem causes can be found at EU level.  
Moreover, the Directive is an optional instrument for economic operators in so far as 
it does not oblige them to claim interest for late payment. The directive also operates in a field where many other factors could influence the payment performance in B2B 
transactions. The regulatory landscape appli cable to the payment process and judicial 
claims to obtain payment for commercial tr ansactions in cross-border cases within 
the EU is being reshaped by new EU rules that recently entered into force or will soon apply. It is hard to account for in terconnection and spill-over effects in the 
baseline scenario. Thus, it is only possi ble to provide indicative quantitative 
estimates of the possible economic and social impacts of any given option. 
Therefore, the analysis is mainly qualitat ive. It should be noted  that none of the 
options would have an environmental im pact or third country implications.  
Some causes of problems where the EU does not have the power to act will 
nevertheless influence the uptake of certa in options. For instance, the market 
structure and the position of an economic operator in a market will determine to a 
large extent his willingness to take action against a late paying debtor and to run the 
risk of damaging a business relationship which might be worth several thousand 
Euros. For this reason, while it is possible to  qualitatively estimate the impact of the 
different options it is difficult to make  a reliable forecast on the overall economic 
effect of the proposal and hence impossible to assess quantitativel y the direct social 
impacts.  
The policy options are assessed in the light of the baseline option in terms of their 
effectiveness, efficiency and consistency: 
 
EN 6   EN General comparison of options 
Option Effectiveness  Efficiency  Consistency  
Option 2a  (non-
legislative): The 
organisation of awareness-
raising activities 
targeted at businesses No: no impact on 
debtors and minimal 
impact on creditors  No: requires too many 
resources for a very 
uncertain result.  Yes: trade-offs across 
other domains could not 
be identified.  
Option 2b  
(non-
legislative): The organisation of 
awareness-
raising activities targeted at 
organisations 
representing SMEs No: objectives are 
unlikely to be achieved.  Yes: fairly low 
budgetary cost for the 
EU. No other costs.  Yes: trade-offs across 
other domains could not 
be identified.  
Option 2c  (non-
legislative): 
Publication of 
information on 
bad debtors Doubtful : possible 
preventive effect on 
creditors but many 
practical drawbacks for 
its implementation  No: very high 
administrative costs for 
businesses.  Yes: trade-offs across 
other domains could not 
be identified.  
Option 3a/1  
(legislative): 
Harmonisation 
of payment periods between 
businesses Yes: likely to lead to less 
late payments by 
shortening contractual 
payment periods.  No: Considerable 
compliance and 
adjustment costs.  No: loss of contractual 
freedom by removing 
the ability of companies 
to compete through payment periods offered 
to clients. This could in 
turn put more pressure on other aspects of 
contract negotiation 
where larger companies can still exercise 
significant influence 
over small company suppliers  
Option 3a/2  
(legislative): 
Harmonisation 
of periods of 
payment by public 
authorities to 
businesses Yes: fear of damaging 
the commercial 
relationship with the 
client should not exist in 
contracts concluded with national authorities 
which are required to 
follow standard and transparent procedures. 
Moreover, the payment 
period is normally not a negotiable item of a 
contract awarded by a 
public authority. However, a sufficiently 
high sanction in case of 
late payment needs to be foreseen.  Yes: budgetary impact 
for national authorities 
would remain fairly 
limited compared with 
the additional liquidity that earlier payment by 
public authorities would 
generate for businesses.  Yes: trade-offs across 
other domains could not 
be identified.  
 
EN 7   EN Option 3b  
(legislative): 
increasing the “margin” 
interest rate  Doubtful : stakeholders 
seem to be satisfied with 
the current “margin” interest rate. Businesses 
are already entitled to 
negotiate a higher interest rate in the 
contract or to include a 
higher rate in their commercial conditions. 
The current rules allow 
Member States to provide for a higher 
minimum “margin” rate 
in their national legislation.  Doubtful : this option 
could strengthen the 
position of bigger or more powerful 
businesses since it would 
reinforce the bargaining position of firms that ask 
for a discount for early 
payment.  Yes: trade-offs across 
other domains could not 
be identified.  
Option 3c  
(legislative): the 
abolition of the €5 threshold Yes for small 
transactions if 
accompanied by other measures that would 
make it economical to 
collect the outstanding 
amounts.  Yes, especially for 
SMEs. No budgetary, 
transaction and compliance costs could 
be identified.  Yes: trade-offs across 
other domains could not 
be identified.  
Option 3d  
(legislative): the 
introduction of a 
“Late Payment 
Fee” Yes: it would permit 
businesses to recover the transaction costs of 
claiming the payment 
and charging interest for late payments so that 
only purely commercial 
arguments would prevent creditors from 
charging interest.  Yes. Costs (mainly 
transaction costs) are redistributive. No 
budgetary or compliance 
costs.  Yes: trade-offs across 
other domains could not be identified.  
Option 3e  
(legislative): the 
introduction of a 
“Late Payment 
Compensation”  Yes: strong deterrent 
effect on debtors proportional to the size 
of the claim since the 
costs incurred by the debtor would exceed the 
savings that he would 
otherwise obtain from 
free trade-credit. It also 
constitutes a strong incentive to creditors to 
claim the payment and 
the interest.  Yes. Costs (mainly 
transaction costs) are redistributive. No 
compliance costs. The 
budgetary costs are justified in view of the 
damage inflicted on 
business and 
proportional to 
compliance.  Yes: trade-offs across 
other domains could not be identified.  
Option 3f  
(legislative): 
Extending the 
role of representative 
organisations Doubtful : these 
organisations may not 
have the resources to 
cope with the administrative charges 
and the financial risks of 
litigation on late payment. They may also 
be prevented from 
bringing an action because of a conflict of 
interest, for example 
when the organisation has as members both the Yes if measures are 
taken to reduce the cost 
of bringing an action and 
the associated financial risks (options 3c, 3d and 
3e). Yes: trade-offs across 
other domains could not 
be identified.  
 
EN 8   EN creditors and the debtor.  
The above impact analysis shows that, as regards B2B transactions, options 3a/2, 3c, 
3d and 3e meet the criteria of effectivene ss, efficiency and consistency. The other 
options fail in respect of at least one criterion:  
Ranking the options  
Option Effectiveness  Efficiency  Consistency  
RECOMMENDED CHOICE 
Option 3a/2  (legislative): Harmonisation 
of periods of payment by public 
authorities to businesses Yes Yes Yes 
Option 3c  (legislative): the abolition of 
the €5 threshold Yes Yes Yes 
Option 3d  (legislative): the introduction 
of a “Late Payment Fee” Yes Yes Yes 
Option 3e  (legislative): the introduction 
of a “Late Payment Compensation”  Yes Yes Yes 
OPTIONS WHICH ARE NOT RECOMMENDED 
Option 3b  (legislative): increasing the 
“margin” interest rate  Doubtful Doubtful Yes 
Option 3f  (legislative): Extending the 
role of representative organisations Doubtful Yes Yes 
Option 3a/1  (legislative): Harmonisation 
of payment periods between businesses Yes No No 
Option 2a  (non-legislative): The 
organisation of awareness raising 
activities targeted at businesses No No Yes 
Option 2b  (non-legislative): The 
organisation of awareness raising activities targeted at organisations 
representing SMEs No Yes Yes 
Option 2c  (non-legislative): Publication 
of information on bad debtors Doubtful No Yes 
The only option likely to impose significant  administrative costs on business is 
option 2c. A rough indication of these co sts for this options amounts to 25,300 
million euro for SMEs and 86.1 milli on euro for large enterprises.