EN    EN EN 
 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 8.4.2009 
SEC(2009) 315 
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) 
 
Impact assessment  
{COM(2009) 126 final} 
{SEC(2009 316}
 
EN 2   EN TABLE OF CONTENTS 
1. Procedural issues and consulta tion of interested parties.............................................. 5 
2. Problem definition........................................................................................................ 5 2.1. The problem and its size .............................................................................................. 5 2.2. The causes of the problem............................................................................................ 9 2.2.1. The market structure .................................................................................................... 9 
2.2.2. The business cycle,..................................................................................................... 10 
2.2.3. Access to finance and budgetary constraints ............................................................. 10 2.2.4. The internal organisation of  creditors and debtors,.................................................... 11 
2.2.5. The absence of effective and efficient remedies........................................................ 12 2.3. The effects of the problem ......................................................................................... 13 2.3.1. Late payment represents a significa nt cost to creditor enterprises............................. 13 
2.3.2. Debtor companies and public authori ties paying late get free trade credit................ 15 
2.3.3. Late payments have a negative impact on intra-community trade............................. 15 2.4. How is the problem likely to develop? ...................................................................... 17 2.5. Legal basis............................................................................................................... ... 17 
3. Objectives.................................................................................................................. . 18 
3.1. General objectives...................................................................................................... 18  
3.2. Specific objectives ..................................................................................................... 19  
3.3. Operational objectives................................................................................................ 19 4. Policy options............................................................................................................. 1 9 
4.1. Overview of policy options - S ubsidiarity and proportionality ................................. 19 
4.2. Baseline option: no policy change ............................................................................. 21 4.3. Non-legislative options .............................................................................................. 21 4.3.1. Option 2a: The organisation of awareness ra ising activities targeted at businesses.. 21 
4.3.2. Option 2b: The organisation of awareness-ra ising activities target ed at organisations 
representing SMEs ..................................................................................................... 22 
4.3.3. Option 2c: Publication of information on bad debtors............................................... 22 4.4. Legislative options ..................................................................................................... 22  
4.4.1. Option 3a: Full harmonisation of payment periods.................................................... 22 
 
EN 3   EN 4.4.2. Option 3b: increasing the "margin” interest rate........................................................ 22 
4.4.3. Option 3c: the abolition of  the threshold of €5 .......................................................... 23 
4.4.4. Option 3d: the introduction of a “Late Payment Fee”................................................ 23 4.4.5. Option 3e: the introduction of a “Late Payment Compensation” .............................. 23 4.4.6. Option 3f: Strengthen the role of  representative organisations.................................. 23 
5. Analysis of impacts.................................................................................................... 24 5.1. Option 1: baseline option ........................................................................................... 25 5.2. Option 2a (non-legislative): The organisati on of awareness raising activities targeted 
at businesses............................................................................................................... 25 
5.3. Option 2b (non-legislative): The organisation of awareness raising activities targeted 
at organisations representing SMEs........................................................................... 26 
5.4. Option 2c (non-legislative): Publicat ion of information on bad debtors ................... 26 
5.5. Option 3a (legislative): Harmonisation of payment periods...................................... 29 5.5.1. Option 3a/1: The harmonisation of paym ent periods between economic operators.. 29 
5.5.2. Option 3a/2: the harmonisation of the peri ods for payment by nati onal authorities to 
economic operators .................................................................................................... 33 
5.6. Option 3b (legislative): increasing the “margin” interest rate ................................... 35 
5.7. Option 3c (legislative): the a bolition of the threshold ............................................... 36 
5.8. Option 3d (legislative): the introduc tion of a “Late Payment Fee” ........................... 37 
5.9. Option 3e (legislative): the introducti on of a “Late Payment Compensation” .......... 39 
5.10. Option 3f (legislative): Extending the role of representing organisations ................. 39 
6. Comparing the options ............................................................................................... 40 6.1. General comparison ................................................................................................... 40 6.2. Ranking the options.................................................................................................... 43 6.3. Administrative cost .................................................................................................... 44 7. Monitoring and evaluation ......................................................................................... 44 8. Annexes..................................................................................................................... . 45 
8.1. Annex 1: Results of the I.P.M. c onsultation of interested parties.............................. 45 
8.2. Annex 2: Results of the EBTP cons ultation of interested parties .............................. 52 
8.3. Annex 3: The causes and the size of the problem: facts and figures ......................... 58 8.4. Annex 4: Detailed descripti on of the baseline option ................................................ 84 
8.5. Annex 5: Options discarded at an early stage ............................................................ 86 
 
EN 4   EN 8.6. Annex 6: overview of the jurisprudence of the Court of Justice about the Directive 95 
8.7. Annex 7: Transposition of Article 3(5)  (organizations representing SMEs) and 
Article 6(3)(c) (threshold of €5)................................................................................. 97 
8.8. Annex 8: the SME test ............................................................................................... 98 
 
EN 5   EN Lead DG: ENTR. Other services  invited to participate: SG, SJ, COMP, BUDG, SANCO, 
TAXUD, ECFIN, MARKT and JLS. The Impact  Assessment Board delivered its opinion on 
17 December 2008 [D(2008)10479]. All recommendations made by the Board were taken into account and this document was amended accordi ngly. Agenda planning or WP reference: 
2009/ENTR/006. This report commits only the Commission's services involved in its 
preparation and does not prejudge the final fo rm of any decision to be taken by the 
Commission. 
1. P
ROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  
An inter-service steering group was establ ished, in which ENTR, ECFIN, MARKT 
and JLS participated. SG, SJ, COMP, BUDG, SANCO and TAXUD declined. The 
steering group met on 17 April, 19 May, 11 September and 14 November 2008. 
Stakeholders were consulted throug h a public consultation through I.P.M.1 (Your 
Voice in Europe2) in accordance with the Comm ission’s minimum standards on 
public consultation. In addition, the EB TP (European Business Test Panel)3 was also 
consulted. The results of these consultatio ns are incorporated in this impact 
assessment. This impact assessment  also draws on external expertise4 and different 
publications mentioned in the footnotes throughout the text. 
2. PROBLEM DEFINITION  
2.1. The problem and its size  
In the EU, most goods and services are supplied by businesses to other businesses 
and to public authorities on a deferred payment basis whereby the supplier gives its client time to pay (“ trade credit ”). This time period is agreed between parties, or set 
out in the supplier’s invoice or laid down by law. At the latest at the end of the trade credit period, the supplier expects paym ent for the goods or services delivered. 
Payment made after the trade credit period constitutes late payment. 
When a business delivers products or services to ot her businesses or to public 
authorities (hereinafter “ commercial transactions ”), each transaction can represent 
a significant share of the turnover of th e economic operator concerned. Therefore, 
most businesses expect payment for commer cial transactions within a reasonable 
time so that they can pay their own debts a nd invest in future activities and assets. 
The deadline for payment in commercial transactions is either specifically agreed upon or laid down in the general commercial conditions of the economic operator delivering the products or the services.  
                                                
 
1 http://ec.europa.eu/yourvoice/ipm/forms/dispatch?form=Latepayment&lang=en . See Annex 1. 
2 http://ec.europa.eu/yourvoice/index_en.htm . 
3 http://ec.europa.eu/yourvoice/ebtp/index_en.htm . See Annex 2. 
4 Study on the effectiveness of Directive 2000/35/EC (2006), hereinafter the “Hoche report” 
(http://ec.europa.eu/enterprise/regulation/late_payments/further_reading.htm ) and a study by RPA Ltd. 
(2008), herinafter the “RPA Report”. 
 
EN 6   EN However, many payments in commercial transactions  between businesses or 
between businesses and public  authorities are made later than agreed or laid down 
in the general commercial conditions (hereinafter “ late payment ”5). Although the 
goods are correctly delivered  or the services well pe rformed, the corresponding 
invoices remain unpaid or are paid well af ter the deadline. Thes e practices impinge 
on liquid assets and complicate the financia l management of enterprises. They can 
also affect their competitiveness and profitability when the creditor needs to obtain external financing because of  late payments. They also have a negative effect on 
intra-Community commercial transacti ons, as will be explained below. 
Directive 2000/35/EC was adopted to combat late payment in commercial 
transactions between businesses or be tween businesses a nd public authorities
6. 
According to the Directive, statutory inte rest may be charged when payment is not 
made within the contractual or legal d eadline. 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. The general rule is th at the level of interest for late payment 
("the statutory rate"), which the debtor is obliged to pa y, should be the sum of the 
interest rate applied by the European  Central Bank to its most recent main 
refinancing operation carried out before th e first calendar day of the half-year in 
question ("the reference rate")7, plus at least seven percen tage points ("the margin"), 
unless otherwise specified in the contract: 
Table 1.1: Interest rates for late p ayments in the EU (1 January 2009) 
Eurozone 
Reference rate (currently the ECB rate is 2.5% plus the margin of at least 7 
percentage points in all Member States of the Eurozone 9.5% 
Exception s: Reference rate plus margin of at least 8 percentage points: 
Germany, Austria, Slovenia 10.5% 
Not Eurozone  
Reference rate (National Bank rate) plus margin of at least 7 percentage points:  
Bulgaria 12.17% 
Czech Republic 9.25% 
Denmark 10.5% 
Estonia 9.5% 
Latvia 13% 
Lithuania 15.21% 
                                                 
5 According to Article 2(2) of Directive 2000/35/EC on combatin g late payment in commercial 
transactions, late payment means “exceeding the contr actual or statutory period of payment”. The Court 
of Justice confirmed in this respect that, pursuant to Article 3(1)(a) of the Directive, the parties are 
generally free to fix in their contract the date or the period for paymen t (judgement of 11 December 
2008, Commission v. Spain, Case C-380/06). 
6 The Directive defines commercial transactions as  “transactions between undertakings or between 
undertakings and public authorities which lead to the delivery of goods or the provision of services for 
remuneration.” The directive applies to more than 23 million undertakings in the EU. It is estimated that there are around 15 billion commercial transactions per year in the EU. 
7 In practice, the ECB rates are published at the begi nning of every January and July in the Official 
Journal, series C. The reference rate in force on th e first calendar day of the half-year in question shall 
apply for the following six months. See http://www.ecb.eu/stats/monetary/rates/html/index.en.html . For 
a Member State which is not participating in the third stage of economic and monetary union, the reference rate referred to above is the equivalent ra te set by its national central bank. For the purposes 
of the Directive, the reference rate in force on the fi rst calendar day of the half-year in question applies, 
in both cases, for the following six months. 
 
EN 7   EN Hungary 17% 
Poland 12.25% 
Rumania 17.25% 
Exceptions : reference rate (National Bank rate) plus margin of at least 8 percentage points:  
United Kingdom  10% 
Sweden  10% 
The Directive mainly addresses the situation where the commercial debt is eventually 
paid after the contract ual or legal deadline but without any judicial proceedings. Yet, 
when judicial proceedings are necessary for obtaining payment of the commercial 
debt, the Directive obliges Member States to  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 app lication at the court or other competent 
authority, provided that neither the debt nor other aspects of the procedure are 
disputed. 
Despite this Directive, late payments in commercial transactions are still a 
widespread practice in the EU : 
Table 1.2: Evolution of late paymen ts for SMEs in 7 EU Member States 
(average actual delays in number of days)  
 2003 2004 2005 2006 2007 
Germany 12 13 19 13 15 
Belgium 23 16 20 19 17 
Spain 10 9 13 18 12 
Italy 19 16 27 21 21 
Portugal 45 35 38 38 38 
U.K. 18 10 18 15 13 
Source : Eurofactor, Baromètres 2006, 2007 and 20088 
There is overwhelming evidence9 that late payment in commercial transactions is still 
a general problem within the EU. For ex ample: a study in 10 Member States 
indicates that 98% of all economic operators experience late payment10. Belgian 
surveys11 show that 31% to 49% of responding enterprises experience problems with 
                                                 
8 More detailed figures are shown in Annex 3. 
9 Besides the sources quoted in other footnotes, other information about payment delays can be found, for 
example, on http://www.payontime.co.uk/news/news_main.html , http://www.ivkm.be/ , 
http://www.finances.gouv.fr/directions_services/ cedef/synthese/delais-paiement/synthese.htm , 
http://www.crion.com/cms_files/N-77-nlBestand.pdf , http://www.iec-
iab.be/ned/publicaties_info_economie.aspx?id=1847 , http://www.fd.nl/artikel/9669604/top10-
betalingsexcuses , http://managementscope.nl/nieuws/2028-credit-managers-kredietwaardigheid/2028-
credit-managers-kredietwaardigheid , http://www.cfo-news.com/ESPA NA-%7C-En-Espana-la-Ley-
contra-la-morosidad-no-es-suficiente_a337.html , http://www.cmrc.co.uk/ surveys/debt_survey/ , 
https://www.financialworld.co.uk/Archive/20 08/2008_06jun/Features/late_payments/14414.cfm , 
http://www.startups.co.uk/667884291089108 4831/late-payments-rise-to-8-3bn.html , 
http://epp.eurostat.ec.europa.eu/portal/page?_p ageid=2293,59872848,2293_68195655&_dad=portal&_
schema=PORTAL#fbs2 , http://press.experian.com/documents/showdoc.cfm , http://eos-
ksi.cz/fileadmin/user_upload/Eastern_Eur opa/EOS_KSI_CZ/EOS_Payment_Practices.pdf , 
http://www.eulerhermes.com/en/documents/studybr ochurecreditmanagement.pdf/studybrochurecreditm
anagement.pdf  and many other sites. 
10 Study on Credit Management Practice in 10 European Economies, commissioned by Euler Hermes, 
2006. 
11 Survey organised by UNIZO, “Dossier Betalingsachterstanden: UNIZO-Actieplan tegen slechte 
betalers”, 24 March 2005; Survey organised by NSZ in 2008: 
http://www.nsz.be/index.cfm?PageID=18119&News_ID=18538&style=66 . 
 
EN 8   EN late payments, with an average payment delay of 28 days. For 81% of respondents, 
late payment is an important problem. Another source points out that average 
payment delays throughout Europe increa sed from 16 days in 2007 to 17 days in 
200812. According to a recent survey13, over 30% of turnover is  paid late to around 
44% of the larger companies. The situation is worse for smaller enterprises: 59% of 
them are paid late for more than 30% of their turnover. A further 27% of large companies indicated that between 20% - 30%  of turnover is paid late, with the 
corresponding figure for smaller companies being around 14%. In the UK, 48% of all SME employers consulted reported late payment as a problem with one in six 
describing it as a major problem (up from 12% in 2005)
14. The Survey organised for 
the RPA Report shows the following results: 
Table 1.3: Percentage of turnover paid late  
Percentage 
turnover <1% 1-5% 5-10% 10-20% 20-30% >30% No 
response 
>250 staff 4.8% 15.9% 9.5% 6.3% 23.8% 38.1% 1.6% 
<250 staff 1.3% 10.1% 8.8% 8.2% 14.5% 56.6% 0.6% 
Stakeholder Consultations point in the same  direction: 53% of the EBTP respondents 
frequently encounter late payment in B2B transactions while 32% frequently 
encounter late payment by public authoriti es. More than 65% of the businesses 
responding in the IPM consultation freque ntly encounter late payment in B2B 
transactions while 61% frequently encount er late payment by public authorities. 
Surveys also show that, in general, late  payment occurs frequently in the public 
sector. According to a recent report, public authorities sust ained their position as the 
worst payers in the EU, taking an average of  65 days to pay an invoice, compared to 
55 days for businesses15. The RPA on-line survey with regard to amounts owed by 
the public/private sector16 indicates that around 30% of the SMEs responding stated 
that 90% or more of their la te payments are owed to them by the public sector, with 
another 30% indicating that a similar percentage is owed to them by the private 
sector. Only 12.7% of larger companies attrib ute 90% or more of their late payments 
to the public sector, while around 32% attri bute 90% or more of late payments to 
private sector clients. When asked about th e sectors that have mo st difficulty paying 
within 30 days, 31% of all companies res ponding to the on-line survey highlighted 
the public sector. Other surveys confirm th ese findings. In Belgium, for example, 
only 13% of respondents experienced payment within 90 days17. In Italy, a survey 
points out that payment delays for public ad ministrations increased from 138 days in 
2008 to 170 days nowadays. 50% of enterp rises supplying to public administrations 
                                                 
12 Intrum Justitia, European Payment Index 2008. 
13 Survey organised for the RPA report. 
14 BERR, Department for Business, Enterprise & Regulatory Reform, The Annual Survey of Small 
Businesses’ Opinions 2006/07 (ASBS 2006/07), URN 07/389. 
15 Intrum Justitia, European Payment Index 2008: White paper Industries and credit management best 
practices, September 2008. 
16 See Table 3.11 in Annex 3. 
17 http://www.sninet.be/. 
 
EN 9   EN suffer payment delays averaging 2-4 months . For 25%, it takes about 4 to 6 months 
to get paid18.  
2.2. The causes of the problem  
The roots of late payments in commercial  transactions and the corresponding passive 
attitude of many creditors are diverse and interrelated19: 
2.2.1.  The market structure 
The level of competition within a market, th e market power of market participants 
and the corresponding fear of harming comm ercial relationships with clients are 
important factors determining whether cred itors 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 co mmercial relationship with the client 
which is the most important reason for EBTP respondents and IPM respondents not 
to claim interest for late payment:
20 
Table 1.4: Why do IPM and EBTP res pondents never claim interest? (Multiple replies possible)  
 IPM EBTP 
Out of fear that the customer would be lost 58.3% 68.5% 
It is too complicated to claim interest 47.9% 45.9% 
Competitors never claim interest for late payments 37.5% 28.8% 
Late interest is considered as revenue, even when it is paid 4.9% 13.5% 
Unawareness about the right to charge interest for late payment 11.8% 13.5% 
The interest rate is unknown 7.6% 7.2% 
Don't know 3.5% 5.4% 
Some businesses do not react to late payment since the tacit extension of the trade 
credit they thereby grant to the customer is an element of their marketing strategy 
and a potential source of competitive adva ntage for generating sales and customer 
loyalty. The acceptance of late payment by suppliers can also respond to the 
customer’s needs or demand for short-term finance, or can signal the financial solidity or the commercial reputation of a busin ess, and even indirectly the quality of 
the product or service. Nevertheless, ma ny suppliers will take into account the 
competitive structure of the markets in whic h they operate, the bargaining strengths 
of both parties and the conditions affecti ng the supply of alternative sources of 
corporate finance
21. 
For debtors, the main reasons for timely payment in commercial transactions are 
often related to commercial or professiona l repute or mutual trust in long-term 
commercial relationships. In other circumstan ces, the debtor is in a strong position 
up to the moment of payment. After the de livery of the goods or  services, the power 
                                                 
18 http://www.varesenotizie. it/varese-economics.html.  
19 See Table 3.1 in Annex 3. 
20 See Annex 3. 
21 Wilson N., “An Investigation into Payment Trends and Behaviour in the UK: 1997-2007”, Department 
for Business, Enterprise & Regulatory Reform and CMRC, 2008. 
 
EN 10   EN in short-term or one-off comm ercial relationships automatically shifts to the debtor 
until the date of payment. 
Furthermore, many debtors know that they are unlikely to be sanctioned for paying 
late. This feeling of impunity derives from several factors, notably the awareness that most creditors are hesitant to take action to preserve their commercial relationships, the slowness and prohibitive cost of lega l procedures to claim payment and the 
corresponding interest and, for some debtors,  the non-deterrent rate  of the statutory 
interest. Debtors’ insouciance also has its roots in a very competitive supply chain whereby customers can pick and choose their suppliers among many competitors, or in a market with imperfect competition. 
In addition to the problem of late payment, stakeholders also often argue that they are 
forced to stretch the contractual payment period or to accept unreasonable payment 
conditions. During contract negotiations fo r commercial transactions or during the 
public procurement process, parties do not necessarily have equal negotiation power. 
In particular, SMEs often find themselv es in a weak position when negotiating 
contracts with larger entiti es and have to consent to very long payment periods to 
strike the deal. In some cases , they could be forced to sign a contract that expressly 
excludes the payment of interest in case of  late payment. In most Member States, 
contract law does not set standardised and legally enforceable payment periods protecting SMEs from contractual clause s stipulating very long payment periods. 
This is compounded by the fact that SMEs normally have insufficient expertise in 
contract negotiations and/or insuffici ent time to negotiate contracts.  
2.2.2.  The business cycle,  
Changing macroeconomic conditions are anot her cause of late payment. A business 
cycle downturn is likely to cause more la te payments as firms delay paying their 
invoices to stretch th eir liquidity. Also, firms suffer from a a reduced ability to 
generate income from th eir operations because of receding demand, and banks 
tighten credit conditions possibly reducing credit volume to firms.  
However, improvement in economic conditions  may also provoke an increase in late 
payment for certain firms presented with  more investment opportunities and, 
consequently a greater need to obt ain a sufficient amount of financing. 
2.2.3.  Access to finance and budgetary constraints  
Monetary policy, the availability of credit, the flow and nature of  credit information, 
the liquidity position of the firm and the availability of fina ncial resources from 
banks may also affect payment behaviour, particularly for businesses for which bank 
credit is a substitute for supplier financing.  
Many debtor enterprises and public authorities  consider late payment an efficient and 
cheap way to finance their own businesses a nd activities. For public authorities, late 
 
EN 11   EN payments to creditors are an efficient way to overcome budgetary constraints by 
postponing payments to the next budgetary period22. 
2.2.4.  The internal organisation of creditors and debtors,  
The financial management practice of debt ors (including public authorities) and the 
credit management practice of  creditors as well as their product and service quality 
and after-sales service are important factors in (avoiding) late pa yment. Creditors in 
commercial transactions, and especially SM Es, do not necessarily have appropriate 
credit management systems for prev enting or managing late payments: 
Table 1.5: Payment Surveillance Practices 
 
Manual 
checking (weekly) 
Manual 
checking (monthly) 
Automated 
system identifies when 
invoices are 
due 
Automated 
system which prepares and 
sends invoices  
When time is 
available 
Other  
>250 staff 3.2% 1.6% 61.9% 6.3% 0.0% 27.0% 
<250 staff 10.7% 9.4% 45.3% 6.9% 1.9% 25.8% 
Source: survey organised for the RPA Report 
For more than 45% of EBTP  and IPM respondents, it is too complicated to claim 
interest when late payment occurs. Sma ller enterprises usually have insufficient 
resources to take action against the debt or. Some of them do not know how to 
calculate late payment interest while others lack the means to enforce payment. It is arguable that smaller firms are less able than  large firms to insist on prompt payment. 
This, in turn, may be because SMEs feel mo re pressure, despite the cost of extending 
trade credit on a net basis, to offer this financial service just to stay in business
23. 
More than 28% of the EBTP respondents and 37.5% of IPM respondents never claim 
interest because their competitors never do. 
                                                 
22 According to the IMF, payment delays by public authorities often arise from attempts to slow down the 
recording of expenditures at the final stages of the spending process. Faced with a monthly or quarterly 
financing constraint, public authorities are often temp ted to slow down the payment process by delaying 
the issue of payment orders in order to meet fi nancing ceilings. In accrual accounting terms, once goods 
or services are verified as delivered, the govern ment has incurred a liability; only in cash accounting 
terms do such practices have any purpose (albeit misguided). If the above practices are relied on for a 
prolonged period, the authorities’ liabilities (and hence expenditure levels) are not correctly reflected in the bank accounts, owing to the existence of unpaid overdue bills, which represent expenditure arrears. 
Therefore, the IMF advises ministries  of finance to carefully compare their reports on bills received and 
payment orders issued with those on payment orders encashed, as recorded by the central bank or government payment agency. The IMF suggests several causes for late payments by public authorities. 
For example, the budget provision is unrealistic and line ministries are allowed to commit expenditure 
within that appropriation (i.e., budget provision), ev en though there is no cash available to liquidate the 
expenditure. Or the budget figures may be realistic, but the cash plan (and monthly cash limits) 
associated with the budget are not, or there is no in-year guidance on when expenditures can be 
committed. Commitments may not be recorded and therefore do not respect the budget ceilings or the 
timetable defined by the cash plan. Finally, the public authorities may not be efficiently organised. 
Source: http://www.imf.org/external/pubs/ft/expend/guide4.htm#probexe. 
23 Wagenvoort R., “Are finance constraints hindering the growth of SMEs in Europe?”, in: Europe's 
changing financial landscape: The financing of small and medium-sized enterprises, EIB Papers 
Volume 08. n°2/2003.  
 
EN 12   EN 2.2.5.  The absence of effecti ve and efficient remedies 
Despite Directive 2000/35/EC, many businesses, and in particular SMEs, do not 
charge interest when entitled to do so, thus contributing to th e situation in which 
debtors are not sanctioned for paying late24. 75% of EBTP respondents seldom or 
never claim interest for late payments. A ccording to the responses from a specific 
questionnaire on claims for late payment inte rest, the average claim rate for SMEs is 
13.5% of all late payments and the equiva lent rate for large companies is 18.24%. 
According to a consultation organised in Fr ance, 90% of participating organizations 
think that less than 10% of their members put into practice the statutory interest provided for by law. Other sources confirm these figures: 
Table 1.6: companies claiming interest fo r late payments in 7 EU Member States 
 2005 2006 2007 
Germany 54% 47% 52% 
Belgium 39% 36% 34% 
Spain 25% 22% 14% 
France 11% 15% 12% 
Italy 25% 21% 21% 
Portugal 22% 20% 26% 
United Kingdom 11% 13% 22% 
Source : Eurofactor, Baromètres 2006, 2007 and 2008  
For some creditors, the cost of taking acti on against late payment is not justified by 
the financial benefits. In many cases, the expenses of the extra-paperwork cannot 
be recovered . Chasing late paying clients or charging interest for late payments 
generates administrative cost s that many businesses wish to avoid. For about 66% of 
EBTP and IPM respondents, the loss of management time and working hours is the most important effect of late payment. Fu rthermore, 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. 
In addition, several key provisions of the Directive are unclear or difficult to 
implement in practice
25. For instance, diverse interpre tations are conceivable for the 
calculation of the applicable interest rate, the definition of “relevant recovery costs” 
and the possibility of compound interest. Moreover, the Direc tive specifies that 
Member States may exclude claims  for interest of less than €526.Thus, the 
Directive implies in practice that the creditor  will have to wait until the interest 
reaches €5 before effectively charging it. This additional delay obviously depends on 
the interest rate and the am ount owed. For example, a cred itor can only claim interest 
for a late payment of €1,000 after 17 days following the payment deadline (based on 
a reference rate of 11%). 
                                                 
24 Etude sur les délais de paiement”, by Prof. Michel Glais, 2005. See Tables 3.8 and 3.9 in Annex 3. 
25 Although the Directive is fairly r ecent, already 5 cases with divergen t interpretations of the Directive 
were submitted to the Court of Justice. An overview of this jurisprudence is shown in Annex 6. 
26 See Annex 7. 
 
EN 13   EN 2.3. The effects of the problem 
2.3.1.  Late payment represents a signific ant cost to creditor enterprises 
In general, late payment strains cash flow, adds financial and administrative costs, 
squeezes investment opportunities and fuels uncertainty for many creditor businesses 
and in particular, SMEs27, especially in an economi c downswing with limited and 
expensive access to finance. 
The result is often that their competitiv eness and solvency, and eventually their 
viability are compromised28. Based on the responses to a survey and on a number of 
assumptions29, the value of turnover paid la te accounts for around €1,864 billion 
across the EU: 
Table 1.7: Value of annual  turnover (€bn) paid late30 
EU €bn 
Large company turnover paid late 724 
SME turnover paid late 1,141 
TOTAL 1,864 
It should be noted that SM E’s are particularly vulner able to late payments:  
(1) SMEs are more exposed to variations in cash flow : the financial costs of 
late payment for SMEs are particularly high31, with cash-flow needs having to 
be met by short-term bank loans or ove rdrafts. Micro and small companies’ 
lower turnover and limited access to finance often result in more expensive credit
32. 
                                                 
27 OECD SME, 2002. In Successes and Challenges for SMEs , 2003, the SME Union observes that 
payment delays caused by big companies are twice as frequent as those caused by SMEs. A survey in 
the UK ( Mamut survey , published November 2006) showed that 56% of the SMEs with less than 20 
employees have debtors who are late payers versus only 29% of those with 20-50 employees. See also Bulletin de la Banque de France , n. 168, décembre 2007, p. 82-84. 
28 Pike R., Cheng N.S., Cravens K. and Lamminmaki D.: “Trade Credit Terms: Asymmetric Information 
and Price Discrimination Eviden ce From Three Continents”; Journal of Business Finance & 
Accounting , 32(5) & (6), June/July 2005, p. 1201. 
29 This turnover could be linked to any delay, i.e. from one day’s delay to 60 days’ delay or more. This 
figure has been calculated by combining the average percentage of turnover paid late with data on 
average company turnover by size from Eurostat. Yet, since this figure is based on people responding to 
the RPA questionnaire, it may overestimate the turnover  paid late reflecting respondents’ bias towards 
the subject. 
30 Applies average percentage paid late to average company turnover by size,  as given in EUROSTAT, 
but assumes the mid-value for percentage of turnover paid late, i.e. 3%, 7.5%, 15%, 25% and 30% for 
the last category of percentage turnover paid late . B2B turnover has been cal culated assuming that the 
% of company turnover from B2B tr ansactions is 42% of the overall turnover. This assumption is made 
on the basis that consumer spending represents approximately 58% of EU GDP. See Table 3.7 in Annex 
3 for further details. 
31 In France for instance, it has been calculated that, for 50% of the SMEs, late payments amount to a 
charge in their cash-flow equivalent of more than 20 days of business. Source: « Délais de paiement et 
solde du crédit interentreprises de 1990 à 2006 », in Bulletin de la Banque de France , n. 168, décembre 
2007, p. 81. 
32 See, for example, Petersen M. and Rajan R.G., "Trade Credit: Theories and Evidence" (1996-06-01), 
NBER Working Paper No. W5602, http://ssrn.com/ abstract=225540 ; Wilson N, Summers B., “Trade 
Credit terms offered by Small Firms: Survey Eviden ce and Empirical Analysis”, Journal of Business 
Finance & Accounting, 2002, Vol. 29 (3&4), p. 317; Pike R. and Sang Cheng N., “Credit Management: 
 
EN 14   EN (2) SMEs often rely on a limited number of clients : the vulnerability of SMEs 
is accentuated by their narrow client spread and the resulting overreliance on specific client activity to maintain revenue streams
33. SMEs are often reliant 
on only a handful of clients for a large proportion of turnover and this in turn 
leads to clients abusing their position by imposing very long payment periods 
in contracts and/or paying late. 
(3) The administrative costs of pursuing debts are disproportionately high 
for SMEs , as they typically have  neither specialized st aff nor enough time to 
properly manage outstanding claims. For example, an average SME in Great Britain spends 2.5 hours a week chasing late payments
34.  
Table 1.8: Impact of late payments  on enterprises: some examples 
The Hoche report shows that for 8% of respondents, late payments impact directly and significantly 
on their survival chances while another 49% of respondents considered that late payments have an 
impact on their survival chances. 
A study in 10 Member States points out that 76% of all economic operators’ cash flow has been affected by late payment
35. 
Another survey36 showed that the profitability of 39% of British firms had been hit by late payment. 
A third (30% of British companies had been unable to  pay their own bills on time as a result of late 
payment which had also forced almost one in five companies (18% to delay the expansion of their 
business .  
Other research37 showed that almost a fifth of SMEs (19%  now employ a dedicated person to chase 
up late payments – losing an average of 17 working days a year to this task . 
For 31% of EBTP respondents, late payment slows down the growth of their business and for 28%, it affects their productivity. Late payment has a negative effect on investment for 22% of EBTP respondents and for 13% of them, it threatens the su rvival of their business. Late payment does not 
affect the business of 18% of EBTP respondents. 
Managing cash flow is still perceived as an obstacl e to success by almost half of SME employers, 
according to a survey. Over half of  the respondents who re ported cash flow to be an obstacle cited 
late payment as being a key concern. 56% cited late payment from businesse s. Possibly because of 
the size of unpaid invoices, late payment by businesses was more commonly cited as the biggest 
challenge in cash flow terms (30 per cent, comp ared to 13 per cent citing late payment from 
individuals)38.  
From a macroeconomic perspective, late payment has a detrimental effect where it 
requires economic operators to take out loans at a higher interest rate than the late paying customers.  
                                                                                                                                                        
 
An examination of Policy Choices, Practices and Late Payment in UK Companies”, Journal of Business 
Finance & Accounting, 2001, Vol. 28, 7&8, p. 1013; Wagenvoort R., “Are finance constraints 
hindering the growth of SMEs in Europe?” in: Europe's changing financial landscape: The financing of small and medium-sized enterprises, EIB Papers Volume 08. n°2/2003. 
33 Howorth C. and Reber B., “Habitual late payment of  trade credit: an empirical examination of UK small 
firms”, Managerial and D ecision Economics, 2003, Vol. 24, 6-7,  according to which a concentrated 
supplier base is shown to be positively associated with late payment. Their case studies provide 
evidence that this is because increased knowledge of suppliers' credit management procedures is used to 
pay late without penalties. 
34 Source: Bacs Payment Sche mes Limited (Bacs), 2007. 
35 Study on Credit Management Practice in 10 European Economies, commissioned by Euler Hermes, 
2006. 
36 Research published on August 2007 by Creditsafe: http://www1.creditsafeuk.com/?id=975&cid=1110 . 
37 Research conducted in 2007 by Bacs Payment Schemes Ltd.: 
http://www.bacs.co.uk/Bacs/Businesses/SME/Useful +tools/Late+payment+tips/Late+payment+tips.htm 
38 BERR, Department for Business, Enterprise & Regulatory Reform, The Annual Survey of Small 
Businesses’ Opinions 2006/07 (ASBS 2006/07), URN 07/389. 
 
EN 15   EN 2.3.2.  Debtor companies and public authorities  paying late get free trade credit 
When a business pays its suppliers on tim e and clients pay on time, its debts and 
credits are broadly in balance. But when, for instance, suppliers are paid within 30 
days and clients only pay within 90 days, the resulting imbalance requires to be 
financed. Paying late is sometimes consider ed as a means of refinancing as opposed 
to applying for bank loans39. Trade credit is the single most important source of 
external finance for firms. It  appears on every balance shee t and represents more than 
one half of businesses’ short te rm liabilities and a third of all firms’ total liabilities in 
most OECD countries. For example, £18.6 bi llion is owed in outstanding (but no 
necessarily late) payments to Britain’ s SMEs in 2008 – a leap of £2.6 billion 
compared with the year before. The average amount owed to an SME at any one time 
is £30,00040.  
There is strong evidence that trade credit is us ed to alleviate credit constraints 
whereby firms insure each other against liquidity shocks, especially since suppliers continue to extend trade credit to firms th at already defaulted on a payment in the 
past. Small, liquidity-strapped firms with lit tle access to outside finance seem to pass 
liquidity shocks on to their supp liers by defaulting on trade credit
41. If the supplier is 
also small and short of liquidity and cannot raise fresh funds on short notice, a 
substantial portion of the shock is likely to  be passed on further down the trade credit 
chain42. 
2.3.3.  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 ri sk of late payment: 
                                                 
39 Cunat V., “Trade Credit: Suppliers  as Debt Collectors and Insurance Providers”, Universitat Pompeu 
Fabra & Financial Markets Group (LSE), May 2005; SMES under threat from late payments , Intrum 
Justitia, 2005, p. 13; Russo P.F. and Leva L, “The use of trade credit in Italy: how important are the 
financial motives”, Bank of Italy, Working Paper No 496, June 2004; See table 3.10 in Annex 3. 
40 Research commissioned by the Banker’s Au tomated Clearing Services (Bacs) - 2008. 
41 Peel M. J., Wilson N. and Howorth C., “Late Payment and Credit Management in the Small Firm 
Sector: Some Empirical Eviden ce”, International Small Busine ss Journal, 2000, 18, p. 17. 
42 Boissay F. and Gropp R., “Trade credit defaults and liquidity provision by firms”, ECB Working Paper 
No 753, May 2007. 
 
EN 16   EN Table 1.9: Terms of payment vs. actual payment in 11 Member States (number of days - 2007)  
Domestic trade Non-domestic trade Differences in 
actual delays  
Member State of 
establishment Terms of 
payment  Actual 
payment 
period Actual delay Terms of 
payment  Actual 
payment 
period Actual delay  
Austria 28 30 2 28 41 13 11 
Belgium 35 41 6 35 45 10 4 
Czech Republic 26 32 6 26 34 18 12 
France 46 56 10 46 60 14 4 
Germany 26 31 5 26 46 20 15 
Hungary 29 36 7 29 38 9 2 
Italy 81 80 -1 81 66 -15 -14 
Poland 23 30 7 23 26 3 -4 
Romania 30 32 2 30 28 -2 -4 
Slovakia 26 31 5 26 32 6 1 
United Kingdom 35 41 6 35 46 11 5 
Source : Atradius Paymen t Practices Barometer – Winter 2007 and May 2008 
Among other reasons, the risk of late payment discourages enterprises from selling 
products and services in other Member Stat es since it increases uncertainty and the 
cost of doing business. A buyer's inability or  unwillingness to pay on time is one of 
the major commercial risks in cross-border trade risk management, in particular for 
SMEs43. In that case, transaction costs are higher due to asymmetric information and 
insecurity about the market position and the solvency of a client established outside 
the domestic market44. The reverse side of this asymmetric information is that for 
many debtors the risk to reputation related to late payment is much lower when the 
creditor is established in another Memb er State since the damage to reputation 
caused by late payment diminishes with di stance. Late payment affects the business 
reputation of debtors much more when th e creditor is established in the same 
Member State. Businesses that pay their invoices promptly usually focus more on 
good business relationships, tending to value the maintenance of relationships with 
their suppliers and the compa ny’s reputation as important. 
Trade across national borders amplifies th e costs of offering trade credit because 
language, jurisdiction and access to solvency  data tend to be different and, thus, 
monitoring costs increase while the chances  of successfully enforcing payment are 
lower. Economic studies show that with uncertainty about the repayment of trade credit the output level of a profit-maximising firm is below the level where there is 
                                                
 
43 According to the Business Credit Index of April 2008, published by the Credit Management Research 
Centre ( http://www.cmrc.co.uk/surveys/business_credit_index/index.html ), medium sized firms 
indicate an overdue period of 26 days for payment by non-domestic customers and an average payment 
delay of 21 days for domestic sales; the COFACE UK Export Survey 2007 
(http://www.cmrc.co.uk/surveys/export_survey/ ) indicates 27 overdue days for sales by UK companies 
to other EU Member States. 
44 Portes R. and Rey H. “The Determinants of Cros s-Border Equity Flows”, Département et Laboratoire 
d'Economie Théorique et Appliquée de l’Ecole Normale Supérieure, Document N° 2001-08; Smith 
J.K., “Trade Credit and Informational Asymmetry”, The Journal of Finance, Vol. 42, No. 4 (Sep., 
1987), pp. 863-872. 
 
EN 17   EN revenue certainty45. As a result, trade credit insurance and other instruments coping 
with trade risk management are often used  in cross-border trade. These instruments 
reduce revenue uncertainty but they in crease production costs due to insurance 
premiums, factoring, buying in formation from agencies, using collecting agencies, 
bank guarantees etc. The cost of some of these services may absorb an important 
fraction of the profit margin, in pa rticular of small enterprises.  
The alternative to instruments coping with cross-border trade risk management is in-
house risk management. This either requi res extra working capital to cope with 
uncertainty about the payment of the comm ercial debt, or obliges the supplier to 
charge higher prices to cover the payment risk. In the worst case, the supplier will 
refrain from selling his produc ts or services in another Member State. In addition, 
due to the cross-border element, the admi nistrative costs of sending reminders and 
contacting debtors are higher when the debtor is established in another Member 
State. 
Table 1.10: Impact of late payments on intra-EU trade: some examples 
A survey performed in late 2004 in the UK found th at payment issues remained a deterrent to intra 
EU trade46. The issue of late payment has a bearing on the decisions of 46% of  companies surveyed 
when they consider working with comp anies from other countries of the EU. 
In another survey47, more than 9000 companies interviewed in 22 European countries had indicated 
that payment uncertainty was seen as the major obstacle to cross-border trade.  
2.4. How is the problem likely to develop? 
The regulatory landscape appl icable to the payment proc ess and claims to obtain 
payment for commercial transactions in cr oss-border cases within the EU is being 
reshaped by new EU rules that recently entered into force or will soon apply. They are set out in detail in annex 4. The former will improve the speed and the efficiency of the payment process while the latter create new possibi lities for judicial and extra-
judicial claims for the recovery of outst anding payments for cross-border commercial 
transactions in the EU. The measures on ju dicial and extra-judicial claims are only 
expected to have a minor impact on late payment in commercial transactions. Their 
impact is more downstream in the process, i. e. when creditors consider that litigation 
is the most appropriate method for obtai ning payment which, by definition, will be 
late.  
2.5. Legal basis 
Late payment can be an important impedime nt to intra-EU trade, especially for 
products and services to be sold in Member States where payment delays frequently 
occur (see section 2.3). The absence or in effectiveness of national rules combating 
late payment could therefore unfairly prot ect national economic operators against 
products and services coming from other Me mber States. Failure by a Member State 
to act or take sufficient action to prevent obstacles to the free movement of goods or 
services originating in other Member States caused by late payment by private 
                                                
 
45 Funatsu, H., “Export Cr edit Insurance”, Journal of Risk an d Insurance, 1986, 53, 4, 680–92. 
46 Credit Management Research Centre, 2004, http://www.payontime.co.uk/news/update_advice.html . 
47 Intrum Justitia, European Payment Index 2004. 
 
EN 18   EN individuals or national author ities is just as damaging to intra-Community trade as a 
positive trade-restrictive act. 
Therefore, the objective of ensuring the functioning of the internal market by 
reducing obstacles to intra-EU trade arisi ng from late payment cannot be sufficiently 
achieved by Member States. It is theref ore appropriate in accordance with the 
principle of subsidiarity, by reason of its scale and effects, to achieve it at 
Community level. 
The fact that late payment in commercial transactions is still an impediment to intra-
Community trade means that any legislativ e proposal would have to be based on 
Article 95 of the Treaty, which is the legal basis of existing Directive 2000/35/EC. Non-legislative action would be based on Article 211 of the Treaty. The 
proportionality of the options will be assessed later in this report. 
3. O
BJECTIVES  
3.1. General 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 Jobs48, i.e. 
that Europe should become the most competitive and dynamic knowledge-based economy in the world, capable of sustaina ble economic growth, creating more and 
better jobs, and developing greate r social and regional cohesion; 
• 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 Act
49, in which the facilitation of SMEs’ access to finance 
and the development of a legal and business environment supportive to timely payments in commercial transactions is earmarked as one of the 10 principles to 
guide the conception and implementati on of SME policies both at EU and 
Member State level. 
• Facilitate the smooth functioni ng and the completion of the  internal market via 
the elimination of related barriers to cro ss-border commercial transactions. In its 
vision for the 21
st century single market, the Commission emphasized the need for 
a strong, innovative and co mpetitive internal market50. The Single Market 
review51 announced that the Commission would examine a range of initiatives to 
                                                 
48 Commission Communication: Working together for growth and jobs. A new start of the Lisbon 
strategy, COM(2005)24. 
49 Communication from the Commission to the Council, the European Parliament, the European 
Economic and Social Committee and the Committee of  the Regions - “Think Small First” - A “Small 
Business Act” for Europe, COM(2008)394final of 25 June 2008. 
50 COM(2007) 60, 21.2.2007. 
51 Commission Communication: A single market for 21st century Europe, COM(2007) 724 final. 
 
EN 19   EN foster the right conditions for small and medium-sized businesses and to improve 
framework conditions for businesses.  
Such initiative would also provide an important impetus to overcome the current 
economic crisis by contributing to the implementation of the European Economic 
Recovery Plan52 and promoting businesses’ cash fl ow in order to reinforce the 
competitiveness of European enterprises in the long term. 
3.2. Specific objectives 
Any future policy should provide econom ic operators involved in commercial 
transactions with a business environmen t that promotes the timely payment of 
commercial debts whereby: 
– The competitiveness of European businesses, in particular SMEs is improved by a 
substantial reduction in late payments fo r commercial transactions within the EU 
and by a reduction of excessi vely long periods of  payment, in particular by public 
authorities; 
– The discouraging effect of late payment in cross-border commercial transactions 
is reduced. 
3.3. Operational objectives 
Concretely, this translates into th e following twin operational objectives: 
(1) Confront debtors with measures that  successfully discourage them from 
paying late or from requiring excessive ly long contractual payment periods; 
and 
(2) Provide creditors with measures that enable them to fully and effectively 
exercise their rights when paid late. 
4. POLICY OPTIONS  
4.1. Overview of policy options - Subs idiarity and proportionality 
It should be noted that, for some important aspects of th e three first problem causes 
set out in section 2.2, the EU does not nece ssarily have the pow er 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. In addition, certain options had to be 
discarded at an early stage for the reasons set out in Annex 5. 
                                                
 
52 COM(2008)800, 26.11.2008. 
 
EN 20   EN Table 1.11: Overview of all policy options 
Problem causes (1) Discarded options (see 
Annex 5) (2) Non-legislative options (3) Legislative options 
2.2.1: the market 
structure  - Option 2a : the 
organisation of awareness 
raising activities targeted at businesses 
- Option 2b
: the 
organisation of awareness raising activities targeted at 
SME organisations  
 - Option 3a
: Full 
harmonisation of payment 
periods   
 
2.2.2: the business 
cycle    
2.2.3: access to 
finance and 
budgetary constraints  - The creation of a 
European Fund aimed at 
providing finance to SMEs.  - Option 3a
: Full 
harmonisation of payment 
periods   
 
2.2.4: the internal 
organisation of 
creditors and 
debtors - A new programme to 
enhance SME capabilities; 
- Promoting the use of 
Escrow Facilities (non-legislative option); 
- Promoting the use of 
securities (non-legislative option); 
- Developing and 
Promoting Credit and Financial Management 
Programmes (non-
legislative option). - Option 2c
: the publication 
of information on bad 
debtors; 
- Option 2a : the 
organisation of awareness 
raising activities targeted at 
businesses - Option 2b
: the 
organisation of awareness 
raising activities targeted at SME organisations  - Option 3f
: Strengthen the 
role of representing 
organisations 
- Option 3g : Encourage 
timely payment by 
compulsory information of 
debtors 
2.2.5: The absence of effective and 
efficient remedies - Repeal of the Directive; 
- Exempt income in the 
form of late payment 
interest from VAT.   - Option 3b
: Increase of the 
statutory interest rate 
- Option 3c : Abolition of 
the threshold of €5 - Option 3d
: introduction of 
a “Late Payment Fee” 
- Option 3e : introduction of 
the “Late Payment 
Compensation” 
Consequently, this impact assessment w ill concentrate primarily on the problem 
causes on which the EU has the right to act.  The legislative options are predicated on 
the principle that the EU should only legisl ate to the extent n ecessary. Regarding the 
nature and the extent of Community acti on, the options leave as much scope for 
national decision as possible, consistent with securing the aim of the measure and 
observing the requirements of the Treaty. Well established national arrangements and the organisation and working of Member St ates' legal systems should be respected. 
None of the options is exclusive. 
 
EN 21   EN Table 1.12: Overview of policy options subjected to an in-depth impact analysis 
Operational 
objective (1) Baseline: No change 
(see annex 4) (2) Non-legislative options (3) Legislative options 
Provide creditors 
with measures that enable them to 
fully and 
effectively exercise their rights when 
paid late. - SEPA will improve 
efficiency of payments  - Debt collection agencies 
will benefit from Services 
Directive 2006/23/EC  - Access to alternative 
dispute resolution will be 
improved by Directive 2008/52/EC  - Option 2a
: the 
organisation of awareness raising activities targeted at 
businesses 
- Option 2b
: the 
organisation of awareness 
raising activities targeted at 
SME organisations   
Confront debtors 
with measures that 
successfully discourage them 
from paying late or 
from requiring excessively long 
contractual 
payment periods. - Regulation 1896/2006 on 
European order for payment 
procedure  - Regulation 805/2004 
creating a European 
Enforcement Order for uncontested claims  
- Regulation (EC) No 
44/2001 on judgments in 
civil and commercial 
matters  - Option 2c
: the publication 
of information on bad 
debtors - Option 3a : Full 
harmonisation of payment periods  
- Option 3b
: Increase of the 
statutory interest rate - Option 3c
: Abolition of 
the threshold of €5 
- Option 3d : introduction of 
a “Late Payment Fee” 
- Option 3e : introduction of 
the “Late Payment Compensation” 
- Option 3f
: Strengthen the 
role of representing organisations 
- Option 3g
: Encourage 
timely payment by 
compulsory information of 
debtors 
4.2. Baseline option: no policy change 
The baseline option consists of the measures outlined in section 2.4 and annex 4. 
They only relate to the payment pro cess and claims to obtain payment for 
commercial transactions in cross-border  cases within the EU. Consequently, any 
further policy options should only fo cus on measures encouraging timely 
payment , without considering the technical asp ects of the payment process or late 
payment made following debt collection m easures by third parties, alternative 
dispute resolution or judicial proceedings.  
4.3. Non-legislative options 
4.3.1.  Option 2a: The organisation of awareness ra ising activities targ eted at businesses 
Despite certain weaknesses of  the Directive, its provision s could be disseminated to a 
wider audience of economic operators so that they can fully grasp its potential benefits. 
This could be done in the first place thr ough guides and specific websites specifically 
addressed to economic operat ors and other stakeholders like SME organisations. A 
dedicated section on late payment could, for example, be included in the SME 
portal
53 and on the Your Europe–Business Portal54. Other more tailor-made 
awareness raising activities, like confer ences and seminars, could complement the 
guides and websites and coul d be organised in cooperation with the Enterprise 
Europe Network55. Awareness-raising activities s hould also cover national debt 
                                                 
53 http://www.enterprise- europe-network.ec.europa.eu/index_en.htm  
54 http://ec.europa.eu/enterprise/sme/index_en.htm  
55 http://ec.europa.eu/youreurope/business/index_en.htm 
 
EN 22   EN settlement procedures. Finally, exchange of best practice betw een Member States 
could be promoted. 
4.3.2.  Option 2b: The organisation of awarene ss-raising activities targeted at 
organisations representing SMEs  
The Directive provides for the possibility for organisations representing SME’s to 
take action with regard to unfair clauses. Until now, ther e are very few indications 
that these representative or ganisations have actually full y exploited this  possibility 
which could be highlighted in awareness-ra ising activities specifically targeting SME 
representative organisations. These would aim to prevent the inclusion of grossly 
unfair clauses in future c ontracts through, inter alia, th e application of competition 
rules to cases of unfair contract clause s and excessive use of dominance by large 
customers. They should also cover codes of best practice that  identify abusive 
practices and unfair terms.  
4.3.3.  Option 2c: Publication of information on bad debtors 
Detailed information on the id entity of bad debtors is currently not made publicly 
available by companies. Under this op tion, companies would publish (either 
voluntarily or by law) detailed information on bad debtors in their annual returns, so 
that regular late payers could become more easily identifiable56.  
4.4. Legislative options 
4.4.1.  Option 3a: Full harmonisation of payment periods  
Under this option, payment periods togeth er with the calculation and timing of 
interest chargeable on late payment would be harmonised in  all contracts to protect 
the weaker party during contra ct negotiation and in contract s with public authorities. 
A maximum payment period of 30 days (c orresponding to the “d efault period” under 
the current Directive) would apply to co mmercial contracts across Member States. 
This option presupposes that current ru les on interest for late payment are 
maintained.  
4.4.2.  Option 3b: increasing the "margin” interest rate 
The objective of this measure would be to compensate the creditor while creating an 
incentive for the debtor to change beha viour, resulting in improvements to payment 
practice. It would involve a s ubstantial increase in the “margi n” interest rate for late 
payment above the 7% currently  in force. For the purposes of this assessment, it is 
proposed that the rate introduced be the ECB rate plus a “margin” interest rate of 
12%. 
                                                 
56 This option does not address the transparency of debtors’ assets  in the European Union in the 
framework of the enforcement of judicial deci sions in the European Union, about which the 
Commission published a Green Paper COM(2008)128 on 6.3.2008. 
 
EN 23   EN 4.4.3.  Option 3c: the abolition of  the threshold of €5 
The Directive specifies that Member States may exclude claims for interest of less 
than €5. A stronger deterrent effect would be achieved if, in all cases, the interest 
could be imposed on the first day of a payment becomes overdue. Therefore, the 
threshold of €5 would be repealed under this option. 
4.4.4.  Option 3d: the introduction of a “Late Payment Fee” 
This option introduces a fixed “Late Paymen t Fee” for the recovery of administrative 
costs and compensation for internal costs incurred due to late payment. This minimum fee would be cumulated with inte rest for late payment and would become 
payable automatically from the first day after payment becomes overdue:  
Table 1.13: Late Payment Fee (option 3d)  
Amount of late payment Fixed minimum amount to be paid by the 
creditor 
Not exceeding €1000 €40 
Exceeding €1000  €70 
These amounts are slightly progressive sin ce more important debts usually require 
more attention and corresponding credit management time, and a more formal approach to cash collection (formal remi nders, legal counselling, etc). For higher 
amounts of late payment, senior management levels and/or external accountants, debt collection services or solicitors are more likely to be involved. 
4.4.5.  Option 3e: the introduction of a “Late Payment Compensation” 
A sufficiently high financial compensation fo r the recovery costs related to late 
payment can be a serious discouragement, in particular for smaller debts. Under this option, the compensation would amount to 1%  of the amount due in order to recover 
the costs of involving senior management levels and/or external accountants, debt collection services or solicitors. This comp ensation would also be cumulated with the 
interest for late payment. It could be  increased in case of further delays. 
4.4.6.  Option 3f: Strengthen the role of representative organisations 
At the moment, in the Directive the role of organisations officially  recognised as, or 
having a legitimate interest in, representing SMEs is fairly limited: they may take 
action before the courts or before comp etent administrative bodi es under national law 
on the grounds that contractual terms draw n up for general use are grossly unfair 
within the meaning of Article 3(3), so th at appropriate and effective measures are 
taken to prevent the continued use of such terms
57. 
Under this option, representative organisa tions would also be entitled to claim 
payment of invoices that should have been paid and all related amounts (e.g. interest 
for late payment) through a representative  action. This would be  an action brought by 
a representative organisation on behalf of businesses who are not themselves party to 
the action, and aimed at obt aining damages for the individual harm caused to the 
                                                 
57 See Annex 7. 
 
EN 24   EN interests of all those represented (and not th e representative entity itself). It would be 
left to the Member States to set criteria to define which organisations would qualify 
but these could include professional asso ciations, public author ities specifically 
responsible for SME protection, chambe rs of commerce and industry, etc.  
5. ANALYSIS OF IMPACTS  
All quantitative data about payment delays used in this impact assessment are based 
on different types of surveys and intervie ws. Surveys usually collect information on 
the perception of late payment as a problem and trends in the number and value of accounts paid on time. The data collected coul d potentially suffer from selection bias 
or respondents’ bias towards the subject whereby, for exam ple, respondents consider 
that payments following a contested claim or a judgement are also late payments. 
Businesses that are sensitive to the paymen t behaviour of their customers are more 
likely to indicate that payments are “late” than businesses that have the financial strength to absorb some vari ations in payment times and/or anticipate actual payment 
behaviour. Despite all efforts, there are no hard scientific data based on a detailed 
analysis of all payments made by and to a reliable sample of economic operators 
throughout the EU.  
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
58. The regulatory landscape applicable to the payment process and 
judicial claims to obtain payment for comm ercial transactions 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 certain  options. 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 wo rth several thousand Euros. There are 
many other similar individual factors which will all be neutralised whenever possible during this impact assessment. For the same reason, it was impossible to identify direct social impacts. 
The policy options are assessed in the light of the baseline option in terms of their 
effectiveness
59, efficiency60 and consistency61  
                                                 
58 See Table 3.11 in Annex 3. 
59 The extent to which options can be expected  to achieve the objectives of the proposal. 
60 The extent to which objectives can be achieved for a given level of resources/at least cost (cost-
effectiveness). 
61 The extent to which options are likely to limit trad e-offs across the economic, social, and environmental 
domain. 
 
EN 25   EN 5.1. Option 1: baseline option 
The base-line option co mprises a number of recently adopted measures that will 
quicken the payment process and introdu ce new means of pursuing judicial and 
extra-judicial claims  for the recovery of outsta nding payments for commercial 
transactions in cross-border  cases within the EU. An im portant side-effect of these 
measures is their possible positive influe nce on the payment attitude of debtors. 
It should however be noted that these measures will have no impact on late 
payments for which no debt collection by third parties, alternative dispute 
resolution or judicial proceedings are initiated. 
Moreover, the ambiguity arising from certain pr ovisions of the Directive will not 
be fixed  under this option. Examples of uncl ear, inextricable or unmanageable 
provisions that remain unsol ved under this option include  the calculation of the 
applicable interest rate, the nature and ex tent of “retention of title”, the types of 
commercial transactions covered by the Directive, the definition of “relevant recovery costs” and the possibility of compound interest. 
5.2. Option 2a (non-legislative): The organis ation of awareness raising activities 
targeted at businesses 
The main advantage  of awareness-raising activities resides in their flexibility and 
the scope for active participation by all stakeholders. 
Since awareness is not the most important impediment to claiming interest for late 
payment, the most important inconvenience  of this option is its very minimal 
efficiency . Experience shows that these activities can take several years and thus tie 
up substantial resources, certainly when th ey should reach (new) businesses in all 27 
Member States. Moreover, following the transposition of Directive 2000/35/EC, 
national authorities and repres entative organisations have already organised, and are 
still organising, numerous awareness-raisin g activities targeted at businesses, 
especially SME’s. There is a significant risk  that any future similar activities will 
also fail to reach an important part of this  specific target audien ce. It is highly likely 
that the audience reached will remain fair ly small: about 13% of EBTP respondents 
and 11% of IPM respondents never claim interest for late payment due to unawareness about the right to claim interest. 
Another negative aspect of this opti on is its very limited effectiveness
: awareness-
raising activities w ould only address a few of the problems set out above. Many 
problems are inherent in the text of th e Directive and awareness-raising cannot 
resolve these. Any attempte d clarification of its provi sions would have no binding 
value, which would add an element of un certainty. Awareness-raising and informal 
guidelines have only de facto, but no lega l, force. Legal force may, however, be 
required in critical cases. Moreover, this  option would have no impact on any other 
parties than enterprises. 
Table 1.14: Summary of impacts of option 2a  
Effectiveness No: no impact on debtors and minimal impact on creditors 
Efficiency No: requires too many resources for a very uncertain result.  
Consistency  Yes: trade-offs across other domains could not be identified. 
 
EN 26   EN 5.3. Option 2b (non-legislative): The organis ation of awareness raising activities 
targeted at organisations representing SMEs 
The possibility for organisations representi ng SME’s to take action with regard to 
unfair clauses could be highlighted in aw areness raising actions that specifically 
target these organisations. The advantage of this option  is the flexibility of these 
awareness raising activities and the possib ility of an active participation by all 
stakeholders, combined, with the fairly limited number of these organisations 
throughout the EU. Therefore, it should be fa irly easy to reach them. It is estimated 
that the cost for the Commissi on would amount to €300,000 per year. 
However, there are several important uncertainties regarding the effectiveness of 
this option . A prerequisite for these awareness ra ising actions is that Member States 
have put in place, in the interests of creditors and of competitors, adequate and effective means to prevent the continue d use of terms which are grossly unfair 
(Article 3(4)). The success of this option depends on an active participation of the 
competent authorities in Member States re sponsible for the implementation of these 
adequate and effective means. In addition,  awareness raising ac tivities do not solve 
the fundamental problem of the limited role of representative organisations laid down 
in the Directive. Their role, as laid down in the Direct ive, does not concern ongoing 
contracts. This limitation may discourage businesses from reporting grossly unfair 
clauses to the representati ve organisations. In addition, these organisations may 
refrain from taking action in cases where they  represent both suppliers and clients in 
a particular sector and where they may be f aced with an internal conflict of interests. 
Table 1.15: Summary of impacts of option 2b  
Effectiveness No: objectives are unlik ely to be achieved. 
Efficiency Yes: fairly low budgetary cost for the EU. No other costs. 
Consistency Yes: trade-offs across other domains could not be identified. 
5.4. Option 2c (non-legislative): Publicat ion of information on bad debtors 
The publication of detailed figures about bad debtors in the accounts receivable 
would certainly constitute valuable information for other businesses , including 
credit reference organisations. This op tion would enable creditors to identify 
potential debtors in a way that does not  directly threaten their commercial 
relationship with them. Such publication co uld warn other economic  operators of the 
risks of doing business with pe rsistent late payers. This would enable companies to 
focus time in negotiating contracts with “hig her risk customers”, as part of a risk 
based strategy. It could also help reduce the number of grossl y unfair clauses in 
contracts. The additional element of “naming and shaming” of persistent late 
payers  under this option would pr ovide an incentive to comp anies to maintain their 
reputation by ensuring that they pay thei r accounts on time. Similarly, the measure 
would facilitate the consolidation of pub licly available information on poor-paying 
public institutions and industr y sectors and would thus pr ovide valuable information 
for organisations lobbying government and industries for better performance as 
regards payment times. 
There seems to be more support for this preventive measure from large companies 
than smaller companies. The measure coul d have a considerable impact on major 
companies if they believed that their reputations could be damaged by adverse 
 
EN 27   EN publicity. It could become an issue of public  interest, as part of overall social 
responsibility. 
However, this option creates more problems than it would solve: 
• There are many practical drawbacks . Firstly, the quality of reporting on disputed 
cases and cases in which a business we nt through a short difficult period needs 
particular attention. Secondly, businesse s with a high number of invoices may 
appear to have paid a larger number of invoices late, even though the actual 
proportion of its total is low. Thirdly, many businesses, and especially SME’s, 
may be reluctant to “name and shame” individual creditors for business relationship reasons or out of fear of possible claims for damages for unjustified 
reporting. Fourthly, this option could oblig e businesses to disclose commercially 
sensitive information about their busines s relations or thei r cost components. 
Fifthly, the onus of reporting and dealing wi th the issue of late payments would 
rest more heavily on small companies whic h, in most cases, are the victims of the 
late payments and not the perpetrators
62. This at a time when  strenuous efforts are 
being made under our Bette r Regulation policies to reduce  the burden of corporate 
reporting requirements on SMEs. 
• The information would be scattered  in thousands of annual accounts and would 
therefore not be easily accessible to ot her enterprises, ex cept credit rating 
agencies. That implies that economic ope rators would have to use credit rating 
agencies to obtain information on the pa yment performance of possible clients. 
The alternative would be the appointment  by every Member States of a body to 
gather information on bad debtors and make  this information publicly available. 
This would generate extra-costs for th e Member States. Considering that the 
development of a national database w ould cost a minimum of €3 million per 
Member State and that maintenance and updating as well the preparation and 
dissemination of guidelines, plus the provision of trai ning to tax services and 
accountants would at least amount to €500,000 per year per Member State, the 
total cost for the entire EU could eas ily amount to €90 million or more during the 
start-up phase. Moreover, this measure would require legislative changes in 
national accounting rules. Substantia l national differences between the 
implementation of these measures within the Member States could call into question the reliability of the data in case  of cross-border commercial transactions.  
• Above all, the additional administrative cost
 for many, especially small, 
businesses would be disproportionately high. The administrative effort to 
consolidate the information from my riad small accounts would be very 
burdensome for businesses si nce they would be  obliged to gather information 
during the entire year to give a real pi cture of which companies were the worst 
offenders in late payment. The estimate d administrative costs to companies of 
                                                 
62 This type of measure was also assessed by the Irish authorities: 
http://www.entemp.ie/publications/enterprise/ 2007/THIRDPROGRESSREPORT(FINALVersionof10D
ecember2007).pdf . They came to the conclusion that it seems likely that small companies would derive 
significantly less benefit from such a provision than may have been envisaged in the beginning. This report calls into question the balance between that benefit and the potential adverse impacts that would 
be associated with implementation of the measure, including the additional regulatory burden for those 
companies that would be required to file the in formation specified in their annual accounts. 
 
EN 28   EN meeting the reporting requirements are summarised in the next table. The bulk of 
these costs would be borne by SMEs rather than by the large companies who are generally considered to be  the root of the problem.
 
EN 29   EN  
Table 1.16: Costs to companie s from reporting requirements 
All 27 EU MS 
 SME Large 
Number of companies 23,000,000 41,000 
Hours per undertaking on retrieving information 20 30 
Hours per external for checking and adjusting 10 15 
Total costs (€m) 25,300,000,000 86,100,000 
The impacts of this option can  be summarised as follows: 
Table 1.17: Summary of impacts of option 2c  
Effectiveness Doubtful : possible preventive effect on credit ors but many practical drawbacks for 
its implementation 
Efficiency No: very high administrativ e costs for businesses. 
Consistency Yes: trade-offs across other domains could be not identified. 
5.5. Option 3a (legislati ve): Harmonisation of payment periods 
At first glance, the advantages of this option are numerous . Harmonised payment 
periods would put an end to the practi ce of circumventing the current rules 
combating late payment by contracts cont aining very long payment periods. This 
option would also prevent the inclusion of  grossly unfair contractual payment terms 
in contracts. By introducing standard pa yment periods, the measure would address 
the inherent lack of understanding and expe rtise (especially on the part of SMEs) in 
identifying grossly unfair contractual clause s and contesting them before entering 
into a contract. 
Moreover, some argue that harmonised pa yment periods would promote (quicker) 
contracts between undertakings in different Member States . It would also encourage 
enterprises to participate in public procur ement procedures in other Member States. 
The potential costs associated with a loss of contractual freedom could be offset by 
the reduction in administrative costs in appl ying European law. The costs presently 
incurred in cross border trade include duplicating documents for different legal 
systems and consulting legal experts fo r advice. More than 67% of EBTP 
respondents and almost 80% of IPM respondents support this possibility. 
5.5.1.  Option 3a/1: The harmonisation of paymen t periods between economic operators 
Analysis of a possible harmonisation of payment periods between economic 
operators reveals that it would have many drawbacks and could be contrary to the 
principles of proportionality and subsidiarity: 
• This option may not be very effective in reality. Late payment would be a breach 
of contract which would not nece ssarily be acted on by the creditor  out of fear of 
damaging the commercial relationship with th e client, or due to the administrative 
burden of claiming interest, insufficient res ources (in particular of SMEs) or lack 
of knowledge how to calculate late paym ent interest. A breach of contract does 
not necessarily mean that expenses incurred in suing the debtor can be recovered. Even where there is a clear breach of contract, chasing late paying clients or 
charging interests for late payments ge nerate administrati ve costs that many 
 
EN 30   EN businesses wish to avoid. Moreover, the current rules define late payment already 
as “exceeding the contractual or statutory period of paym ent” (Article 2(2) of the 
Directive) meaning that all late paym ents are a consequence of a breach of 
contract. 
• The payment period is typically one of the negotiable items of a contract . It is a 
part of trade credit  between enterprises63 which, as such, does not necessarily 
constitute a problem for the creditor as  long as he knows when he can expect 
payment. It is important to bear in mind that trade credit, i.e. the granting to a customer by a supplier of goods or services  of a deferral in the time to pay, is a 
major competitive tool for many small businesses
64. Most commercial 
transactions are made on credit terms and trade credit is an important source of funding for small businesses. Studies show  that small firms extend trade credit 
more aggressively than medium and large firms. This behaviour  even occurs in 
those firms in financial distress. Larger  firms, with better access to alternative 
internal and external financing and w ith a lower cost, use less credit from 
suppliers. Moreover, firms with higher gr owth opportunities use more trade credit 
for financing sales growth
65. 
Table 1.18: Trade Credit as a component of business strategy 
Market signalling 
and Differentiation Credit acts as an implicit guarantee of product quality. Available 
credit terms provide a ‘quality signal’ to potential buyers. Offering 
credit may be a key factor that differentiates one supplier among 
competing suppliers. 
Customer Loyalty & 
Information Trade credit can be used to ‘tie-i n’ customers and encourage repeat 
purchase i.e. ‘building relationships’. Extending credit generates 
potentially useful information on customers. 
Price Discrimination & Price competition Offering credit terms provides more opportunities for varying 
effective price to buyers with different elasticities of demand or 
different credit risk. Credit terms can be an important element of 
price competition and the ‘marketing-mix’ in competitive markets 
Cost Leadership Offering a package of both product and finance that is cheaper than a 
buyer negotiating with two parties (supplier & financier) may 
generate profitable sales. The supplier may generate profit from both 
activities - profit margin on the product; (premium) interest on the finance. 
Managing 
Uncertainties Using and extending trade credit can be used to reduce the 
uncertainties in trading relationships and minimise ‘transaction 
costs’. To make money available, firms have to convert liquid assets into cash. The costs for doing this may be greater if conversion is 
frequent and/or for small amounts, consequently firms have a 
demand for precautionary cash balances. Trade credit reduces the 
need for this, particularly where there is uncertainty in the trade 
                                                 
63 Summers B. and Wilson N., “Trade credit and customer relationships”, Managerial and Decision 
Economics, 2003, Vol. 24, 6-7; See also Ng C.K., Smith J.K. and Smith R.L., “Evidence on the 
Determinants of Credit Terms Used in Interfirm Trade”, The Journal of Finance, 1999, Vol. 54, 3, p. 1109. 
64 Wilson N., Le Duc L.T. and Wetherhill P., "Trade Credit and Monetary Policy in the UK: An Empirical 
Investigation" (December 2004). Available at SSR N: http://ssrn.com/abstr act=675630; Rodríguez-
Rodríguez O.M., “Trade Credit in Small and Medi um Size Firms: An App lication of the System 
Estimator With Panel Data”, Small Business Economics, 2006., Vol. 27, 2-3. 
65 Garcia-Teruel P.J. and Martinez-Solano P., “A dyna mic perspective on the de terminants of accounts 
payable”, Department of Management and Finance, Faculty of Economics and Business, University of 
Murcia (Spain), October 2006. 
 
EN 31   EN exchange. It can therefore help the firm develop an environment 
conducive to innovation. 
Source: Wilson N., “An Investigation into Payment Trends and Behaviour in the UK: 1997-
2007”, Department for Business, Enterpri se & Regulatory Reform and CMRC, 2008. 
• The rules combating late payment do not yet fully harmonise national laws but 
rather focus on compliance with some minimum requirements that apply across 
the EU . Currently, businesses are not obliged to apply these rules and to claim 
their rights. This fundamental principle would be dropped for a more compulsory 
approach that would deprive economic operators of a valuable commercial element. Furthermore, many businesses wi ll try to circumvent these rules by 
slicing a limited number of contractual payments into a much higher number of 
contractual payments which will increase the administrative burden for businesses. 
• The adjustment and compliance costs
 of this option could be considerable for 
enterprises. They would be obliged to adapt their new contracts to the harmonised 
provisions. This may si gnificantly alter some companies’ cash flows both 
positively and negatively where they have been used to dealing with contractual provisions involving long payment periods
66. It is important to recognise that 
many of these negotiated elements are part of the competitive process by which buyers and sellers interact so that th e benefits stemming from freedom of 
negotiation may compensate fo r the costs related to barr iers to trade and other 
problems already explained (i.e. lack of  expertise on nego tiation, time, etc.). 
Moreover, establishing statutory contra ct periods and terms within contracts 
means a 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 ne gotiation where larger companies can still 
exercise significant influence over sm all company suppliers, the most obvious 
being price. Debtors might also negotiate different payment terms and payment by 
instalments in response to a harmonisation of payment periods.  
It is difficult to quantify precisely the cost s and benefits of this option since a number 
of factors are too uncertain to be calculate d, e.g. the potential lo ss in turnover, the 
contract negotiation costs, the financial c onsequences of reduced trade credit, etc. 
Tables 3.20 to 3.27 in Annex 3 show scen ario calculations fo r a harmonization of 
payment terms to 30 days across the board with 4 different scenarios: a baseline scenario (current payment terms and late  payment patterns), an optimum scenario 
(reduction of payment terms to 30 days maximum and no late payment, i.e. effective payment equal to payment term), a realisti c scenario (reduction of payment terms to 
30 days maximum and a proportional reduc tion of late payment whereby late 
payment expressed in days represents the same proportion to the contractual payment 
term than in the baseline scenario) and a worst scenario (reduction payment terms to 30 days but without a reduction of effective payment delays). 
                                                
 
66 See Table 3.12 in Annex 3. 
 
EN 32   EN  
Table 1.19: scenario calculations for B2B regardi ng the proposal of harmonization of payment 
terms to 30 days across the board - Net effect (in mio EURO - gains +, loss -)) 
 Baseline scenario 
(Table 3.21) Optimum 
scenario (Table 
3.23) Realistic scenario 
(Table 3.25) Worst scenario 
(Table 3.27) 
Belgium -2,682.4 4,749.2 2,563.9 -1,446.8
Bulgaria -- -- -- --
Czech Rep. -1,557.0 1,562.7 0.0 0.0
Denmark -762.9 689.3 0.0 0.0
Germany -7,389.0 7,461.5 0.0 0.0
Estonia -138.4 51.6 0.0 0.0
Ireland -1,549.7 2,683.1 1,485.4 -767.8
Greece -1,906.7 8,088.9 7,391.9 -3,963.7
Spain -8,518.5 41,204.1 37,662.1 -22,933.2
France -13,264.7 35,122.0 26,931.9 -15,780.5
Italy -14,369.5 54,861.8 48,434.9 -27,344.9
Cyprus -163.2 479.3 405.0 -212.3
Latvia -275.3 -- 0.0 0.0
Lithuania -317.9 328.1 12.7 -6.0
Luxembourg -- -- -- --
Hungary -2,105.3 1,666.7 0.0 0.0
Malta -- -- -- --
Netherlands -3,565.9 2,574.9 0.0 0.0
Austria -1,161.7 727.4 0.0 0.0
Poland -3,404.3 3,355.4 0.0 0.0
Portugal -2,694.0 4,730.7 2,988.0 -1,394.8
Romania -- -- -- --
Slovenia -- -- -- --
Slovakia -184.3 218.8 40.4 -23.0
Finland -529.6 0.0 0.0 0.0
Sweden -1,160.0 664.0 0.0 0.0
U.K. -17,219.0 21,531.5 5,878.4 -3,101.6
Total -84,919.2 192,750.9 133,794.6 -76,974.7
Source : European Commission, DG ECFIN on the ba sis of average payment terms in days (table 
3.3), and Eurostat turnover figures 
Table 1.19 shows that the potential benefits of this option would be very impressive 
under the optimum and realistic scenario, and that the situation would slightly 
improve in the worst scenario. The probability of the optimum scenario is, however, very low. 
In any event, it is certain that the harm onisation of payment periods for commercial 
transactions would undermine the possibility for smaller firms to receive trade credit 
from their suppliers, in particular dur ing a period of monetary contraction. 
 
EN 33   EN Consequently, the impact of this opti on would be negative for those European 
businesses using trade credit, especially for SMEs67. 
Table 1.20: Summary of impacts of option 3a/1  
Effectiveness Yes: likely to lead to less late payments 
Efficiency No: Considerable compliance and adjustment costs. 
Consistency 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 wh ere larger companies can still exercise 
significant influence over small company suppliers 
5.5.2.  Option 3a/2: the harmonisation of the periods  for payment by na tional authorities to 
economic operators 
A possible harmonisation of payment peri ods by national authorities to economic 
operators reveals that it would not have any of the dr awbacks set out in section 
5.5.1: 
• The fear of damaging the commercial rela tionship with the clie nt should not exist 
in contracts concluded w ith national authorities . The risk that a claim for interest 
for late payment would have a negativ e effect on the chance of winning a new 
contract in another procurement proce ss is minimal. The public procurement 
directives68 and the national rules on procuremen t procedures below the threshold 
already provide a number of procedural guarantees protecting economic operators 
from negative attitudes of the awarding auth ority. For the public contracts that are 
not, or are only partially, covered by the Directive, the principles of equal 
treatment and non-discrimination on grounds of  nationality imply an obligation of 
transparency which, according to the case-law of the Court of Justice, “consists in 
ensuring, for the benefit of any potenti al tenderer, a degree of advertising 
sufficient to enable the services market  to be opened up to competition and the 
impartiality of the proce dures to be reviewed.” 
• Only in very exceptional cases is the payment period one of the negotiable items 
of a contract awarded by a public authority . The competitive advantages of trade 
credit between enterprises do not appl y to contracts concluded by public 
authorities. 
• The budgetary impact  for national authorities would remain fairly limited 
compared with the additional liquidity th at earlier payment by public authorities 
would generate for businesses. Public au thorities can obtain financing at much 
more attractive conditions than private undertakings. It is estimated that this 
option would cost public authorities 7.25 billion euro but that the additional 
                                                 
67 For similar reasons, the Irish authorities also came to the conclusion that possible advantages of this 
idea are very much outweighed by the significant disadvantages that could arise, that it is a 
disproportionate response to the issue of late payments. See 
http://www.entemp.ie/enterpr ise/smes/publications.htm . 
68 Directive 2004/17/EC of 31 March 2004 coordinatin g the procurement procedures of entities operating 
in the water, energy, transport and postal services sectors (OJ L 134, 30.4.2004, p. 1–113) and Directive 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works 
contracts, public supply contracts and public service contracts (OJ L 134, 30.4.2004, p. 114–240). 
These directives do not concern the conten t of the contract or its performance. 
 
EN 34   EN liquidity for businesses woul d amount to 179.11 billion euro69. Assuming that this 
measure will be effective and that national authorities will pay within the legal deadline, the actual amount spent on pr ocurement would not increase but, for 
some Member States, payment may have to  take place earlier in the year. This 
could have an effect on the scheduling of  cash expenditure for Member States in 
which payment periods for public authori ties exceed 30 days. According to Table 
3.3, there would be no - or a negligible - impact on cash management for most 
public authorities in 19 Member States. Some  public authorities in the 8 remaining 
Member States would have to change th eir cash management practices and they 
would lose bank interest for the period be tween the current payment date and the 
future payment date or, in case of late pa yment, they would have to pay interest 
for late payment. Nevertheless, it is safe to assume that mismatches between the timing of payments and the availability of cash might resu lt in conditions of 
temporary cash surpluses or temporary cash s hortfalls for public authorities if they 
fail to implement active daily cash mana gement. Member States with complex 
expenditure approval processes may have to eliminate duplication of 
responsibilities of multiple players involved in intermediate handling. In the 
absence of any reliable scientific data on the actual payment practices of public 
authorities, it is impossible to estimat e the budgetary impact of this option. 
• This option should not entail any adjustment and compliance costs
 for economic 
operators.  
• The effectiveness of this option will de pend upon the willingne ss of businesses to 
enforce their rights and upon a sufficiently high sanction in cas e of late payment . 
Where private debtors might  heavily damage their co mmercial or professional 
reputation by paying late and loose the trust of their creditors in long-term 
commercial relationships, public authorities are in a more comfortable position since reputation and long-term trust are le ss important factors when authorities 
procure goods and services. Furthermore, th e feeling of impunity may arise within 
public authorities due to the slowness and prohibitive cost of legal procedures to claim payment against public authoritie s, the greater availability of legal 
resources, less legal possibilities to se ize public property and the non-deterrent 
rate of the statutory interest.  
Table 1.21: Summary of impacts of option 3a/2  
Effectiveness Yes: fear of damaging the commercial relationship with the client should not 
exist in contracts concluded with national authorities. 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.  
Efficiency 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.  
Consistency Yes: trade-offs across other domains could not be identified. 
                                                 
69 See Tables 3.15, 3.16 and 3.17 in Annex 3. It should  be noted that these estimates are made on the basis 
of the figures in Tables 3.1 to 3.6 and Table 3.14 which are based on surveys. Therefore, it is possible 
that public authorities pay their major invoices on time and postpone payment for smaller invoices, or 
vice versa. 
 
EN 35   EN 5.6. Option 3b (legislative): increasing the “margin” interest rate 
This option has many positive aspects . Increasing the “margin” interest rate for late 
payment from 7% to 12% would certainly cons titute a strong deterre nt for debtors, as 
well as a strong incentive for creditors. The impact on trade credit would be 
negligible since creditors woul d still be entitled to fix a payment period in line with 
the trade credit they are prepared  to grant to their client. Ho wever, there is a risk that 
some companies could take advantage of their unequal negotiating power and force 
smaller businesses to consent to longer paym ent periods to avoid paying interest for 
late payment. 
Obviously, this option could have a str ong impact on businesses and authorities 
paying late systematically. In  order to avoid the negative financial consequences of 
late payments, they would have to pay on time, seek bank credit or start negotiating a 
longer payment period that could be accepte d by both parties. However, a linear 
increase of the “margin” interest rate w ould have a linear impact on claims for late 
payment so that the deterrent effect of th is measure might be bigger for late payment 
due to larger businesses. Considering that larger businesses are usually more familiar with charging interest which is often higher than the statutory rate, they would 
probably be the main beneficiaries of th is option. Assuming that smaller businesses 
usually invoice smaller amount s, this option would hardly have any effect on them, 
in particular in the light of  their narrow client spread and the resulting over-reliance 
on specific client activity to maintain revenue streams. 
Debt collection agencies would benefit by co llecting interest on the overdue debts of 
their clients along with some collection co sts and could pass this benefit onto their 
clients in the form of lower commission rate s. Factoring agencies can apply interest 
charges on the trade debts of the debtor and collect the interest. Other parties dealing 
with debt collection would equally benefit. 
Although, at first sight, this option seems to present many positive sides, the 
negative aspects of this option  need to be highlighted. The effectiveness and the 
efficiency of this option are doubtful: 
• During the public consultations, stakeholde rs seemed to be satisfied with the 
current “margin” interest rate . 61% of EBPT responde nts and 59% of IPM 
respondents took the view that  the current rate is reas onable and proportionate to 
encourage timely payment. This may be due to the fact that, in the case of a late 
payment, the usual response for 22% of EBTP respondents and 30% of IPM 
respondents is to postpone their own paym ents to their creditors. The “pass-on” 
effect of late payments can turn creditors into debtors. Given that all businesses 
are creditors and debtors at the same time,  stakeholders may ha ve answered this 
part of the EBTP and IPM questionnaire s as debtors rather than creditors. 
• 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 “margin” 
interest rate is only a minimum interest rate so creditors may deviate from that 
rate and charge a higher inte rest rate for late payment. 
• The current rules allow Member States to  provide for a higher minimum “margin” 
rate in their national legislation. 
 
EN 36   EN • This option could strengthen the position of bigger or more powerful businesses . 
Some experts argue that interest for late payment reinforces the bargaining 
position of firms that ask for a discount for early payment. These firms consider that, if interest can be ch arged for late payment, an equivalent discount should be 
given for early payment. One possible fu rther issue with the current statutory 
interest rate is that this was set with a view to ‘compensating’ small businesses based on their average cost of capital. Ho wever the same rate applies to large 
businesses which generally have a much lower cost of capital. Therefore, one 
could argue that large busine sses are ‘more than compensate d’ and in fact have an 
incentive to enforce interest penalties. This is particularly the case if they are less fearful of losing business by applying penalties
70. 
• Businesses working with pre-printed invoices  would have to bear a fairly small 
amount of adjustment costs  when they amended their general commercial 
conditions to adapt to this option. It is r easonable to believe that these costs would 
be quickly recovered by more timely paym ents and by interest on late payment 
paid by debtors. 
Table 1.22: Summary of impacts of option 3b  
Effectiveness 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. 
Efficiency 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. 
Consistency Yes: trade-offs across other domains could not be identified.  
5.7. Option 3c (legislative): the abolition of the threshold 
The positive side  of the repeal of the possibility that claims for interest of less than 
€5 could be excluded would certainly clear a hurdle for claiming interests for late 
payments, in particular for SMEs. If, for example, the interest rate I is 11% per 
annum non compounded and the amount A owed is 1,000 Euros, the number of days overdue N before the creditor can claim inte rest is, according to the current rules: N 
= 5 x 365 / (A x I) = 17 (16.59) days. By rep ealing this threshold, this creditor could 
seek interest for late payments 16 days ear lier than nowadays in this case. The higher 
the amount, the shorter this period will be. If one assumes that SME’s are more likely to invoice smaller amounts than major co mpanies, this threshold would hit SME’s 
first. This option is particularly effective for claiming interest for late payment in smaller transactions where interest amounts to only a small sum. 
On the negative side , it is fair to assume that th is option, if adopted independently 
from any other measure, is unlikely to encourage creditors
 to seek the payment of 
interests of less than €5. Th e cost of establishing the invoice charging the interest 
will be higher than the amount of the in terest, thus making it uneconomical to 
collect. It is therefore doubtful whether th is option would have any effect on a stand-
alone basis. 
                                                 
70 Wilson N., “An Investigation into Payment Trends and Behaviour in the UK: 1997-2007”, Department 
for Business, Enterprise & Regulatory Reform and CMRC, 2008. 
 
EN 37   EN Although this option would not have any nega tive impact on credit ors, its impact on 
debtors may not be clearly perceivable. Th e abolition of the th reshold could have a 
pedagogic effect but would be unlikely to result into short-term attitude changes . 
More importantly, debtors know that only very few cr editors will start court 
proceedings for such an amount of less that  €5 so that some debtors could simply 
decide to disregard this invoice and fail to pay the interests. One should also keep in 
mind that it is not excluded that, in pr actice, larger companies would benefit 
proportionally more than smaller companies fr om this option, since they are often in 
a better position to charge interest than sm aller operators, given the differences in 
buyer/supply power in the supply chain. 
Table 1.23: Summary of impacts of option 3c  
Effectiveness Yes for small transactions if accompanied by other measures that would make it 
economical to collect th e outstanding amounts.. 
Efficiency Yes, especially for SMEs. No budgetary, transaction and compliance costs could be 
identified. 
Consistency Yes: trade-offs across other domains could be identified. 
5.8. Option 3d (legislative): the introduction of a “Late Payment Fee” 
As its stands, the transaction costs for ch arging interest by means of an invoice can 
hardly be recovered:  
Table 1.24: Provisions for recovery costs in Member States 
Austria The losing party in a court case will be responsible for the legal costs of court 
action, including the fees of lawyers as determined by the 
“Rechtsanwaltstarifgesetz”.  
Belgium The losing party in a court case will be responsible for the legal costs of court 
action, including the fees of lawyers within the limits laid down by the law of 21 April 2007 and the royal decree of 26 October 2007. 
Czech Republic Costs for legal representation paid as a lump sum (usually  according to value 
of suit). Hourly fees of lawyers paid in full in high value cases, but if low 
value, full costs may not be awarded 
Spain All recovery costs up to  15% of the amount of the debt if debt exceeds 
€30,000. If it is less than €30,000, maximum is the value of the debt 
Finland Judges decide on recovery costs and cr editors can claim all. However, debtors 
will pay maximum of €192 to €302 depending on size and nature of debt 
(This limit can be set aside in excep tional circumstances).  Median amount 
awarded in 2005 was €220 
Ireland If the debt is less than €1,000, recovery payment is €40. If less than €10,000 
the amount is €70 and if more than €10,000 it rises to €100. However, the 
amount of recovery costs in cases of late payment must be stated in the 
contract 
Malta Reasonable compensation costs can be recovered for all recovery costs 
United Kingdom Compensation costs of £40 are payable on debts of less than £1,000, £70 on 
debts of less than £10,000 and £100 for debts of more than £10,000  
Germany As a general rule, the loser in a court case will be responsible for the legal 
costs of court action, but the judge decides whether out-of-court costs and the 
fees of lawyers can be claimed. 
Poland Losing party pays costs in legal cases which can vary from €25 to €25,000 
Portugal Judges rarely award costs over and ab ove court costs. Debts of more than 
€3,740 require representation by a lawyer 
Sweden All recovery costs can be claimed but maximum payable is €100 
France Recovery costs are only payabl e as a result of court proceedings 
Slovakia Reasonable compensation is payable for all relevant recovery costs 
 
EN 38   EN The purpose of the “Late Payment Fee” would be to provide an instant deterrent to 
the debtor and an incentive on the part of the creditor to claim interest, if it is 
assumed the fee will exceed any costs (e.g. invoicing, accounting and administration costs) placed on the creditor when chargi ng interest. Setting the correct fee is 
important in this respect, if the effectiveness of the measure is to be maximised. A fixed fee charged on a relatively small de bt is proportionally goi ng to have a much 
larger impact than in relation to much larger transactions.  
The principal advantage  of this option is that it w ould permit businesses to recover 
the transaction costs of charging interest  for late payments so that only purely 
commercial arguments would prevent credito rs from charging interest. Under this 
option, the cost of creating the invoice ch arging the interest would be recovered 
together with the amount of  the interest, so that it becomes economical to collect 
interest. These costs are redistributive in nature
71. 
Assuming that the cost C of sending remi nder or dunning letters to a debtor is 
20 Euros (including special tracking posta ge/return receipt letter, labour cost, 
equipment etc), that the interest rate I is 11% per annum non compounded and that 
the debt amount A is €1,000, the number of days N before an overdue payment starts 
to compensate a creditor is currently: N = C x 365 / (A x I) = 67 (66.36) days. As its 
stands, only after 67 days of overdue paym ent it becomes economically interesting to 
apply the current legal provisions on late  payment. Under this option, the creditor 
would not have to wait until it becomes economically interesting to charge interests. 
He would have an immediate incentive to ch arge interest for a late payment as the 
administrative burden and the cost of invoici ng the client would not be higher than 
the compensation provided by the law. More than 69% of the IPM respondents are in 
favour of this fee. 
For many smaller transactions, interest amount s to only a small sum, thus the making 
it uneconomical to collect, particularly when the risk of damaging a business 
relationship is considered. A larger fixed fee would be a more effective instrument 
for companies dealing in smaller tran sactions. A fixed amount may therefore 
compensate a business for the administrative cost related with late payment, but to the competitive advantage of SMEs dealing in smaller transactions. Debt collection 
agencies and other third parties dealing wi th debt collection as  well as factoring 
agencies would benefit from this option.  
This option could give raise to some minor adjustment cost  for businesses working 
with pre-printed invoices. Since the “L ate Payment Fee” would be optional and 
businesses would not be oblig ed to amend their genera l commercial conditions, one 
may assume that the adjustment cost s would be recovered very quickly. 
Table 1.25: Summary of impacts of option 3d  
Effectiveness Yes: it would permit businesses to recove r the transaction costs of charging 
interest for late payments so that only purely commerci al arguments would 
prevent creditors from charging interest.  
Efficiency Yes. Costs (mainly transaction costs) ar e redistributive. No budgetary or 
compliance costs. 
Consistency Yes: trade-offs across other domains could not be identified.  
                                                 
71 See Table 3.19 in Annex 3. 
 
EN 39   EN 5.9. Option 3e (legislative): the introducti on of a “Late Payment Compensation” 
The alternative to the previous option is a fixed financial compen sation of 1% of the 
outstanding amount for the recovery co sts related to late payment. This 
compensation would also be cumulated with the interests for late payment and could 
even be increased in case of substantial delays. The advantage  of this option is its 
strong deterrent effect on debtors proportional to the size of the claim. The 
compensation costs incurred by the debtor fo r paying late in all circumstances would 
exceed the savings that he would otherwise obtain from free trade-credit. It could 
encourage the use of debt collection agen cies, factoring agencies and other third 
parties dealing with debt collection since bus inesses would be able to recover part of 
the commission or fees to be paid to these agencies and other third parties.. 
One of the drawbacks  is the fact that, for many smaller transactions, a compensation 
of 1% amounts to only a small sum, t hus the making it uneconomical to collect, 
particularly when the risk of damaging a business relationship is considered. In 
addition, larger companies benefit proportiona lly more than smaller companies from 
a “Late Payment Compensation” as they can obtain lower interest rates on loans from 
financial institutions than SMEs and are often in a better position to charge interest 
than smaller operators, given the differen ces in buyer/supply power in the supply 
chain. A flat rate may therefore compensate the company for late payment, but to the 
competitive disadvantage of SMEs that are dealing in smaller transactions. 
This option could give rise to some minor  adjustment cost for businesses working 
with pre-printed invoices.  
Table 1.26: Summary of impacts of option 3e  
Effectiveness 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.  
Efficiency Yes. Costs (mainly transaction costs) ar e redistributive. No budgetary or 
compliance costs. 
Consistency Yes: trade-offs across other domains could not be identified.  
5.10. Option 3f (legislative): Extending the role of representing organisations 
Several Member States reserve certain legal activities to a particular legal profession, 
for example the provision of le gal advice (reserved to lawyers)72. In particular, 
according to Council Directive 77/249/EEC to  facilitate the e ffective exercise by 
lawyers of the freedom to provide services, judicial activities and representing clients 
before public authorities should be pursu ed in any given Member State under the 
obligations laid down for lawy ers established in that State. However, this provision 
only applies to cross-border activities by lawyers as defined in the Directive. 
Consequently, it does not apply to repr esentative organizations. Moreover, 
organisations representing SMEs do not re present clients but only their members so 
that, unlike lawyers, they do not operate in a competitive environment. In addition, representation by a lawyer or  another legal profession al is not mandatory for 
claimants within the framework of Re gulation (EC) No 861/2007 establishing a 
                                                
 
72 For an overview, see http://ec.europa.eu/civiljustice/case_ to_court/case_to_court_ec_en.htm . 
 
EN 40   EN European Small Claims Procedure a nd Regulation (EC) No 1896/2006 creating a 
European order for payment procedure.  
The advantage  of this option is that smaller businesses with insufficient resources 
would neither have to  bear the cost and financial risks of bringing an action nor 
spend management time on chasing the late payment. It could be helpful for enterprises having insufficient resources to take action against the debtor or lacking 
the knowledge how to calculate late paymen t interest. It would also improve access 
to justice for smaller businesses for which litigation for late payment constitutes a major hurdle. Moreover, the mere possibi lity of having to face litigation could 
encourage debtors to pay smaller creditors  within the agreed or legal deadline. 
This option presupposes that measures are taken to reduce the co st of bringing an 
action and the associated financial risk s. Any action taken by a representative 
organisation involves administ rative costs in preparing th e file, court fees, possibly 
lawyers' fees and, if the action is brought in  another Member State, translation costs. 
Therefore, the impact of this option depe nds to a large extent on the implementation 
of options 3c, 3d and 3e. 
This negative side  of this option is the lack of  effectiveness. The problem of 
insufficient resources would, at  least partly, be shifted to  organisations representing 
SMEs which may not have the human or financial resources to cope with the 
administrative charges and the financial risks of litigation on late payment. A representative organisation may not have  the resources to simultaneously handle 
several actions related to distinct late payment cases and may decide to prioritise its action. A very important stumbling block is  that the organisation may be prevented 
from bringing an action because  of an internal conflict of  interest, for example when 
a business association has as members both th e creditors and the debtor. Finally, it is 
possible that the interests of  certain groups of businesse s are not represented by any 
organisation (e.g. SMEs active in a new market with no tr ade association). 
Table 1.27: Summary of impacts of option 3f  
Effectiveness 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 creditors and the debtor.  
Efficiency Yes if measures are taken to reduce the cost of bringing an action and the 
associated financial risks (options 3c, 3d and 3e). 
Consistency Yes: trade-offs across other domains could not be identified. 
6. COMPARING THE OPTIONS  
6.1. General comparison 
Considering the availability of several forms of intervention, comparison of the 
options should concentrate on those limiting the EU institutions' involvement to what 
is necessary to achieve the objectives of the Treaties. The form of Community action 
should be as simple as possible, consiste nt with satisfactory achievement of the 
objective of the measure and the need for effective enforcement.  
It is also important to keep in mind that the current rules (base line option) do not aim 
at full harmonisation of national laws but at compliance with some minimum 
 
EN 41   EN requirements that apply across the EU . With the exception of option 3a, businesses 
are not obliged to apply these rules and to claim their rights . Whether they do 
depends above all on the commercial and fi nancial strategy of each of the operators 
concerned in the light of the economic conditions in the various markets. In addition, Member States and enterprises may lay down more stringent provisions. This 
combination creates an important elemen t of uncertainty about the take-up by 
economic operators of any of the options except 3a. 
Assessment of the results of this comparison of the policy options with respect to the 
baseline option in terms of their effectiveness
73, efficiency74 and consistency75 shows 
the following results: 
Table 1.28: General comparison of options in terms  of effectiveness, efficiency and consistency 
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  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 
                                                 
73 The extent to which options can be expected  to achieve the objectives of the proposal. 
74 The extent to which objectives can be achieved for a given level of resources/at least cost (cost-
effectiveness). 
75 The extent to which options are likely to limit trad e-offs across the economic, social, and environmental 
domain. 
 
EN 42   EN suppliers  
Option 3a/2  
(legislative): 
Harmonisation of periods for 
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. 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.  
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 
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.  Yes. Costs (mainly 
transaction costs) are 
redistributive. No budgetary or compliance 
costs.  Yes: trade-offs across 
other domains could not 
be identified.  
Option 3f  
(legislative): 
Extending the Doubtful : these 
organisations may not 
have the resources to Yes if measures are 
taken to reduce the cost 
of bringing an action and Yes: trade-offs across 
other domains could not 
be identified.  
 
EN 43   EN role of 
representative 
organisations 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 
creditors and the debtor.  the associated financial 
risks (options 3c, 3d and 
3e). 
6.2. Ranking the options 
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:  
Table 1.29: Ranking the options  
Option Effectiveness  Efficiency  Consistency  
RECOMMENDED CHOICE 
Option 3a/2  (legislative): Harmonisation 
of periods for payment by public 
authorities to businesses Yes Yes Yes 
Option 3e  (legislative): the introduction 
of a “Late Payment Compensation”  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 
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 
Considering that none of the options is mu tually exclusive and that their optional 
nature for businesses allows them to choose the most appropriate to ol in the light of 
the late payment at hand, it is suggested that options 3a/2, 3c, 3d and 3e be taken 
together as a single package of measures. 
 
EN 44   EN 6.3. Administrative cost 
The only option likely to impose significant administrative costs76 on business is 
option 2c. A rough indication of these costs can be found in table 1.16. 
7. MONITORING AND EVALUATION  
The organisation of a reliable monitoring and evaluation scheme for the combination 
of options 3a/2, 3c, 3d and 3e is complicated  by the principle that the rules laid down 
in the Directive should not ha ve a compulsory effect on businesses, i. e. businesses 
should not be obliged to apply these rules and to claim their rights. In addition, 
evidence suggests that a negative economic cycle is likely to negatively influence 
timely payment as it affects companie s’ cash flows and funding opportunities77.  
During a period of economic growth, enterp rises benefit from better cash inflow 
which, at least partly, can be used for paying more promptly.  
Nevertheless, monitoring and evaluation coul d be organised primarily by reference to 
the information and data set out in annexes 1, 2 and 3 (partly) which could be used as indicators for the achievement of the obj ectives. The organisati on of new, similar 
surveys is recommended to compare the be haviour of creditors  before and after 
implementation of the options. 
Furthermore, Member States would play a st ronger role in the implementation of the 
directive if options 3a /2, 3c, 3d and 3e were to be re tained. National authorities could 
provide information on the implementation of these options in a report that would be sent to the Commission at three-year intervals. 
                                                
 
76 Administrative costs are defined as the costs incu rred by enterprises, th e voluntary sector, public 
authorities and citizens in meeting legal obligations to provide information on their action or 
production, either to public authorities or to private parties. 
77 See for example Baum C, Caglayan M. and Ozkan N., “The Impact of Macroeconomic Uncertainty on 
Trade Credit for Non-Financial Firms”, Boston College, Economics Department, Working Papers in 
Economics, 2003; Lovea I, Preveb L. and Sarria-A llende V., “Trade credit and bank credit: Evidence 
from recent financial crises”, Journal of Financia l Economics, Volume 83, Is sue 2, February 2007, 
pages 453-469; Bossay F., “Credit chains and the propagation of financial distress”, ECB Working 
Paper No 573, January 2006. 
 
EN 45   EN 8. ANNEXES  
8.1. Annex 1: Results of the I.P.M. consultation of interested parties 
Consultation from 29 May 2008 to 31 August 2008 on Your Voice on Europa. 510 
Responses were received. 
a) Identity 
1a. Are you replying as a:  
single choice reply Number of 
requested records Requested records 
(510) % of total 
number records 
(510) 
Company 361 70.8% 70.8% 
 Representative organisation 83 16.3% 16.3% 
 Other interested party 59 11.6% 11.6% 
 Public authority 7 1.4% 1.4% 
 
1b. What is the size of your company 
(number of employees)?  single choice 
reply Number of 
requested records Requested records 
(361) % of total 
number records 
(510) 
 0 – 9 134 37.1% 26.3% 
 10 – 49 101 28% 19.8 
 50 – 249 64 17.7% 12.5% 
 250+ 62 17.2% 12.2% 
 
2. What is your country of residence? 
single choice reply Number of 
requested 
records Requested 
records 
510) % of total 
number 
records 
(510) 
Italy 81 15.9% 15.9% 
Germany 77 15.1% 15.1% 
United Kingdom 76 14.9% 14.9% 
Greece 56 11% 11% 
Belgium 53 10.4% 10.4% 
Portugal 35 6.9% 6.9% 
Spain 25 4.9% 4.9% 
Ireland 20 3.9% 3.9% 
Austria 14 2.7% 2.7% 
France 13 2.5% 2.5% 
Cyprus 13 2.5% 2.5% 
Other 12 2.4% 2.4% 
Czech Republic 7 1.4% 1.4% 
Netherlands 7 1.4% 1.4% 
Sweden 5 1% 1% 
Denmark 4 0.8% 0.8% 
Poland 3 0.6% 0.6% 
Finland 3 0.6% 0.6% 
Bulgaria 2 0.4% 0.4% 
Slovenia 2 0.4% 0.4% 
Hungary 1 0.2% 0.2% 
Malta 1 0.2% 0.2% 
Estonia 0 0% 0% 
Latvia 0 0% 0% 
Lithuania 0 0% 0% 
Luxembourg 0 0% 0% 
Romania 0 0% 0% 
 
EN 46   EN Slovakia 0 0% 0% 
 
b) Problems and effects 
3. Have you experienced problems with other businesses 
paying you later than you requi re in your normal terms of 
business? single choice reply 
 Number of 
requested 
records Requested 
records 
(361) % of total 
number 
records 
(510) 
Seldom (1-25% of your invoices to other businesses) 112 31% 22% 
Quite often (26-50% of your invoices to other businesses) 93 25.8% 18.2% 
Often (51%-75% of your invoices to other businesses) 85 23.5% 16.7% 
Very often (more than 75% of your invoices to other 
businesses) 62 17.2% 12.2% 
Never 9 2.5% 1.8% 
 
4. Have you experienced probl ems with public authorities 
paying you later than you re quire them to in your normal 
terms of business? single choice reply 
 Number of 
requested 
records Requested 
records 
(361) % of total 
number 
records 
(510) 
Very often (more than 75% of your invoices to public 
authorities) 138 38.2% 27.1% 
Seldom (1-25% of your invoices to public authorities) 84 23.3% 16.5% 
Never 55 15.2% 10.8% 
Often (51%-75% of your invoices to public authorities) 52 14.4% 10.2% 
Quite often (26-50% of your invoices to public authorities) 32 8.9% 6.3% 
 
5. What has been  the effect of late payment on your 
business ? multiple choices reply  
 
 Number of 
requested 
records Requested 
records 
(361) % of total 
number 
records 
(510) 
It takes up too much management time and valuable working 
hours 239 66.2% 46.9% 
Our business needs bank credit 204 56.5% 40% 
It slows down the growth of our business 182 50.4% 35.7% 
It has a negative effect on investment 136 37.7% 26.7% 
It affects the productivity of the business 135 37.4% 26.5% 
It threatens the survival of our business 129 35.7% 25.3% 
It discourages us from engaging in public procurement 
contracts 84 23.3% 16.5% 
It discourages us from engaging in cross-border transactions 29 8% 5.7% 
It does not really affect our business 27 7.5% 5.3% 
Other 6 1.7% 1.2% 
Don't know 4 1.1% 0.8% 
Does not apply 3 0.8% 0.6% 
 
6. What is your usual response in case of late payment?   
multiple choices reply  Number of 
requested 
records Requested 
records 
(361) % of total 
number 
records 
(510) 
We contact the client personally 307 85% 60.2% 
Our business pays our creditors late in turn 109 30.2% 21.4% 
Our lawyers contact th e client 94 26% 18.4% 
We are patient and only react after a long time 84 23.3% 16.5% 
A debt collecting agency contacts the client 47 13% 9.2% 
Other 17 4.7% 3.3% 
Does not apply 4 1.1% 0.8% 
Don't know 3 0.8% 0.6% 
 
EN 47   EN  
 
EN 48   EN c) Interest 
7a. Do you claim interest for late payment? 
single choice reply  Number of 
requested 
records Requested 
records 
(361) % of total 
number 
records 
(510) 
Never 144 39.9% 28.2% 
Seldom 123 34.1% 24.1% 
Frequently 39 10.8% 7.6% 
Always 34 9.4% 6.7% 
Very often 15 4.2% 2.9% 
Don't know 6 1.7% 1.2% 
  
7b. Why do you never claim interest ?  
multiple choices reply Number of 
requested 
records Requested 
records 
(144) % of total 
number 
records 
(361) 
Out of fear that the customer would be lost 84 58.3% 23.3% 
It is too complicated to cl aim interest 69 47.9% 19.1% 
Competitors never claim interest for late payments 54 37.5% 15% 
Unawareness of the right to charge interest for late payment 17 11.8% 4.7% 
The interest rate is unknown 11 7.6% 3% 
Interest is considered as taxable revenue 7 4.9% 1.9% 
Don't know 5 3.5% 1.4% 
 
7c. Why do you seldom claim interest ?  
multiple choices reply  Number of 
requested 
records Requested 
records 
(123) % of total 
number 
records 
(361) 
Out of fear that the customer would be lost 85 69.1% 23.5% 
It is too complicated to claim interest 54 43.9% 15% 
Competitors never claim interest for late payments 27 22% 7.5% 
Unawareness of the right to charge interest for late payment 5 4.1% 1.4% 
Interest is considered as taxable revenue 4 3.3% 1.1% 
Don't know 4 3.3% 1.1% 
The interest rate is unknown 3 2.4% 0.8% 
 
8a. The laws on late payment in the EU currently specify 
that a creditor may claim an interest rate of approximately 
11 % in case of late payment.  
In your view, is that interest rate reasonable and 
proportionate to encourage ti mely payment in commercial 
transactions? single choice reply  Number of 
requested 
records Requested 
records 
(510) % of total 
number 
records 
(510) 
Yes 301 59% 59% 
No 172 33.7% 33.7% 
Don't know 37 7.3% 7.3% 
 
8b. If you think it is unreasonable or disproportionate, is it: 
single choice reply Number of 
requested 
records Requested 
records 
(510) % of total 
number 
records 
(510) 
Too low 330 64.7% 64.7% 
Too high 180 35.3% 35.3% 
 
EN 49   EN  
8c. What would be a more appropriate total interest rate 
for late payment?  
single choice reply  Number of 
requested 
records Requested 
records 
(330) % of total 
number 
records 
(510) 
12 to 14% 105 31.8% 20.6% 
15 to 19% 92 27.9% 18% 
20 to 24% 63 19.1% 12.4% 
No opinion 40 12.1% 7.8% 
30% or higher 17 5.2% 3.3% 
25 to 29% 13 3.9% 2.5% 
 
8d. What would be a more appropriate total interest rate 
for late payment?  
single choice reply Number of 
requested 
records Requested 
records 
(180) % of total 
number 
records 
(510) 
10% 65 36.1% 12.7% 
8% 35 19.4% 6.9% 
7% or lower 35 19.4% 6.9% 
No Opinion 27 15% 5.3% 
9% 18 10% 3.5% 
 
9. Do you apply the interest rate of 11 % for late payment 
in your general commercial and payment conditions?  
single choice reply Number of 
requested 
records Requested 
records 
(361) % of total 
number 
records 
(510) 
No, I don't apply an interest rate at all 204 56.5% 40% 
Yes 74 20.5% 14.5% 
No, I apply another interest rate. 64 17.7% 12.5% 
Don't know 19 5.3% 3.7% 
 
10. During the last 5 years, did you sign a contract 
(providing services and/or goods) in which the other party 
refused to insert a clause on interest for late payment, or 
which specified an interest rate lower than 11%? 
single choice reply   Number of 
requested 
records Requested 
records 
(361) % of total 
number 
records 
(510) 
Never 144 39.9% 28.2% 
Seldom 64 17.7% 12.5% 
Don't know 57 15.8% 11.2% 
Very often 54 15% 10.6% 
Frequently 42 11.6% 8.2% 
 
 
EN 50   EN d) Action 
11. An idea is to introduce in the European Union a “late 
payment fee”, i.e. an automa tic minimum amount based on 
the size of the debt, in addition to an interest rate of 
approximately 11%.  
Do you think such a 'late pa yment fee' would be useful?   
single choice reply Number of 
requested 
records Requested 
records 
(510) % of total 
number 
records 
(510) 
Yes 251 49.2% 49.2% 
Yes, but only as an alternative to the interest rate for late 
payment 103 20.2% 20.2% 
No, current rules are su fficient 78 15.3% 15.3% 
No, an increase of the interest rate would be more efficient 53 10.4% 10.4% 
Don't know 25 4.9% 4.9% 
 
12. Sometimes major companies systematically refuse to 
pay the full amount for reasons not envisaged in the 
contract or they systematically  pay well after the deadline 
in the invoice.  
Do you think it would be useful if organisations 
representing SMEs were entitled to  take action on behalf of 
the SME before a case is referred to court (e.g. mediation) 
or during court proceedings?  
single choice reply  Number of 
requested 
records Requested 
records 
(510) % of total 
number 
records 
(510) 
Yes 374 73.3% 73.3% 
No 79 15.5% 15.5% 
No opinion 57 11.2% 11.2% 
 
13a. Interest for late payment is only due after the 
contractually agreed payment period. Do you think that a 
maximum period for making pa yments between businesses 
or between businesses and public authorities fixed at 
European level would be useful?  
single choice reply  Number of 
requested 
records Requested 
records 
(510) % of total 
number 
records 
(510) 
Yes 407 79.8% 79.8% 
No 103 20.2% 20.2% 
 
13b. Why do you not  consider such an EU maximum period 
useful? 
multiple choices reply Number of 
requested 
records Requested 
records 
(103) % of total 
number 
records 
(510) 
Contractual freedom of businesses should not be restricted or 
regulated 72 69.9% 14.1% 
It is impossible to provide for a maximum period that would fit 
all enterprises 63 61.2% 12.4% 
It is much better to provide for efficient sanctions 20 19.4% 3.9% 
Other 0 0% 0% 
 
EN 51   EN  
13c. How long should that maximum period be?  
single choice reply  Number of 
requested 
records Requested 
records 
(407) % of total 
number 
records 
(510) 
30 days 206 50.6% 40.4% 
45 days 106 26% 20.8% 
20 days 69 17% 13.5% 
Other 26 6.4% 5.1% 
 
14a. Is it necessary to provide for a specific regime 
favouring micro and small enterprises in case of late 
payment? 
single choice reply Number of 
requested 
records Requested 
records 
(510) % of total 
number 
records 
(510) 
Yes 288 56.5% 56.5% 
No 143 28% 28% 
Don't know 79 15.5% 15.5% 
 
14b. What kind of measures should such a regime include? 
1) Fixing a much higher interest rate for late payment to SMEs 
than the one fixed in the laws on late payment in the EU  
single choice reply  Number of 
requested 
records Requested 
records 
(288) % of total 
number 
records 
(510) 
Yes 168 58.3% 32.9% 
No 82 28.5% 16.1% 
Don't know 38 13.2% 7.5% 
 
2) Enable representative organisations to take action in name of a business single choice reply  
 
 Number of 
requested 
records Requested 
records 
(288) % of total 
number 
records 
(510) 
Yes 222 77.1% 43.5% 
No 36 12.5% 7.1% 
Don't know 30 10.4% 5.9% 
 
3) Labelling systematic late payment to SMEs as an unfair business practice  
single choice reply Number of 
requested 
records Requested 
records 
(288) % of total 
number 
records 
(510) 
Yes 241 83.7% 47.3% 
Don't know 29 10.1% 5.7% 
No 18 6.2% 3.5% 
 
4) Other measure  
single choice reply Number of 
requested 
records Requested 
records 
(288) % of total 
number 
records 
(510) 
Don't know 148 51.4% 29% 
Yes 89 30.9% 17.5% 
No 51 17.7% 10% 
 
EN 52   EN 8.2. Annex 2: Results of the EBTP cons ultation of interested parties 
Consultation from 13 May 2008 till 20 June 2008 - 408 responses 
Table 2.1: Number of employees in your company 
0 4,9%
1-9 22,5%
10-49 24,3%
50-249 21,8%
250-499 7,6%
500 + 18,9%
 
Table 2.2: Main sector of activity 
C - Mining/Quarrying 1,5%
D – Manufacturing 24,3%
E - Electricity, gas and water supply 3,9%
F – Construction 7,4%
G - Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and 
household goods 13,5%
H - Hotels, restaurants and bars 2,7%
I - Transport, storage and communication 12,7%
J - Financial intermediation 7,6%
K - Real estate, renting and business activities 15,7%
N - Health and social work 2,5%
O - Other community, social and personal service activities 8,3%
 
Table 2.3: Apart from your country, in how many countries of the European Union do you 
regularly sell products and services? 
None 41,2%
1 9,1%
2-3 17,4%
4-5 8,8%
more than 5 23,5%
 
Table 2.4: EBTP respondents having a problem wi th other businesses payi ng later than they 
require them to in your normal terms of business 
Seldom (1-25% of your invoices to other businesses) 42.3% 
Frequently (26-50% of your invoices to other businesses) 27.9% 
Often (51%-75% of your invoices to other businesses) 15.7% 
Very often (more than 75% of your invoices to other businesses) 11.2% 
Never 1.9% 
Does not apply 1.1% 
 
EN 53   EN Table 2.5: EBTP respondents having a problem with  public authorities paying later than they 
require them to in your normal terms of business  
Seldom (1-25% of your invoices to public authorities) 36.2% 
Does not apply 21.0% 
Frequently (26-50% of your invoi ces to public authorities) 12.8% 
Very often (more than 75% of your invoices to public authorities) 12.5% 
Often (51%-75% of your invoices to public authorities) 9.0% 
Never 8.5% 
 
Table 2.6: What has been the effect of late pa yment on your business? (Tick all that apply) 
It takes up too much management time and valuable working hours 67.0% 
Our business needs a bank credit  38.3% 
It slows down the growth of our business 31.4% 
It affects the productivity of the business 28.7% 
It has a negative effect on investment 22.9% 
It does not really affect our business 18.4% 
It threatens the survival of our business 13.6% 
Discourages from engaging in public procurement contracts 13.0% 
It discourages from engaging in cross-border transactions 7.4% 
Does not apply 3.7% 
Other 1.9% 
Don't know 0.3% 
 
Table 2.7: What is your usual response in ca se of late payment? (Tick all that apply) 
We contact the client personally 87.5% 
Our business pays late in turn to our creditors 22.9% 
Our lawyers contact the client 22.3% 
A debt collecting agency contacts the client 17.3% 
We stay patient and only react after a long time 16.0% 
Other 4.5% 
Does not apply 2.1% 
Don't know 0%
 
Table 2.8: Do you claim in terest for late payment? 
Seldom 44.7% 
Never 29.5% 
Frequently 10.9% 
Very often 7.2% 
Always 6.9% 
Don't know 0.8% 
 
 
EN 54   EN Table 2.9: Why do you seldom claim interest? (Tick all that apply) 
Out of fear that the customer would be lost 60.1% 
It is too complicated to claim interest 45.2% 
Competitors never claim interest for late payments 23.8% 
Late interest is considered as revenue, even when it is not paid 14.9% 
The interest rate is unknown 4.2% 
Unawareness about the right to charge interest for late payment 4.2% 
Don't know 0.6% 
 
Table 2.10: Why do you never claim interest? (Tick all that apply) 
Out of fear that the customer would be lost 68.5% 
It is too complicated to claim interest 45.9% 
Competitors never claim interest for late payments 28.8% 
Late interest is considered as revenue, even when it is paid 13.5% 
Unawareness about the right to charge interest for late payment 13.5% 
The interest rate is unknown 7.2% 
Don't know 5.4% 
 
Table 2.11: The laws on late payment in the EU specify that a creditor may claim an interest rate 
of currently approximately 11 % in case of late payment. In your  view, is that interest rate 
reasonable and proportionate to encourage timely payment of your invoices? 
Yes 61.4% 
No 25.0% 
Don't know 13.6% 
 
Table 2.12: Is this interest rate 
Too low 68.1% 
Too high 31.9% 
 
Table 2.13: What would be a more appropriate total interes t rate for late payment? 
7% or lower 73.3%
8% 13.3%
10% 6.7%
9% 3.3%
No opinion 3.3%
 
EN 55   EN  
Table 2.14: What would be a more appropriate interest rate? 
15 to 19 % 35.9%
20 to 24% 26.6%
30 % or higher 23.4%
25 to 29%  7.8%
12 to 14 % 4.7%
No opinion 1.6%
 
Table 2.15: Do you apply the int erest rate of 11 % for late pa yment in your general commercial 
and payment conditions? 
No, I don't apply an interest rate at all. 42.8%
No, I apply another interest rate. 30.1%
Yes 20.2%
Don't know 6.9%
 
Table 2.16: An idea is to introduce in the Europe an Union a “late payment fee”, i.e. an automatic 
minimum amount based on the size of the debt, in addition to an interest rate of approximately 
11%. Do you think such a 'late payment fee' would be useful? 
Yes 35.4%
No, current rules are sufficient 21.3%
Yes, but only as an alternative to the interest rate for late payment 18.9%
No, an increase of the interest rate would be more efficient 12.5%
Don't know 12.0%
 
Table 2.17: Were you obliged, during the last 5 ye ars, to sign a contract (providing services 
and/or goods) in which the other party refused to insert a clause on interes t for late payment, or 
which specified an interest rate lower than 11%? 
Never 43.6%
Seldom 23.1%
Frequently 13.8%
Don't know 12.0%
Very often 7.4%
 
Table 2.18: It happens that major companies grant themselves a discount on the price by 
systematically refusing to pay th e full amount for reasons that w ere not envisaged in the contract. 
Do you think it would be useful if organisations representing SMEs were entitled to take action on 
behalf of the SME before a case is handled in co urt (e.g. intermediation) or  during the court case?
Yes 64.1%
No 18.1%
No opinion 17.8%
 
EN 56   EN  
Table 2.19: Practices occur whereby companies or national authorities systematically pay well 
after the deadline in the invoice. Do you think it  would be useful if or ganisations representing 
SMEs could take action on behalf of the SME before a case is handled in court (e.g. 
intermediation) or during the court case? 
Yes 71.8%
No 16.2%
No opinion 12.0%
 
Table 2.20: Interest for late pay ment is only due after the cont ractually agreed payment period. 
Do you think that a maximum period for making payments between businesses or between public 
authorities and businesses fixed at European level would be useful? 
Yes 67.6%
No 32.4%
 
Table 2.21: What should, in your view, the maximum period be, taking into account the payments 
your company receives and pays itself? 
30 days 53.5%
45 days 20.1%
20 days 16.1%
Other 10.2%
 
Table 2.22: Why do you not consider such an EU  maximum period useful? (Tick all that apply) 
Contractual freedom of businesses should not be restricted or regulated 73.0%
It is impossible to provide for a maximum period that would fit all enterprises 54.9%
It is much better to provide for efficient sanctions 23.0%
Other 4.9%
 
Table 2.23: Is it necessary to provide for a specific and more favourable regime for micro and 
small enterprises in case of late payment? 
Yes 47.6%
No 35.6%
Don't know 16.8%
 
EN 57   EN  
Table 2.24: What kind of measu res should such a regime include? 
1) Fixing a much higher interest rate for late pay ment to SMEs than the on e fixed in the laws on 
late payment in the EU 
No 50.3%
Yes 40.2%
Don't know 9.5%
2) Enable representative organisations to take action in name of a business 
Yes 76.5%
No 14.5%
Don't know 8.9%
3) Labelling systematic late payment to  SMEs as an unfair business practice 
Yes 88.8%
No 8.9%
Don't know 2.2%
4) Other measure 
Don't know 23.5%
Yes 17.3%
No 6.7%
 
EN 58   EN 8.3. Annex 3: The causes and the size of the problem: facts and figures 
Table 3.1: Assertions on the causes of late payment 
There are a range and complexity of motives for businesses both extending and receiving trade 
credit. Therefore, late payment is likely to derive from multiple and often complex causes. In the 
diagram below, the main themes associated with likely causes of  late payments are summarised. 
1. The Market Structure : The ‘popular’ view of the causes of late payment asserted that business 
customers that have a dominant position in the market vis-à-vis suppliers are able to leverage their 
own cash-flow and profits by taking extended tr ade credit from the supp ly-base. Clearly this 
behaviour is more likely in market structures  where there exist dominant buyers with very 
competitive supply chains. The buyer has bargaining power arising from its ability to select from a 
range of potential suppliers and is able to dictate the credit terms/periods from suppliers and/or take 
extended credit (pay late) when it is advantageous to do so with out fear of a loss of supply. 
Bargaining may manifest itself by the buyer insisting on longer credit periods than the supplier 
might wish to extend and/or discounts on the invoice values. Moreover, buyers with bargaining power may insist on high standards of delivery, after-sales service and invoicing providing much 
scope for disputing invoices and, in consequence, extending the credit period. Bargaining power 
occurs where the buyer is a large company and the supply-chain is composed of many small 
competitive businesses or where the market structure is one of imperfect competition. However 
dominance is not necessarily a function of the rela tive sizes of businesses. There are many other 
types of customer-supplier relationships where the customer may have a strong bargaining position relative to the supplier related to product type rather than size of order/business. For instance a 
supplier is vulnerable if the nature of the produc t/service being supplied involves investing a lot of 
time and effort in securing a sale with a customer  (specific investment) and/or needs repeat business 
to make the relationship profitable. Industry where there are contractors and subcontractors (e.g. 
construction sector; software and IT provision) a ppear to be bedevilled by late payment problems. 
Typically a contractor waits to be paid before be ing in a position to pay subcontractors. In the latter 
case both the market structure an d the complex nature of the product/service precipitate the late 
payment problem. […] Of course, small businesses  with low profit margins are more sensitive to 
late payments and its impact on cash-flow  than larger more profitable companies. 
2. One could assert that late payment is a function of poor business and credit management 
practice . Where there is scope for disputing the quality of the supplier’s products/services, after-
sales service then the customer is likely to do so and withhold payment until satisfied. This may be 
perceived as valid practice by the customer but as late payment by the supplier. A particular issue 
surrounds credit management practi ce and the establishment of the te rms of trade prior to the sale. 
As will be demonstrated later many small busine sses extend credit to custom ers without establishing 
the credit terms in advance with the customer or  without even specifying a payment date. Clearly 
this gives rise to possible disputes surrounding the due date and precipitates uncertainty about the timing of cash-inflows. Good credit management pr actice would ensure that  credit terms, credit 
limits and credit periods are clearly  established with the customer prior to any trade and that goods 
or services and invoices are supplied as pre-ag reed. The supplier should endeavour to credit check 
the customer and establish the financial health, risk and creditworthiness of the customer. Disputes 
should be identified and resolved quickly and ‘excuses’ for payment delays minimised or 
eliminated. Should late payment still arise then it is likely that the customer is itself inefficient, acting strategically and/or is in some unanticipated (short or long term) financial difficulty. Of 
course, the risks of doing business dictate that the supplier cannot anticipate all eventualities but 
should take all reasonable step s to minimise payment risks. Un fortunately when a supplier makes 
the ‘lending decision’ to supply to a customer on trade credit terms it is difficult to ascertain how 
much trade credit the customer has received from ot her suppliers at any point in time and therefore 
establish whether the customer will have eno ugh cash to repay on the due date. Moreover, 
customers that do not manage their own working capital well may not always have cash resources 
available to pay creditors as debt fall due. Indeed financial and working capital practice (or lack of) 
has often been cited as being as major reason for late payments between businesses.  
The reality of the competitive process is that bu sinesses will establish and fail due to changes in 
technology, product innovations and management mistakes and inefficiencies. Businesses on the 
 
EN 59   EN path to failure will typically begin to struggle w ith cash-flow and financing and the servicing of 
debt. Often trade creditors will not be a priority in the pecking order of creditors as the business 
attempts to stay afloat. Firms in financial difficulty  often stretch their creditors in order to alleviate 
cash-flow problems. Thus businesses in financial distress will be late payers and businesses that 
continue to supply will run the increased risk of  slow or non-payment from these customers. 
Particularly, as alluded to above, if the custom er has increased the amount of credit it has received 
from other trade suppliers. Moreover  it can often be the case that a business will fail quickly without 
showing obvious signs of financial distress and the trade suppliers continues supplying on credit 
terms when the banks have started to withdraw funding.  
3. Clearly the macro-economic climate  will have a bearing on the number of business failures as 
the economy moves through cycles. Likewise we would expect to see late payments and bad debts 
increasing as the economy moves into a through recession. Subsets of small businesses that overtrade as the economy moves into growth are potential late payers.  
4. Access to finance
: A further assertion has been that small and growing businesses can get into 
difficulties with cash-flow and payment when they have difficulty raising institutional and bank finance. Businesses that are undercapitalised or ina ppropriately financed have a constant battle with 
cash-flow. CMRC [Credit Management Research Centre, Leeds University Business School] 
research identified that small, growing businesses an d particularly those that service export markets 
can be periodically starved of cash and struggle to pay creditors. In an empirical study of the 
demand for trade credit by small UK firms, CMRC found strong evidence of a financing demand for 
trade credit. The paper surmised that small firms, which pay trade credit liabilities late, appear to do 
so when they have reached their limit on short-term bank finance. These 'credit rationed' firms were 
typically growing and export oriented.  
Source
: Wilson N., “An Investigation into Payment Trends and Behaviour in the UK: 1997-2007”, 
Department for Business, Enterprise & Regulatory Reform and CMRC, 2008. See 
http://berr.ecgroup.net/Publications/BetterBusinessFramework/Finance.aspx  
Assertions:  Causes of Late Payment
Macro and Financial Environment
Commercial and B2B Lending
- Flow of commercial finance/credit
- Monetary policy- Flow and nature of credit information
- Credit Rationing (transitory/permanent)
- Capital Structure (bank/trade credit)Business Cycle and Monetary Conditions
Business Cycle Upturn/Downturn
-o v e r - t r a d i n g
- under capitalised businesses- inappropriate financing
- export growth/finance
- product life-cycles/innovationBusiness Cycle Downturn
- tight lending/interest rates
- financial distress and insolvency- creditors in the pecking orderCompetition and Bargaining Power
Market Structure
- Imperfect competition- Bargaining power- Dominant Buyers/competitive suppliers
- ‘fair trading’
- Sub-contracting- Competitive processManagement and Customer Service
- Financial management practice
- Credit management practice
- Product and Service Quality- After-sales service
 
 
EN 60   EN Table 3.2: Evolution of payment periods for SMEs78 in 7 Member States (number of days - 
2003-2007)  
2003 2004 2005 
 Theoretical 
payment 
deadline Actual 
delay Actual 
payment 
period Theoretical 
payment 
deadline Actual 
delay Actual 
payment 
period Theoretical 
payment 
deadline Actual 
delay Actual 
payment 
period 
Germany 25 12 37 27 13 40 33 19 52 
Belgium 44 23 67 42 16 58 42 20 62 
Spain 78 10 88 82 9 91 54 13 67 
France 53 15 68 52 15 67 52 13 65 
Italy 74 19 93 70 16 86 74 27 101 
Portugal 53 45 98 47 35 82 45 38 83 
U.K. 36 18 54 35 10 45 33 18 51 
 
2006 2007 
 Theoretical 
payment deadline Actual delay Actual payment 
period Theoretical 
payment deadline Actual delay Actual payment 
period 
Germany 32 13 45 27 15 42 
Belgium 43 19 62 43 17 60 
Spain 63 18 81 61 12 73 
France 52 14 66 52 14 66 
Italy 72 21 93 73 21 94 
Portugal 56 38 94 61 38 99 
U.K. 34 15 49 30 13 43 
Source : Eurofactor, Baromètres 2006, 2007 and 2008 
                                                 
78 In this case, 3000 SMEs from 6 to 500 employees in 7 EU Member States, essentially involved in B2B 
transactions. 
 
EN 61   EN Table 3.3: Payment duration in Member States  
 Average payment term 
in days  
B2B  
(2008) Average payment term 
in days  
Public authorities  
(2008) Average payment 
duration in days 
B2B  
(2008) Average payment 
duration in days 
Public authorities  
(2008) 
Belgium 37.0 49.0 50.0 75.0 
Bulgaria -- -- -- -- 
Czech Republic 30. 0 23.0 49.0 33.0 
Denmark 29.4 27.5 35.5 35.8 
Germany 30.0 25.0 36.0 40.0 
Estonia 20.7 15.3 35.5 19.8 
Ireland 39.1 36.4 57.5 50.7 
Greece 84.0 95.0 110.0 157.0 
Spain 73.0 103.0 89.0 144.0 
France 49.0 57.0 65.0 71.0 
Italy 68.0 95.0 88.0 135.0 
Cyprus 67.2 55.4 95.8 72.4 
Latvia 21.5 20.1 41.5 31.3 
Lithuania 30.3 30.0 46.2 39.8 
Luxembourg -- -- -- -- 
Hungary 26.0 30.0 45.0 55.0 
Malta -- -- -- -- 
Netherlands 26.1 27.2 40.0 46.0 
Austria 27.0 27.0 35.0 47.0 
Poland 29.7 27.7 46.8 47.9 
Portugal 47.1 57.4 80.1 137.8 
Romania -- -- -- -- 
Slovenia -- -- -- -- 
Slovakia 31.0 28.0 39.0 35.0 
Finland 21.0 20.0 27.0 24.0 
Sweden 27.0 28.0 34.0 35.0 
United Kingdom 33.2 30.0 51.0 48.0 
Source : Intrum Justitia, European Payment Index 2008 
Table 3.4: Which measures do you take to protect your company from bad debt?  
Credit insurance (commercial) 30% Cash on delivery 3% 
Advance payment 17% Guarantees 4% 
Active collection procedures (inter nal) 13% Retention of title 2% 
External collection services 11% Factoring 1% 
Letter of Credit (ILC) 6% A ttorney, Bailiff, lawyer 2% 
Credit check 4% Bill of exchange 1% 
Source : Atradius Payment Practices Barometer – Winter 2007 
Table 3.5: Payment delays in Member States  
 Average payment delay in 
days  
B2B  
(2008) Average payment delay in 
days  
Public authorities  
(2008) Average payment delay in 
days 
B2B + Public authorities 
(2007) 
Belgium 13.0 26.0 15.3 
Bulgaria -- -- -- 
 
EN 62   EN Czech Republic 19.0 10.0 25.0 
Denmark 6.1 8.3 7.2 
Germany 16.0 15.0 15.5 
Estonia 14.8 4.5 8.5 
Ireland 18.4 14.3 14.3 
Greece 26.0 62.0 27.4 
Spain 16.0 41.0 15.2 
France 16.0 14.0 14.3 
Italy 20.0 40.0 23.9 
Cyprus 28.6 17.0 32.4 
Latvia 20.0 11.2 11.9 
Lithuania 15.9 9.8 14.9 
Luxembourg -- -- -- 
Hungary 19.0 25.0 16.3 
Malta -- -- -- 
Netherlands 13.9 18.8 13.2 
Austria 8.0 20.0 16.0 
Poland 17.1 20.2 17.1 
Portugal 33.0 80.4 39.9 
Romania -- -- -- 
Slovenia -- -- -- 
Slovakia 8.0 7.0 20.1 
Finland 6.0 4.0 6.0 
Sweden 7.0 7.0 6.9 
United Kingdom 17.8 18.0 17.6 
Source : Intrum Justitia, European Payment Index 2008 
Table 3.6: Payment delays in Member States  
 Average payment delays in 
days (2007)  Average payment delays in 
days (2007) 
Belgium 16.2 Ireland 19.6 
Germany 9.4 Netherlands 11.7 
Spain 14.8 Portugal  24.1 
France 12.2 United Kingdom 13.6 
Italy 12.6   
Source : Altares, Les comportements de paiement des enterprises en Europe, Bilan 2007 
Table 3.7: Value of turnover paid late by Member States (€m) 
 Turnover (€m) Adjustment factor 
for volume of 
turnover Value turnover paid 
late (€m, rounded) 
 SME Large  Days 
delay Adjust-
ment 
factor 
for days 
delay SMEs Large SMEs Large  
BE 175,534 129,806 13 0.81 0.04 0.04 32,507 20,616 
CZ 57,706 42,674 19 1.19 0.01 0.01 15,619 9,906 
DK 95,614 70,706 6 0.38 0.02 0.02 8,308 5,269 
DE 949,861 702,419 16 1.00 0.19 0.19 216,497 137,306 
EE 7,243 5,357 15 0.93 0.00 0.00 1,527 969 
IE 74,608 55,172 18 1.15 0.01 0.01 19,556 12,403 
EL 64,226 47,494 26 1.63 0.01 0.01 23,788 15,087 
ES 453,925 335,675 16 1.00 0.09 0.09 103,461 65,617 
 
EN 63   EN FR 738,835 546,365 16 1.00 0.15 0.15 168,399 106,801 
IT 621,249 459,411 20 1.25 0.12 0.12 176,997 112,255 
CY 5,070 3,750 29 1.79 0.00 0.00 2,066 1,310 
LV 7,243 5,357 20 1.25 0.00 0.00 2,064 1,309 
LT 9,417 6,963 16 0.99 0.00 0.00 2,133 1,353 
HU 52,636 38,924 19 1.19 0.01 0.01 14,246 9,035 
NL 251,590 186,050 14 0.87 0.05 0.05 49,817 31,595 
AT 111,550 82,490 8 0.50 0.02 0.02 12,712 8,062 
PL 124,105 91,775 17 1.07 0.02 0.02 30,231 19,173 
PT 73,883 54,637 33 2.06 0.01 0.01 34,732 22,028 
SK 18,109 13,391 8 0.50 0.00 0.00 2,064 1,309 
FI 73,401 54,279 6 0.38 0.01 0.01 6,274 3,979 
SE 134,729 99,631 7 0.44 0.03 0.03 13,435 8,521 
UK 805,716 595,824 18 1.11 0.16 0.16 204,302 129,572 
Total 4,906,249 3,628,151 16 Baseline - - 1,140,734 723,474 
Source: RPA Study. 
Sources of Data:  - Turnover B2B: Eurostat 
- Days delay: private survey. 
Countries not figuring in Table due to lack of data: BG, LU, MT, RO, SI. 
 
EN 64   EN Table 3.8: Value of turnover against which interest is claimed (€m) 
MS Turnover paid late Value of turnover paid late a gainst whi c
interest is claimed 
 SME Large SME Large 
BE 22,755 20,616 3,072 3,760
CZ 10,933 9,906 1,476 1,807
DK 5,816 5,269 785 961
DE 151,548 137,306 20,459 25,043
EE 1,069 969 144 177
IE 13,689 12,403 1,848 2,262
EL 16,651 15,087 2,248 2,752
ES 72,422 65,617 9,777 11,968
FR 117,879 106,801 15,914 19,479
IT 123,898 112,255 16,726 20,474
CY 1,446 1,310 195 239
LV 1,445 1,309 195 239
LT 1,493 1,353 202 247
HU 9,973 9,035 1,346 1,648
NL 34,872 31,595 4,708 5,762
AT 8,899 8,062 1,201 1,470
PL 21,162 19,173 2,857 3,497
PT 24,313 22,028 3,282 4,018
SK 1,445 1,309 195 239
FI 4,392 3,979 593 726
SE 9,404 8,521 1,270 1,554
UK 143,012 129,572 19,307 23,632
Total 798,514 723,474 107,799 131,952
Source: RPA Study. 
Note :  
The figures for turnover paid late to SMEs have been adjusted downwards from those in Table 37 on 
the assumption that 30% of the turnover paid late would not have generated €5 in interest and might 
therefore either not be eligible for late payment in terest under national legislation, or not worthwhile. 
The responses from a questionnaire on claims for late payment interest have been used to calculate 
an average claim rate for all companies. The aver age claim rate for SMEs is 13.5% of all late 
payments and the equivalent rate for large compan ies is 18.24%. Applying these average claim rates 
to the total turnover paid late to SMEs and large co mpanies produces the results given in this table. 
 
EN 65   EN Table 3.9: Value of late payment interest successfully claimed (€m) 
MS SMEs Large Companies 
BE 3.88 4.22 
CZ 2.72 2.97 
DK 0.76 0.83 
DE 34.67 37.78 
EE 0.21 0.23 
IE 3.30 3.60 
EL 6.19 6.74 
ES 15.19 16.55 
FR 24.72 26.93 
IT 32.48 35.39 
CY 0.54 0.59 
LV 0.38 0.41 
LT 0.31 0.34 
HU 2.82 3.07 
NL 6.35 6.92 
AT 1.02 1.11 
PL 5.28 5.76 
PT 10.52 11.46 
FI 0.35 0.38 
SE 0.94 1.03 
UK 39.43 42.96 
Total 192  209 
Source: RPA Study. 
Note : 
Although the estimates given in table 3.8 represent the amounts being claimed, not all claims are 
successful. Companies responding to the questionnaire  indicated that for SMEs  only 32% on average 
of the above claims for interest were indeed su ccessful, with the figure for large companies being 
29% of claims. Applying these percentages to the figures in Table 3.8 to late payment interest rates 
and average delays in payments provides the basis for calculating the value of interest successfully 
claimed, presented in this table. 
 
EN 66   EN Table 3.10: Value of bank loans to SMEs to finance late payments (€m) 
 Turnover 
Value on 
which late 
payments has 
been claimed 
successfully 
by SMEs Days credit 
taken % of 
companies 
financing late 
payments by 
bank loans Bank interest 
rate 
 Cost of credit 
to cover late 
payments 
BE 990 13 58.5% 9% 1.9 
CZ 475 19 58.5% 9% 1.3 
DK 253 6 58.5% 9% 0.2 
DE 6,591 16 58.5% 9% 15.2 
EE 46 15 58.5% 9% 99.3 
IE 595 18 58.5% 9% 1,.6 
EL 724 26 58.5% 9% 2.7 
ES 3,150 16 58.5% 9% 7.3 
FR 5,127 16 58.5% 9% 11.8 
IT 5,388 20 58.5% 9% 15.5 
CY 63 29 58.5% 9% 0.3 
LV 63 20 58.5% 9% 0.3 
LT 65 16 58.5% 9% 0.1 
HU 434 19 58.5% 9% 1.1 
NL 1,517 14 58.5% 9% 3.0 
AT 387 8 58.5% 9% 0.4 
PL 920 17 58.5% 9% 2.3 
PT 1,057 33 58.5% 9% 5.0 
SK 63 8 58.5% 9% 0.7 
FI 191 6 58.5% 9% 0.2 
SE 409 7 58.5% 9% 0.4 
UK 6,220 18 58.5% 9% 16.0 
Total 34,728    86.8 
Source: RPA Study. 
Note :  
It is argued that small firms often have higher financing costs relative to large companies as they do 
not hold such strong bargaining positions when applying for finance to banks. Table 3.10 uses the 
turnover value on which late paym ents has been claimed successfully  by SMEs to provide estimates 
for the value of finance that is required by SMEs from banks to finance late payments. Considering 
that an online consultation revealed that 58.5% of  respondents said that they resorted to bank 
finance to cover late payments, this figure (an overestimate for the total amount of late payments financed through bank loans since it is unlikely that these respondents would have covered ALL late 
payments through bank loans) was used to estimate  the value of credit together with an assumed 
bank loan rate of 9% for SMEs and an assumption that the length of the loans taken are equivalent to the average days delay on payment in each Member State. 
 
EN 67   EN Table 3.11: Percentage of late payments owed by different sectors 
Percentage of late payments 0 10 25 50 75 90 100 NA 
Public sector  
Large comp %  22.2 22.2 12.7 7.9 14.3 9.5 3.2 7.9 
Small comp %  13.8 13.2 10.1 5.7 13.2 22.0 8.2 13.8 
Private sector  
Large comp % 4.8 20.6 14.3 7.9 11.1 15.9 17.5 7.9 
Small comp % 3.8 21.4 17.0 7.5 9.4 10.1 20.8 10.1 
Source: RPA Study. The first column of this table indicates, for example, th at 22.2% of the large 
responding economic operato rs and 13.8% of the small respondent s received all payments by public 
authorities on time. It also shows that 4.8% of the large responding economic operators and 3.8% of the 
small respondents never experience late payment by private businesses. The last column of this table 
indicates that all payments made by public authorities were late for 3.2% of the large responding 
economic operators and 8.2% of the small respondents. 17.5% of the large responding economic operators and 20.8% of the small respondents are always paid late by private businesses.  
 
Table 3.12: Option 3a/1: Potential direct cost s of contract renegotiation for companies 
in 10 Member States with agreed terms >30 days (€m) 
 SMEs Large Total 
Total number of companies in countries where 
average agreed payment period is >30 days 10,673,617 17,845 10,691,462 
25% of companies holding contracts with >30 day 
payment terms renegotiate 1 contract 2,668,404 4,461 2,672,865 
15% of companies holding contracts with >30 days 
payment terms renegotiate 1 contract 1,601,043 2,677 1,603,719 
Costs of contract renegotiation € 5,000 € 5,000  
Total direct costs of chan ges to contracts - 25% 
companies 13,342 22 13,364  
Total direct costs of chan ges to contracts - 15% 
companies  8,005 13 8,019  
Source: RPA Study. 
 Note
: 
This table provides estimates of what the one-off transitional costs of contract renegotiation might be, 
assuming that 25% of companies holding contracts with greater than 30 day payment periods may seek to renegotiate one contract or that 15% of such companies would seek to renegotiate one contract 
(based on 20% of companies believing that this measure would have an impact on their business 
according to a survey).  Note that it is assumed that on average only one contract would be renegotiated 
per company to take into account the fact that a larg e proportion of contracts ar e likely to be of a short 
duration or are completed within weeks or months of any new harmonised contract terms entering into 
use. Furthermore, it has been assumed that the average costs of familiarisation and renegotiating contracts for these companies would be €5,000 to allow for the time and expenses of both the buyer 
and supplier (costs of senior management time, legal costs, etc); obviously, the actual costs of 
familiarisation and negotiations may be minor in so me cases and far higher in others (e.g. where 
considerable legal input is required to the negotiations). 
 
EN 68   EN Table 3.13: Option 3a/2: Public procurement by Member States (billion €)  
Member State  2002 2003 2004 2005 2006 
Belgium 40.58 42.54 45.42 49.27 46.78
Czech Rep. n/a n/a 22.65 20.46 30.23
Denmark 33.29 34.50 32.33 29.61 31.99
Germany 366.04 371.46 348.86 364.16 375.47
Estonia n/a n/a 1.26 2.11 2.30
Ireland 16.73 16.97 17.90 20.79 22.45
Greece 21.12 22.18 1 9.31 18.78 19.64
Spain 93.56 100.54 116.17 126.88 142.88
France 235.76 247.89 282.19 303.80 319.64
Italy 147.79 162.75 209.65 204.12 212.66
Cyprus n/a n/a 1.54 1.53 1.73
Latvia n/a n/a 1.98 2.15 2.63
Lithuania n/a n/a 2.34 2.70 3.91
Luxembourg 3.57 3.73 4.62 4.16 4.59
Hungary n/a n/a 16.11 16.33 19.41
Malta  n/a n/a 0.61 0.77 0.77
Netherlands 98.94 104.41 116.12 123.60 136.06
Austria 35.16 36.06 39.44 45.13 44.02
Poland n/a n/a 32.24 38.97 50.17
Portugal 16.86 17.65 22.70 23.23 23.99
Slovenia n/a n/a 4.77 4.08 6.01
Slovakia  n/a n/a 7.75 8.76 11.40
Finland 22.55 23.99 25.52 25.62 27.14
Sweden 50.19 51.60 50.60 52.86 56.65
UK 282.52 281.20 309.14 313.13 351.38
Total 1,464.65 1,517.46 1,731.23 1,802.97 1,943.92
Source: RPA Study. 
 
Note :  
 
The above figures are derived from national accounts.  Since 2004, the value of contribution of the 
Utilities to these totals is extrapolated either from data in the harmonised Input/Output tables available 
from Eurostat, or from the latest available company annual reports. This change has been explained in 
more detail elsewhere. For this reason data from 2004 and after is not strictly comparable with 2003 or 
earlier data. It should also be noted that National Accounts figures for 2005 and earlier years may have 
been revised since this in dicator was last issued.  
 
 
EN 69   EN Table 3.14: Option 3a/2: Payment duration (public authorities to businesses)  
Member 
State  Average 
payment 
term in days  Average 
payment 
duration in 
days Payment 
duration: 
number of 
days 
exceeding 
30 days Member 
State  Average 
payment 
term in days Average 
payment 
duration in 
days Payment 
duration: 
number of 
days 
exceeding 
30 days 
Belgium 49.0 75.0 45.0 L ithuania 30.0 39.8 9.8
Bulgaria -- -- -- Luxembourg -- -- --
Czech Rep. 23.0 33.0 3.0 Hungary 30.0 55.0 25.0
Denmark 27.5 35.8 5.8 Malta -- -- --
Germany 25.0 40.0 10.0 Net herlands 27.2 46.0 16.0
Estonia 15.3 19.8 -10.2 Austria 27.0 47.0 17.0
Ireland 36.4 50.7 20.7 P oland 27.7 47.9 17.9
Greece 95.0 157.0 127.0 Portugal 57.4 137.8 107.8
Spain 103.0 144.0 114.0 Romania -- -- --
France 57.0 71.0 41.0 Slovenia -- -- --
Italy 95.0 135.0 105.0 Sl ovakia 28.0 35.0 5.0
Cyprus 55.4 72.4 42.4 Finland 20.0 24.0 -6
Latvia 20.1 31.3 1. 3 Sweden 28.0 35.0 5
    U.K. 30.0 48.0 18.0
Source: Tables 3.3 and 3.5 
 
EN 70   EN  
Table 3.15: Option 3a/2: Impact of maximum period of 30 days for payments by public 
authorities to businesses (procurement expenditure)  
Scenario on the basis of average number of days of earlier payment  
  Average 
number of 
days of earlier 
payment  
Annual 
effective 
interest rate  Budgetary 
cost in billion 
euro for 
public 
authorities (1)Additional 
liquidity to 
companies in 
billion euro 
(1) Budgetary 
cost in billion 
euro for 
public 
authorities (2) Additional 
liquidity to 
companies in 
billion euro 
(2) 
Belgium 45 4 0.231 5.8 0.24 6.03 
Bulgaria -- 8 -- -- -- -- 
Czech Rep. 3 4.3 0.011 0.2 0.02 0.40 
Denmark 5.8 3.7 0.019 0.5 0.02 0.50 
Germany 10 3.2 0.329 10.3 0.37 11.51 
Estonia 0 (7.2) 0.0 0.0 0.00 0.00 
Ireland 20.7 4.4 0.056 1.3 0.08 1.82 
Greece 127 5.2 0.355 6.8 0.36 7.01 
Spain 114 4 1.785 44.6 2.47 61.85 
France 41 3.6 1.293 35.9 1.57 43.54 
Italy 105 4.5 2.753 61.2 2.81 62.50 
Cyprus 42.4 4.5 0.009 0.2 0.01 0.24 
Latvia 1.3 (10.3) 0.001 0.0 0.00 0.01 
Lithuania 9.8 (9) 0.009 0.1 0.02 0.25 
Luxembourg -- 4 -- -- -- -- 
Hungary 25 7.9 0.105 1.3 0.14 1.78 
Malta -- 4.5 -- -- -- -- 
Netherlands 16 3.8 0.227 6.0 0.29 7.64 
Austria 17 4 0.082 2.1 0.10 2.43 
Poland 17.9 5.7 0.140 2.5 0.29 5.14 
Portugal 107.8 4.1 0.290 7.1 0.32 7.71 
Romania -- (14) -- -- -- -- 
Slovenia -- 4.5 -- -- -- -- 
Slovakia 5 4.7 0.007 0.2 0.01 0.29 
Finland 0 3.9 0.0 0.0 0.00 0.00 
Sweden 5 2.8 0.022 0.8 0.03 0.92 
U.K. 18 3.6 0.624 17.3 0.76 21.13 
Total    8.3 204.1 9.9 242.7 
Source: European Commission ECFIN. Annua l effective interest rate is long term  interest and short term (proxied) 
for Member States between brackets. Average number of days of earlier payment based on the average payment 
duration set out in Table 3.14. 
(1) Procurement figures for 2006 – See Table 3.13. 
(2) Procurement figures for 2009, assuming similar a nnual growth in the period 2006-2009 as in 2004-2006. 
 
EN 71   EN Table 3.16: Option 3a/2: Impact of maximum period of 30 days for payments by public 
authorities to businesses (procurement expenditure)  
Scenario on the basis of the reduction of the average payment term 
  Reduction of 
average 
payment term  
Annual 
effective 
interest rate  Budgetary 
cost in billion 
euro for 
public 
authorities (1)Additional 
liquidity to 
companies in 
billion euro 
(1) Budgetary 
cost in billion 
euro for 
public 
authorities (2) Additional 
liquidity to 
companies in 
billion euro 
(2) 
Belgium 19 4 0.097 2.4 0.10 2.55 
Bulgaria -- 8 -- --  -- --  
Czech Rep. 0 4.3 0  0 0  0 
Denmark 0 3.7 0  0 0  0 
Germany 0 3.2 0  0 0  0 
Estonia 0 (7.2) 0  0 0  0 
Ireland 6.4 4.4 0.017 0.4 0.02 0.56 
Greece 65 5.2 0.182 3.5 0.19 3.59 
Spain 73 4 1.143 28.6 1.58 39.61 
France 27 3.6 0.851 23.6 1.03 28.67 
Italy 65 4.5 1.704 37.9 1.74 38.69 
Cyprus 25.4 4.5 0.005 0.1 0.01 0.14 
Latvia 0 (10.3) 0  0 0 0  
Lithuania 0 (9) 0  0 0  0 
Luxembourg -- 4 --  -- --  -- 
Hungary 0 7.9 0  0 0  0 
Malta -- 4.5 --  -- --  -- 
Netherlands 0 3.8 0  0 0  0 
Austria 0 4 0  0 0  0 
Poland 0 5.7 0  0 0  0 
Portugal 27.4 4.1 0.074 1.8 0.08 1.96 
Romania -- (14) --  -- -- --  
Slovenia -- 4.5 --  -- --  -- 
Slovakia 0 4.7 0  0 0  0 
Finland 0 3.9 0  0 0  0 
Sweden 0 2.8 0  0 0  0 
U.K.  0 3.6  0  0  0  0 
Total 4.1 98.3 4.8 115.8 
Source: European Commission ECFIN. Annua l effective interest rate is long term  interest and short term (proxied) 
for Member States between brackets. Reduction of averag e payment term based on the average payment term set 
out in Table 3.14. 
(1) Procurement figures for 2006 – See Table 3.13. 
(2) Procurement figures for 2009, assuming similar a nnual growth in the period 2006-2009 as in 2004-2006. 
 
EN 72   EN Table 3.17: Option 3a/2: Impact of maximum period of 30 days for payments by public 
authorities to businesses (procurement expenditure for 2009) – Average scenario 
 Scenario Table 3.15 Scenario Table 3.16 Average scenario 
  Budgetary 
cost in billion 
euro for 
public 
authorities Additional 
liquidity to 
companies in 
billion euro  Budgetary 
cost in billion 
euro for 
public 
authorities Additional 
liquidity to 
companies in 
billion euro Budgetary 
cost in billion 
euro for 
public 
authorities Additional 
liquidity to 
companies in 
billion euro 
Belgium 0.24 6.03 0.10 2.55 0.17 4.29 
Bulgaria -- -- -- --  -- -- 
Czech Rep. 0.02 0.40 0.00 0.00 0.01 0.20 
Denmark 0.02 0.50 0.00 0.00 0.01 0.25 
Germany 0.37 11.51 0.00 0.00 0.18 5.84 
Estonia 0.00 0.00 0.00 0.00 0.00 0.00 
Ireland 0.08 1.82 0.02 0.56 0.05 1.19 
Greece 0.36 7.01 0.19 3.59 0.27 5.30 
Spain 2.47 61.85 1.58 39.61 2.03 50.73 
France 1.57 43.54 1.03 28.67 1.30 36.10 
Italy 2.81 62.50 1.74 38.69 2.22 50.59 
Cyprus 0.01 0.24 0.01 0.14 0.01 0.19 
Latvia 0.00 0.01 0.00 0.00 0.00 0.00 
Lithuania 0.02 0.25 0.00 0.00 0.00 0.00 
Luxembourg -- -- --  -- -- -- 
Hungary 0.14 1.78 0.00 0.00 0.07 0.89 
Malta -- -- --  -- -- -- 
Netherlands 0.29 7.64 0.00  0.00 0.14 3.82 
Austria 0.10 2.43 0.00 0.00 0.05 1.21 
Poland 0.29 5.14 0.00 0.00 0.14 2.57 
Portugal 0.32 7.71 0.08 1.96 0.20 4.83 
Romania -- -- -- -- -- -- 
Slovenia -- -- -- -- -- -- 
Slovakia 0.01 0.29 0.00  0.00 0.01 0.14 
Finland 0.00 0.00 0.00  0.00 0.00 0.00 
Sweden 0.03 0.92 0.00  0.00 0.01 0.46 
U.K. 0.76 21.13  0.00  0.00 0.38 10.56 
Total 9.9 242.7 4.8 115.8 7.25 179.11 
Source: Tables 3.15 and 3.16, based on estimated procurement figures for 2009,  assuming similar annual growth in 
the period 2006-2009 as in 2004-2006. 
 
EN 73   EN Table 3.18: Option 3b: Interest successfully claimed at different average rates of claim 
made (@current late payment interest rates) / € m 
  Ave. rate of 
claim = 
13.5% Ave. rate of 
claim = 
18.25% Ave. rate of 
claim = 
18.5% Ave. rate of 
claim = 
23.2% Ave. rate of 
claim = 
23.5% Ave. 
rate of 
claim = 
28.25% 
 SME Large SME Large SME Large 
BE 3.9 4.2 5.3 5.4 6.7 6.5 
CZ 2.7 3.0 3.7 3.8 4.7 4.6 
DK 0.8 0.8 1.0 1.1 1.3 1.3 
DE 34.7 37.8 47.5 48.1 60.4 58.5 
EE 0.2 0.2 0.3 0.3 0.4 0.4 
IE 3.3 3.6 4.5 4.6 5.7 5.6 
EL 6.2 6.7 8.5 8.6 10.8 10.4 
ES 15.2 16.5 20.8 21.1 26.4 25.6 
FR 24.7 26.9 33.9 34.3 43.0 41.7 
IT 32.5 35.4 44.5 45.1 56.5 54.8 
CY 0.5 0.6 0.7 0.8 0.9 0.9 
LV 0.4 0.4 0.5 0.5 0.7 0.6 
LT 0.3 0.3 0.4 0.4 0.5 0.5 
HU 2.8 3.1 3.9 3.9 4.9 4.8 
NL 6.4 6.9 8.7 8.8 11.1 10.7 
AT 1.0 1.1 1.4 1.4 1.8 1.7 
PL 5.3 5.8 7.2 7.3 9.2 8.9 
PT 10.5 11.5 14.4 14.6 18.3 17.7 
FI 0.3 0.4 0.5 0.5 0.6 0.6 
SE 0.9 1.0 1.3 1.3 1.6 1.6 
UK 39.4 43.0 54.0 54.7 68.6 66.5 
Total 192.1  209.3  263.2  266.6  334.3  324.0  
Source: RPA Study. 
 
Note : 
 
If interest rates would be increased, costs to debtor s are likely to increase as  a result of the higher 
interest payments on late payments. This table establishes an estimate for the value of late payment interest successfully claimed by companies in 21 Memb er States at the prevailing interest rates, on the 
basis of a number of scenarios based on different hi gher levels of late payment interest and based on 
different assumptions regarding the willingness of creditor companies to make claims for late payment 
interest from their debtor customers. These figures have then been adjusted to produce predictions of 
the interest successfully claimed at a range of intere st rates and with differing levels of average claim 
rate. Any changes in the amount of interest successf ully claimed as a result of imposing more punitive 
late payment interest rates, whilst representing a cost to debtors, will also represent an equal benefit to 
creditors. Therefore, the ov erall net change in costs would be zero , with the measure effecting a change 
in distribution rather than an increase or decrease in costs. 
However, this scenario is quite optimistic since the fear of damaging commercial relationship may still 
refrain many economic operators from claiming interest. 
 
EN 74   EN Table 3.19: Option 3d: Costs of imposing flat late payment fees on debtors 
Late payment fee costs /€million 
Average invoice 
value (SME)/€ No. of invoices paid 
late per annum 
(SMEs) (millions) @ €100 @ €200 @ €300 @ €400 
2,000 17 1,736 3,473 5,209 6,946 
1,000 35 3,473 6,946 10,418 13,891 
500 69 6,946 13,891 20,837 27,782 
Average invoice 
value (Large)/€ No. of invoices paid 
late per annum 
(Large) (millions)     
15,000 3 252 505 757 1,009 
10,000 4 378 757 1,135 1,514 
5,000 8 757 1,514 2,270 3,027 
Source: RPA Study. 
 Note
: 
 
In the absence of a scientifically reliable indicatio n of the number of succ essful claims for late 
payment interest, an assumption is made on the aver age size of an invoice across all transactions of 
€1,000 for SMEs and for €10,000 for large companie s. These figures are used to estimate the number 
of transactions which are paid late as follows: 
 
Number of transactions paid late = 
Turnover paid late and successfully claimed  
Average invoice size (€10,000 or €1,000) 
 Applying this formula results in figures of approximately 17 million invoices paid late for SMEs and 
3.8 million invoices paid late for large companies.  
The introduction of a Late Payment Fee would imply that debtors would incur these fees in cases where the creditor is successful in claiming late paym ents. A range of potential fees is included in this 
table which set out the potential costs of imposing a flat late payment fee in the countries covered by 
the analysis. It also considers variations in the numbe r of transactions that end up in successful claims 
for late payment interest by analysing different aver age levels of invoice valu e to provide some costs 
for different levels of late payment fee.  
 Based on the above, the introduction of a flat rate fee for late payments, due on day 1 after the expiry 
of the agreed or default payment period might lead to costs ranging from €3.5bn to €13.9bn for SMEs 
debtors (assuming that the average invoice size is €1,000) and from €378 million to €1.5bn for large 
debtor companies (assuming that the average invoice size is €10,000). Since these costs will be 
incurred by the debtor and paid over to the creditor,  the net effect is only one of redistribution, with 
the exception of any administrative costs (likely to be small) incurred by the creditor in claiming the 
fee. 
 
EN 75   EN Table 3.20: Baseline scenario: Current paym ent terms and late payment patterns (B2B) 
   Payment terms and 
patterns Negative impact late payment: 
costs due to late av. effective 
payment (late payment interest 
rate, table 1.1) in mio. Euro, 
based on turnover year 2006 Positive impact late payment : 
value of late payment interest 
successfully claimed (table 3.9)) 
 Average 
payment 
term (in 
days) Average 
effective 
payment 
(in days) TOTAL SME Large 
companiesTOTAL SME Large 
companies
Belgium 37,0 50,0 2,690.5 1,636.8 1,053.7 8,1 3,9 4,2
Bulgaria -- -- -- -- -- -- -- --
Czech Rep. 30,0 49,0 1,562.7 922.7 639.9 5,7 2,7 3,0
Denmark 29,4 35,5 764.5 512.3 252.2 1,6 0,8 0,8
Germany 30,0 36,0 7,461.5 3,552.7 3,908.8 72,5 34,7 37,8
Estonia 20,7 35,5 138.8 113.5 25.4 0,4 0,2 0,2
Ireland 39,1 57,5 1,556.6 879.4 677.3 6,9 3,3 3,6
Greece 84,0 110,0 1,919.6 1,509.3 410.3 12,9 6,2 6,7
Spain 73,0 89,0 8,550.2 5,739.3 2,810.9 31,7 15,2 16,6
France 49,0 65,0 13,316.4 7,406.9 5,909.5 51,7 24,7 26,9
Italy 68,0 88,0 14,437.3 10,239.7 4,197.7 67,9 32,5 35,4
Cyprus 67,2 95,8 164.3 140.3 24.0 1,1 0,5 0,6
Latvia 21,5 41,5 276.1 219.9 56.2 0,8 0,4 0,4
Lithuania 30,3 46,2 318.5 206.6 111.9 0,7 0,3 0,3
Luxembourg -- -- -- -- -- -- -- --
Hungary 26,0 45,0 2,111.2 1,241.1 870.1 5,9 2,8 3,1
Malta -- -- -- -- -- -- -- --
Netherlands 26,1 40,0 3,579.1 2,231.9 1,347.2 13,3 6,4 6,9
Austria 27,0 35,0 1,163.8 738.5 425.3 2,1 1,0 1,1
Poland 29,7 46,8 3,415.3 2,020.5 1,394.8 11,0 5,3 5,8
Portugal 47,1 80,1 2,716.0 1,916.5 799.5 22,0 10,5 11,5
Romania -- -- -- -- -- -- -- --
Slovenia -- -- -- -- -- -- -- --
Slovakia 31,0 39,0 184.3 91.1 93.2 -- -- --
Finland 21,0 27,0 530.4 254.0 276.4 0,7 0,4 0,4
Sweden 27,0 34,0 1,162.0 649.9 512.1 2,0 0,9 1,0
U.K. 33,2 51,0 17,301.4 8,397.8 8,903.6 82,4 39,4 43,0
Total     85,320.5 50,620.4 34,700.1 401,3 192,1 209,3
Source : European Commission, DG EC FIN on the basis of average payment terms in days (table 3.3), and 
turnover table 3.28 
 
EN 76   EN Table 3.21: Baseline scenario: Current paym ent terms and late payment patterns (B2B) 
Net effect of negative and positive impacts of Table 3.20 (in mio EURO) 
 TOTAL SME Large companies 
Belgium -2,682.4 -1,632.9 -1,049.4
Bulgaria -- -- --
Czech Rep. -1,557.0 -920.0 -637.0
Denmark -762.9 -511.6 -251.3
Germany -7,389.0 -3,518.0 -3,871.0
Estonia -138.4 -113.2 -25.2
Ireland -1,549.7 -876.1 -673.7
Greece -1,906.7 -1,503.1 -403.6
Spain -8,518.5 -5,724.1 -2,794.4
France -13,264.7 -7,382.1 -5,882.6
Italy -14,369.5 -10,207.2 -4,162.3
Cyprus -163.2 -139.7 -23.4
Latvia -275.3 -219.5 -55.8
Lithuania -317.9 -206.3 -111.5
Luxembourg -- -- --
Hungary -2,105.3 -1,238.3 -867.1
Malta -- -- --
Netherlands -3,565.9 -2,225.5 -1,340.3
Austria -1,161.7 -737.5 -424.2
Poland -3,404.3 -2,015.2 -1,389.1
Portugal -2,694.0 -1,905.9 -788.0
Romania -- -- --
Slovenia -- -- --
Slovakia -184.3 -91.1 -93.2
Finland -529.6 -253.6 -276.0
Sweden -1,160.0 -648.9 -511.1
U.K. -17,219.0 -8,358.4 -8,860.7
Total -84,919.2 -50,428.4 -34,490.9
Source : European Commission, DG EC FIN on the basis of average payment terms in days (table 3.3), and 
turnover table 3.28 
 
EN 77   EN Table 3.22: Optimum scenario: Reduction Payment terms to 30 days maximum, no longer 
late payment (effective payment equal to payment term) (B2B) 
  Impact added liquidity due to 
reduction of payment terms 
(effective interest rates, see 
table 3.15 and 3.16) Impact added liquidity due to 
improved payment behaviour 
(late payment interest rates – 
Table 1.1) Net effect (in mio EURO, 
gains +, loss -) 
 TOTAL SME Large 
compa-
nies TOTAL SME Large 
compa-
nies TOTAL SME Large 
compa-
nies 
Belgium 610.0 371.1 238.9 4,139.2 2,518.2 1,621.0 4,749.2 2,889.2 1,859.9
Bulgaria -- -- -- -- -- -- -- -- --
Czech Rep. -- -- -- 1,562.7 922.7 639.9 1,562.7 922.7 639.9
Denmark -- -- -- 689.3 461.9 227.4 689.3 461.9 227.4
Germany -- -- -- 7,461.5 3,552.7 3,908.8 7,461.5 3,552.7 3,908.8
Estonia -- -- -- 51.6 42.2 9.4 51.6 42.2 9.4
Ireland 356.6 201.4 155.1 2,326.5 1,314.3 1,012.2 2,683.1 1,515.7 1,167.4
Greece 2,182.3 1,715.8 466.5 5 906.6 4,644.0 1,262.6 8,088.9 6,359.8 1,729.1
Spain 9,675.2 6,494.5 3,180.8 31 528.9 21,163.7 10,365.2 41,204.1 27,658.2 13,546.0
France 5,992,4 3,333.1 2,659,3 29,129.6 16,202.5 12,927.1 35,122.0 19,535.6 15,586.4
Italy 12,993.6 9,215.7 3,777.9 41,868.2 29,695.0 12,173.2 54,861.8 38,910.7 15,951.1
Cyprus 101.2 86.4 14.8 378.0 322.7 55.3 479.3 409.1 70.1
Latvia -- -- -- 158.7 126.4 32.3 -- -- --
Lithuania 3.6 2.3 1.2 324.5 210.5 114.0 328.1 212.8 115.2
Luxembourg -- -- -- -- -- -- -- -- --
Hungary -- -- -- 1,666.7 979.8 686.9 1,666.7 979.8 686.9
Malta -- -- -- -- -- -- -- -- --
Netherlands -- -- -- 2,574.9 1,605.7 969.2 2,574.9 1,605.7 969.2
Austria -- -- -- 727.4 461.5 265.8 727.4 461.5 265.8
Poland -- -- -- 3,355.4 1,985.0 1,370.4 3,355.4 1,985.0 1,370.4
Portugal 607,4 428,6 178,8 4,123.3 2,909.5 1,213.8 4,730.7 3,338.1 1,392.6
Romania -- -- -- -- -- -- -- -- --
Slovenia -- -- -- -- -- -- -- -- --
Slovakia 11.4 5.6 5.8 207.4 102.5 104.9 218.8 108.1 110.6
Finland -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Sweden -- -- -- 664.0 371.3 292.7 664.0 371.3 292.7
U.K. 1,119.7 543.5 576.2 20,411.8 9,907.5 10,504.3 21,531.5 10,451.0 11,080.5
Total 33,653.4 22,398.1 11,255.3 159,256.2 99,499.8 59,756.4 192,750.9 121,771.4 70,979.5
Source : European Commission, DG EC FIN on the basis of average payment terms in days (table 3.3), and 
turnover table 3.28 
 
EN 78   EN Table 3.23: Optimum scenario: Reduction Payment terms to 30 days maximum, no longer 
late payment (effective payment equal to payment term) (B2B) 
Total net effect vs. Baseline Scenario (in mio EURO) 
 TOTAL SME Large companies 
Belgium 2,066.8 1,256.3 810.5
Bulgaria -- -- --
Czech Rep. 5.7 2.7 3.0
Denmark -73.6 -49.6 -24.0
Germany 72.4 34.7 37.8
Estonia -86.8 -71.1 -15.7
Ireland 1,133.3 639.6 493.7
Greece 6,182.2 4,856.7 1,325.5
Spain 32,685.7 21,934.1 10,751.6
France 21,857.2 12,153.4 9,703.8
Italy 40,492.4 28,703.5 11,788.8
Cyprus 316.1 269.4 46.7
Latvia -- -- --
Lithuania 10.2 6.5 3.7
Luxembourg -- -- --
Hungary -438.6 -258.5 -180.1
Malta -- -- --
Netherlands -990.9 -619.9 -371.1
Austria -434.3 -275.9 -158.4
Poland -48.9 -30.2 -18.7
Portugal 2,036.7 1,432.2 604.5
Romania -- -- --
Slovenia -- -- --
Slovakia 34.4 17.0 17.4
Finland -529.6 -253.6 -276.0
Sweden -496.0 -277.6 -218.5
U.K. 4,312.5 2,092.6 2,219.8
Total 107,831.6 71,343.0 36,488.6
Source : European Commission, DG EC FIN on the basis of average payment terms in days (table 3.3), and 
turnover table 3.28 
 
EN 79   EN Table 3.24: Realistic scenario: Reduction Payment terms to 30 days maximum, 
proportional reduction of late payment (eff ective payment equal to payment term) (B2B) 
  Impact added liquidity due to 
reduction of payment terms 
(effective interest rates, see 
table 3.15 and 3.16) Impact added liquidity due to 
improved payment behaviour 
(late payment interest rates) Impact due to loss of 
interests successfully 
claimed by late payment 
(table 3.9 "interest 
successfully claimed"), 
proportional to ∆ payment 
delay 
 TOTAL SME Large 
compa-
nies TOTAL SME Large 
compa-
nies TOTAL SME Large 
compa-
nies 
Belgium 610.0 371.1 238.9 1,957.7 1,191.0 766.7 3.8 1.8 2.0
Bulgaria -- -- -- -- -- -- -- -- --
Czech Rep. -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Denmark -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Germany -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Estonia -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Ireland 356.6 201.4 155.1 1,132.1 639.6 492.6 3.4 1.6 1.8
Greece 2,182.3 1,715.8 466.5 5,221.0 4,104.9 1,116.0 11.4 5.5 6.0
Spain 9,675.2 6,494.5 3,180.8 28,015.1 18,805.1 9,210.0 28.2 13.5 14.7
France 5,992.4 3,333.1 2,659.3 20,976.7 11,667.7 9,309.0 37.2 17.8 19.4
Italy 12,993.6 9,215.7 3,777.9 35,498.8 25,177.5 10,321.3 57.5 27.5 30.0
Cyprus 101.2 86.4 14.8 304.7 260.1 44.6 0.9 0.4 0.5
Latvia -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Lithuania 3.6 2.3 1.2 9,2 5,9 3,2 0.0 0.0 0.0
Luxembourg -- -- -- -- -- -- -- -- --
Hungary -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Malta -- -- -- -- -- -- -- -- --
Netherlands -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Austria -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Poland -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
Portugal 607.4 428.6 178.8 2,393.4 1,688.9 704.5 12.8 6.1 6.7
Romania -- -- -- -- -- -- -- -- --
Slovenia -- -- -- -- -- -- -- -- --
Slovakia 11.4 5.6 5.8 29.0 14.3 14.7 -- -- --
Finland -- -- -- 0.0 0.0 0.0 -- -- --
Sweden -- -- -- 0.0 0.0 0.0 0.0 0.0 0.0
U.K. 1,119.7 543.5 576.2 4,778.0 2,319.1 2,458.8 19.3 9.2 10.1
Total 33,653.4 22,398.1 11,255.3 100,315.7 65,874.2 34,441.5 174.5 83.5 91.0
Source : European Commission, DG EC FIN on the basis of average payment terms in days (table 3.3), and 
turnover table 3.28 
 
EN 80   EN Table 3.25: Realistic scenario: Reduction Payment terms to 30 days maximum, 
proportional reduction of late payment (eff ective payment equal to payment term) (B2B) 
Net effects 
 Net effect (in mio EURO, gains +, loss -) 
on the basis of Table 3.24 Total net effect vs. Baseline Scenario (in 
mio EURO) 
 TOTAL SME Large 
companies TOTAL SME Large 
companies 
Belgium 2,563.9 1,560.3 1,003.6 -118.5 -72.6 -45.9
Bulgaria -- -- -- -- -- --
Czech Rep. 0.0 0.0 0.0 -1,557.0 -920.0 -637.0
Denmark 0.0 0.0 0.0 -762.9 -511.6 -251.3
Germany 0.0 0.0 0.0 -7,389.0 -3,518.0 -3,871.0
Estonia 0.0 0.0 0.0 -138.4 -113.2 -25.2
Ireland 1,485.4 839.4 646.0 -64.4 -36.7 -27.7
Greece 7,391.9 5,815.3 1,576.6 5,485.2 4,312.2 1,173.0
Spain 37,662.1 25,286.1 12,376.1 29,143.7 19,561.9 9,581.7
France 26,931.9 14,983.0 11,948.9 13,667.2 7,600.8 6,066.3
Italy 48,434.9 34,365.7 14,069.2 34,065.4 24,158.5 9,906.9
Cyprus 405.0 346.1 58.9 241.8 206.4 35.5
Latvia 0.0 0.0 0.0 -275.3 -219.5 -55.8
Lithuania 12.7 8.2 4.5 -305.2 -198.1 -107.1
Luxembourg -- -- -- -- -- --
Hungary 0.0 0.0 0.0 -2,105.3 -1,238.3 -867.1
Malta -- -- -- -- -- --
Netherlands 0.0 0.0 0.0 -3,565.9 -2,225.5 -1,340.3
Austria 0.0 0.0 0.0 -1,161.7 -737.5 -424.2
Poland 0.0 0.0 0.0 -3,404.3 -2,015.2 -1,389.1
Portugal 2,988.0 2,111.3 876.7 294.1 205.4 88.7
Romania -- -- -- -- -- --
Slovenia -- -- -- -- -- --
Slovakia 40.4 20.0 20.4 -144.0 -71.2 -72.8
Finland 0.0 0.0 0.0 -529.6 -253.6 -276.0
Sweden 0.0 0.0 0.0 -1,160.0 -648.9 -511.1
U.K. 5,878.4 2,853.4 3,025.0 -11,340.6 -5,505.0 -5,835.7
Total 133,794.6 88,188.7 45,605.9 48,875.4 37,760.4 11,115.0
Source : European Commission, DG ECFIN on the basis of average payment terms in days (table 3.3), 
and turnover table 3.28 
 
EN 81   EN Table 3.26: Worst scenario: Reduction Paymen t terms to 30 days, no reduction effective 
payment delay (B2B) 
  Impact late payment: 
additional costs due to late 
av. effective payment vs. 
payment term (late payment 
interest rates) in mio. Euro, 
based on turnover Impact due to increase of 
interests successfully claimed 
by late payment (table 3.9 
"interest successfully 
claimed"), proportional to ∆ 
payment delay Net effect (in mio EURO, 
gains +, loss -)) 
 TOTAL SME Large 
compa-
nies TOTAL SME Large 
compa-
nies TOTAL SME Large 
compa-
nies 
Belgium 1,448.7 881.4 567.4 1.9 0.9 1.0 -1,446.8 -880.4 -566.4
Bulgaria -- -- -- -- -- -- -- -- --
Czech Rep. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Denmark 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Germany 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Estonia 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Ireland 769.9 434.9 335.0 2.1 1.0 1.1 -767.8 -433.9 -333.9
Greece 3,986.9 3,134.7 852.3 23.3 11.1 12.1 -3,963.7 -3,123.5 -840.1
Spain 22,978.7 15,424.4 7,554.3 45.5 21.8 23.7 -22,933.2 -15,402.6 -7,530.6
France 15,813.2 8,795.6 7,017.6 32.7 15.7 17.1 -15,780.5 -8,780.0 -7,000.5
Italy 27,430.9 19,455.4 7,975.6 86,0 41,1 44,8 -27 344.9 -19 414.2 -7 930.7
Cyprus 213.7 182.4 31.3 1.4 0.7 0.7 -212.3 -181.8 -30.5
Latvia 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Lithuania 6.0 3.9 2.1 0.0 0.0 0.0 -6.0 -3.9 -2.1
Luxembourg -- -- -- -- -- -- -- -- --
Hungary 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Malta -- -- -- -- -- -- -- -- --
Netherlands 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Austria 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Poland 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Portugal 1,407.4 993.1 414.3 12.5 6.0 6.5 -1,394.8 -987.1 -407.8
Romania -- -- -- -- -- -- -- -- --
Slovenia -- -- -- -- -- -- -- -- --
Slovakia 23.0 11.4 11.7 -- -- -- -23.0 -11.4 -11.7
Finland 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Sweden 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
U.K. 3,110.4 1,509.7 1,600.7 8,8 4,2 4,6 -3,101.6 -1,505.5 -1,596.1
Total 77,188.8 50,826.8 26,362.0 214.2 102.5 111.7 -76,974.7 -50,724.4 -26,250.3
Source : European Commission, DG EC FIN on the basis of average payment terms in days (table 3.3), and 
turnover table 3.28 
 
EN 82   EN Table 3.27: Worst scenario: Reduction Paymen t terms to 30 days, no reduction effective 
payment delay (B2B) - Net effects 
 Total net effect vs. Baseline Scenario (in 
mio EURO) Baseline scenario: net effect (in mio 
EURO) – Table 3.21 
 TOTAL SME Large 
companies TOTAL SME Large 
companies 
Belgium -4,129.2 -2,513.4 -1,615.8 -2,682.4 -1,632.9 -1,049.4
Bulgaria -- -- -- -- -- --
Czech Rep. -1,557.0 -920.0 -637.0 -1,557.0 -920.0 -637.0
Denmark -762.9 -511.6 -251.3 -762.9 -511.6 -251.3
Germany -7,389.0 -3,518.0 -3,871.0 -7,389.0 -3,518.0 -3,871.0
Estonia -138.4 -113.2 -25.2 -138.4 -113.2 -25.2
Ireland -2,317.5 -1,310.0 -1,007.6 -1,549.7 -876.1 -673.7
Greece -5,870.4 -4,626.6 -1,243.7 -1,906.7 -1,503.1 -403.6
Spain -31,451.7 -21,126.7 -10,324.9 -8,518.5 -5,724.1 -2,794.4
France -29,045.2 -16,162.1 -12,883.1 -13,264.7 -7,382.1 -5,882.6
Italy -41,714.4 -29,621.4 -12,093.0 -14,369.5 -10,207.2 -4,162.3
Cyprus -375.5 -321.5 -54.0 -163.2 -139.7 -23.4
Latvia -275.3 -219.5 -55.8 -275.3 -219.5 -55.8
Lithuania -323.9 -210.2 -113.7 -317.9 -206.3 -111.5
Luxembourg -- -- -- -- -- --
Hungary -2,105.3 -1,238.3 -867.1 -2,105.3 -1,238.3 -867.1
Malta -- -- -- -- -- --
Netherlands -3,565.9 -2,225.5 -1,340.3 -3,565.9 -2,225.5 -1,340.3
Austria -1,161.7 -737.5 -424.2 -1,161.7 -737.5 -424.2
Poland -3,404.3 -2,015.2 -1,389.1 -3,404.3 -2,015.2 -1,389.1
Portugal -4,088.8 -2,893.0 -1,195.8 -2,694.0 -1,905.9 -788.0
Romania -- -- -- -- -- --
Slovenia -- -- -- -- -- --
Slovakia -207.4 -102.5 -104.9 -184.3 -91.1 -93.2
Finland -529.6 -253.6 -276.0 -529.6 -253.6 -276.0
Sweden -1,160.0 -648.9 -511.1 -1,160.0 -648.9 -511.1
U.K. -20,320.6 -9,863.9 -10,456.7 -17,219.0 -8,358.4 -8,860.7
Total -161,893.9 -101,152.7 -60,741.2 -84,919.2 -50,428.4 -34,490.9
Source : European Commission, DG ECFIN on the basis of average payment terms in days (table 3.3), 
and turnover table 3.28 
 
EN 83   EN Table 3.28: Turnover 2006 (in mio EURO)1  
 Turnover total SME large 
companies 1 comments rf. 
NACE 1.1 
Belgium 795,158  483,750 311,409 excl. C 
Bulgaria 61,857  40,931 20,926 2005 
Czech Rep. 324, 538  191,637 132,900  
Denmark 435,662  291,953 143,709 excl.C and E40 
Germany 4,322,906  2,058,297 2,264,609  
Estonia 36,043  29,454 6,589 excl.CA and H 
Ireland 325,043  183,619 141,423 excl.E40 
Greece 283,671  223,033 60,638 excl.C 
Spain 2,053,175   1,378,189 674,986  
France 3,197,686   1,778,620  1,419,066  
Italy 2,773,486   1,967,092 806,393  
Cyprus 22,073  18,844 3,229 excl.E 
Latvia 38,756  30,870 7,886 excl.CA 
Lithuania 48,074  31,188 16,886 excl.I62 and K70 
Luxembourg 74,393  43,865 30,528 excl. E40 and I 
Hungary 238,573  140,246 98,327 excl.C 
Malta - - -  
Netherlands 989,307  616,919 372,388 2005, excl.C and 
E40 
Austria 505,692  320,883 184,809 excl. C and E41 
Poland 595,103  352,061 243,042  
Portugal 316,212  223,129 93,083 excl.C and E41 
Romania 175,821  103,672 72,150  
Slovenia 67,334  42,630 24,704 excl.C 
Slovakia 88,531  43,762 44,769  
Finland 339,627  162,632 176,995 excl. C 
Sweden 605,897  338,852 267,045  
U.K. 3,547,762   1,722,018  1,825,744  
 
EN 84   EN 8.4. Annex 4: Detailed descript ion of the baseline option 
(1) Actual payment peri ods should shorten , on the one hand, with the 
establishment of the Single Euro Payments Area (SEPA)79 which will make 
all electronic payments across the eurozone as easy as domestic payments within one country and, on the other, through e-Invoicing between business 
partners
80. E-Invoicing will become a fundamental part of an efficient 
financial supply chain, linking the inte rnal processes of enterprises to 
payment systems. 
(2) Many hurdles for litigation in cros s-border cases concerning uncontested 
pecuniary claims  will be cleared by Regulati on (EC) No 1896/2006 creating a 
European order for payment procedure which applies from 12 December 2008, except in Denmark. This regulation simplifies, speeds up and reduces 
the costs of litigation in such cross-bo rder cases by creating a European order 
for payment procedure. The new payment procedure also app lies to cases in 
which at least one of the parties is do miciled or habitually resident in a 
Member State other than the Member Stat e of the court. When the application 
for a European order for payment fulf ils the requirements of the regulation 
and when the claim appears to be founded, as soon as possible and normally 
within 30 days of the lodging of the a pplication, the competent court issues a 
European order for payment. European  orders for payment are recognised 
throughout the Member States without a ny intermediate proceedings in the 
Member State of enforcement. 
(3) Regulation (EC) No 805/2004 creating a European enforcement Order for 
uncontested claims  puts in place a system whereby a judgment certified as a 
European enforcement order in the Member State of origin must be recognised and enforced in the othe r Member States (except Denmark) 
without the need for a declaration of enforceability and without any 
possibility of opposing its recognition. Moreover, a judgment certified as a European enforcement order is enfo rced under the same conditions as a 
judgment handed down in the Member State of enforcement. This regulation applies from 21 October 2005. 
(4) Regulation (EC) No 861/2007 of the Eur opean Parliament and of the Council 
of 11 July 2007 establishes a European Small Claims Procedure
 intended to 
simplify and speed up litigation concer ning small claims in cross-border 
cases, and to reduce costs. The European Small Claims Procedure is available to litigants as an alternative to the procedures existing under the laws of the 
Member States. This Regulation also el iminates the intermediate proceedings 
                                                
 
79 Directive 2007/64/EC on payment services in th e internal market amending Directives 97/7/EC, 
2002/65/EC, 2005/60/EC and 2006/48/EC will complete an EU-wide single market for payments and 
provides, amongst others, the necessary legal framewo rk for the SEPA. Moreover, Regulation (EC) No 
2560/2001 on cross-border payments in euro elimin ates the difference of price between cross-border 
and national payments. 
80 Directive 2001/115/EC of 20 December 2001 amen ding Directive 77/388/EEC with a view to 
simplifying, modernising and harmonising the conditions laid down for invoicing in respect of value 
added tax already requires Member States, since 1st January 2004, to recognise the validity of electronic 
invoices and allow cross-bo rder electronic invoicing and electronic storage. 
 
EN 85   EN necessary to enable recognition and enfo rcement, in other Member States, of 
judgments given in one Member State in the European Small Claims Procedure. This Regulation applies, in cross-border cases, to civil and 
commercial matters, whatever the nature of the court or tribunal, where the 
value of a claim does not exceed EUR 2000 at the time when the claim form 
is received by the court or tribunal w ith jurisdiction, excluding all interest, 
expenses and disbursements.  
(5) Certain differences between national rules governing jurisdiction and 
recognition of judgments  in civil and commercial matters hampered the sound 
operation of the internal market. These differences were eliminated with the entry into force of Regulation (EC)  No 44/2001 on jurisdiction and the 
recognition and enforcement of judgme nts in civil and commercial matters 
which unifies the rules on conflicts of jurisdiction and simplifies the formalities with a view to promoting the rapid and simple recognition and enforcement of judgments from Me mber States bound by the Regulation. 
(6) Many obstacles to the services rendered by debt collection agencies
 will be 
lifted by Directive 2006/123/EC on servi ces in the internal market. Debt 
recovery services which are carried out by servic e providers outside the 
context of judicial procedures will fully enjoy the benefits of  the directive so 
that economic operators will have a broader choice of debt collection 
agencies. Only the recovery of debts by recourse to judicial proceedings is 
included in the additional derogations fr om the freedom to provide services, 
laid down in Article 17 of the Directive. 
(7) Access to alternative dispute resolution  will be improved and simplified in all 
Member States except Denmark by Di rective 2008/52/EC on certain aspects 
of mediation in civil and commercial matters. Its objective is to facilitate access to alternative dispute resolu tion and to promote the amicable 
settlement of disputes. The directive will apply to cross-border disputes. 
(8) Economic operators claiming late payment of invoices and/or interest for late 
payment before a court can be legal or natural persons. Natural persons 
submitting such claim in a cross-border dispute are entitled,  under very strict 
conditions, to receive appropriate legal aid
 in accordance with the conditions 
laid down in Council Directive 2002/8/EC to improve access to justice in cross-border disputes by establis hing minimum common rules relating to 
legal aid for such disputes. 
(9) Finally, collective insolvency proceedings
 which entail the partial or total 
divestment of a debtor and the appoin tment of a liquidator are governed by 
Council regulation (EC) No 1346/2000 on insolvency proceedings to prevent the transfer of assets or judicial proceedings from one Member State to 
another, seeking to obtain a more fav ourable legal position (forum shopping). 
 
EN 86   EN 8.5. Annex 5: Options discarded at an early stage 
Options Reasons 
Repeal of the 
Directive The Directive reflects the general principle that payment of interest 
constitutes a compensati on for borrowed capital . The payment of 
interest for late payment is a logi cal consequence of this principle. 
Risk of fragmentation of the internal market : If the Directive is 
repealed, it is likely that, over time, statutory interest rates for late 
payment would vary widely within the EU or would not even be applied so that it would become increasingly unattractive to sell products and services in Member States with a very low (or no) 
statutory interest rate. The types of statutory interest would also vary 
between Member States, some of wh ich would opt for simple interest 
while others would opt for compound interest, possibly combined with other measures. There is no doubt that  the repeal of the Directive would 
worsen the situation in the medium and long term. It would also lead to fragmentation of the internal market. 
The Directive guarantees that interest can be charged . However, 
charging interest for late payment is only a possibility and not an obligation under the Directive. It is therefore important that this possibility exists throughout the EU to give creditors useful tools to 
encourage payment for goods and services on time. Many enterprises 
have included this possibility in their contracts or general commercial 
conditions. 38% of IPM respondent s and more than 50% of EBTP 
respondents apply the statutory interest rate or another interest rate in 
their general commercial and paym ent conditions, while 42% of EBTP 
respondents and 56% of IPM respondents do not apply an interest rate at all.  
About 25% of IPM and EBTP respondents frequently or always claim 
interest for late payment, often successfully: figures indicate that, despite the weaknesses of the Directive, interest for late payment is 
still an effective instrument  for obtaining compensation for late 
payment. 
Furthermore, not a single stakeholder requested or suggested the repeal 
of the Directive.  
The creation of a European Fund aimed at providing finance to SMEs Some sources suggested the creati on of a European Fund aimed at 
providing finance to SMEs at no cost and based on accounts receivable. The fund would be financed th rough penalties levied on large 
companies or public institutions that  systematically pay late. The fund 
would give SMEs access to late payment financing, and would be 
responsible for recouping payment penalties from the relevant large 
companies or public institutions.  
However, such a fund would give rise to a large amount of red tape 
and additional bureaucracy , as mechanisms would have to be 
implemented to prevent fraud. The measure would involve significant administrative expenditure and mi ght involve complex and lengthy 
procedures for verifying entitlement. The potential for fraudulent 
claims on the fund is high. Moreover, it could even send the wrong 
 
EN 87   EN signal to economic operators, the very existence of a fund backing up 
failing late payers could encourage companies to pay late 
systematically or even to postpone payment for an indefinite period. 
Furthermore such a EU-wide instrument  would also raise thorny issues 
with regard to subsidiarity. Theref ore, this option failed to meet the 
proportionality principle.  
A new programme to enhance SME capabilities Another possibility was the developm ent of a programme to enhance 
SME capabilities in evaluating clients and managing account receivables. Such a programme could include measures to promote debt 
collection, factoring and credit insurance for SME’s. 
However, besides national and local programmes specifically targeted 
at SME’s, a number of European funding programmes are already 
available to small and medium-sized enterprises : the 
Competitiveness and Innovation Framework Programme (CIP) , the European Regional Development Fund , the European Social Fund , the 
Joint European Resources for Micro and Medium Enterprises 
(JEREMIE) Programme and the Europ ean Investment Fund (EIF) . In 
addition, the European Bank for Reconstruction a nd Development 
(EBRD) currently offers a EU/EBRD SME Finance Facility, which is aimed at supporting the development of SMEs in the new EU Member 
States and the EU Accession Countries. These measures consist of: 
- an SME Finance Facility (SMEFF): The objective of the SMEFF is to 
encourage banks, leasing companies and investment funds to expand and maintain long-term financi ng of SME operations in the new 
Member States and certain applican t countries. The SMEFF is managed 
by the EIB, EBRD, CEB and KfW and consists of two so-called 
‘windows’: a loan window providing credit lines from the IFIs 
combined with incentives for the par ticipating lending institutions, and 
an equity window providing equity capital. 
- A High Growth and Innovative SME Facility (GIF): The GIF is 
managed by the EIF on behalf of the European Commission and is part 
of the Competitiveness and Innovation Framework Programme, 2007-
2013 (CIP). It comprises two ‘windows’: 
1. GIF 1, which promotes early-stage (seed and start-up) investments 
through specialised Venture Capital Funds. These provide capital to innovative SMEs and co-invest in funds and other investment vehicles promoted by business angel networks. 
2. GIF 2, which promotes expansion-stage investments through 
specialised risk capital funds providing equity or quasi-equity for innovative SMEs with high-growth potential. 
- An SME Guarantee Facility (SMEGF): Also part of the CIP and 
managed by the EIF, the SMEGF has four ‘windows’: a loan window 
providing debt financing via loans or leasing; a microcredit window 
providing guarantees for funds whic h gives loans of smaller amounts 
and grants to partially offset high administrative costs; an equity window providing guarantees for equity or quasi-equity fund investments in SMEs; and a securitisation window providing 
securitisation of SME debt-finance portfolios. 
 
EN 88   EN - A Capacity Building Scheme (CBS ): Again under the CIP, the CBS 
has two parts: a partnership acti on, which focuses on finance for eco-
innovation; and a seed capital acti on managed by the EIF, which 
provides grants to venture capital funds to cover in part their start-up costs and for the long-term recruitmen t of staff with specific investment 
or technology expertise. 
Furthermore, most companies seem to assess the creditworthiness of 
their business customers before signing contracts . According to a 
survey organised for the RPA Report, almost 64% of companies 
actually check creditworthiness while a slightly higher percentage of big companies (75% of large companies responding) than smaller companies (59% of the smaller companies) do so. Only 13% of companies responded that they di d not check creditworthiness. In 
general, the percentage of smaller companies not checking 
creditworthiness was higher at 17% th an for larger companies (1.6%. 
Most respondents confirmed that they have pre-set and readily identifiable strategies in place for managing credit and payment issues (with a higher percentage of larger companies having such strategies in 
place than smaller companies). See also  the table at the bottom of this 
annex. 
Many businesses already use the serv ices offered by debt collection, 
factoring and credit insurance organisations which are service 
providers operating on a commercial basis . Debt collection agencies 
are commercial organisations which collect debts on behalf of a 
creditor for a commission or buy a debt from the creditor at a 
discounted price. Factoring agencies are commercial organisations (factors) providing short-term finance based on purchase of the client’s account receivables at a discount. This transaction can mean the factor assuming the risk for late payment or non-payment (non-recourse 
factoring) or not assuming such risks (recourse factoring). Credit 
insurers are commercial organisations offering for a fee to cover credit risk from delivery of a good or service. 
Debt collection, factoring and credit insurance organisations will 
benefit from the different instruments set out under the base-line option. In particular, the implementation of Directive 2006/123/EC on 
services in the internal market will allow them to explore new markets. 
The promotion of such commercial activities by a European initiative 
might be inappropriate and coul d have a distorting effect on 
competition in that field.  
Thus, this option does not meet the proportionality requirement and 
was discarded. 
Exempt income in the form of late 
payment interest from VAT Currently, Member States vary in th e way they consider late payment 
as a cost to businesses in terms of reduced cash flow and the calculation 
of their tax liabilities. If a company doe s charge late payment interest to 
its debtors, this is often considered business income, sometimes from the moment when it is actually invoiced; this includes subjecting the interest charged to Value Added Tax (VAT) from the moment when it 
is charged, even though no funds have actually been received. As a 
result, the value of monies received from any interest that might 
 
EN 89   EN eventually be recovered will be redu ced by tax payments. This measure 
would require harmonisation of VAT le gislation to exempt interest for 
late payment from VAT in all Member States.  
It is estimated that SMEs and large companies would save 
approximately €37 million and €40 million respectively if Member States did not charge VAT on late payment interest. These amounts would be lost revenue to Member State governments.  
This option only focuses on  the creditor and does not have any effect in 
encouraging late payers to pay on time. Nevertheless, the risk of fraud 
would be very considerable . This option might create a VAT-
loophole, whereby companies would designate other forms of income and payments as “late payment interest” purely to avoid paying VAT on them. Therefore, this option does not meet the proportionality 
requirement and was discarded. 
Promoting the use of Escrow Facilities 
(non-legislative option) An escrow facility involves a deposit of funds, a deed or other 
instrument to a third, trustworthy pa rty acting as an intermediary in the 
transaction. The intermediary receives and holds payment and notifies the seller or provider to deliver the products or render the service. Once the intermediary receives the i nvoice from the creditor and the 
acceptance from the debtor, the intermediary forwards the payment to 
the creditor.  
Escrow facilities avoid the problems of late payment since funds are 
deposited by a debtor (who can obviously pay for the goods) with a third party and the creditor is assured th at their customer will be able to 
pay on time, as soon as the goods ha ve been delivered (and approved). 
It protects the debtor from having to accept faulty goods, as no money 
is transferred until the debtor is satis fied with the goods. It also protects 
the creditor in that cash flow problems stemming from late payments are avoided. The advantage of an escrow facility for SMEs with credit management problems would be to guarantee funds on delivery of goods/services and to reduce the amoun t of financial management for 
creditors (as these are managed by the escrow facility). It is not an 
appropriate system, however, for companies that rely on trade-credit to do business. Currently, escrow facilities are rarely used in B2B transactions by SMEs within Europe, but are becoming more commonly used in consumer-based transactions and for new technologies, such as in software source code licensing, databases, 
industrial designs, and government initiatives for key-escrow 
encryption. Larger enterprises o ccasionally use escrow facilities for 
transactions where guarantees for payments on delivery of services are required or for large, high-risk overseas contracts where the reliability of the buyer or seller is highly uncertain or unknown. In certain 
Member States, escrow facilities are used for property exchange 
transactions. There is currently little evidence of intra-EU trading between SMEs utilising escrow facilities. 
Escrow facilities are already available in almost all Member States but 
are currently not widely used, pa rticularly by SMEs. The latter 
indicated in consultation that escrow facilities are considered too 
complicated, the cost is too high and there is no legal protection of 
the funds  whilst with the third party, so if the escrow company were to 
 
EN 90   EN declare bankruptcy, then the funds would be lost. Moreover, SMEs 
which rely on trade-credit transactions and with fewer funds to 
commit to escrow-type arrangements may end up not being able to compete with larger companies  which are more likely to be able to 
pay on delivery (i.e. large compani es could benefit more than smaller 
SMEs and public services). Similarly, large retailers may prefer not to use escrow as they would lose trade-credit from their extended payment periods, and may not be able to b ase orders on sales. Suppliers would 
benefit from escrow as their risk would be reduced, but they may lose 
customers if they insist on escrow facilities which favour them, rather 
than the debtors. In addition, some interested parties cited the lack of 
comprehensive credit risk reports as another obstacle to increased uptake: if a potential customer has a low credit risk, paying for escrow 
services would be an unnecessary cost.  
For these reasons, this option did not meet the proportionality 
requirement and was discarded. 
Promoting the use of securities (non-legislative option) The timely payment of invoices could be guaranteed by a security 
given by the debtor. A security interest on goods entitles the creditor to satisfy his outstanding claim from the charged goods to the exclusion of other creditors of the borrower. Hence a security interest gives the 
secured creditor a right of preferential satisfaction from the goods 
charged with the security interest. Nowadays, various indirect techniques are usually employed. In some Member States, the rules on sales provide the seller with a statutory right of preferred satisfaction. 
Securities for commercial transactions exist already in all Member 
States. In most Member States, the seller must make his own 
arrangements. Since the transfer of ownership in the goods is subject to 
the agreement of the parties, the seller may retain his ownership in 
them until he has received the full pur chase price, as laid down in the 
Directive. If the seller himself is using credit to finance his credit sales, the lender can usually be secured by transferring to him the seller’s 
retained ownership. Under modern  economic conditions it is rarely 
feasible to deprive the debtor of charged goods. Frequently the goods 
are not even in the debtor’s possession, especially in the case of 
commercial transactions. In these instances the debtor must be allowed to dispose of the goods while the security interest is maintained. A number of legal systems, however, do not yet recognize the legitimate 
interests of both parties in this s ituation. They prohibit any disposition 
by the debtor and may not acknowledge a security interest in goods that remain in his possession for the purposes of resale.  
The rules to be followed in enforcing a security interest differ 
considerably from Member State to Member State and even within 
a Member State according to the type of security interest involved . 
Very often the creditor in a commercial transaction must sell the charged goods by public sale; occasion ally he is permitted to acquire 
the charged goods himself. The rules on security interests are still strongly national in character. National laws differ from one another in 
their priority rules, either between competing charges or between 
voluntary and legal charges, and between categories of creditors. Conflicts may arise in the case of cross-border secured transactions in terms of recognition, efficacy and en forcement which may lead to an 
 
EN 91   EN increased risk and higher costs for creditors. Moreover, a cross-border 
secured transaction may involve either contractual or proprietary issues 
so that different national laws coul d apply to different aspects of the 
same case. The profitability of such transactions depends not only on the risk of the transaction per se but also on factors such as language barriers, national legal formalities, ta xes, enforcement and priority rules 
that may differ from Member State to  Member State and involve extra 
risks in certain cases. From the debtor’s point of view, a transaction that 
would be cheaper in absolute terms if it were concluded with a creditor 
in another Member State may become more expensive because of these factors (see Di Luigi C., “Divergences of Security and Property Law in the European Union: The Need for Action”, J.B.L. 6, 2008, pp. 526-549; Drobnig U., Snijders H.J., Zippro E.-J, Divergences of Property 
Law: An Obstacle To The Internal Market?, European Law Publishers, 
2006). Finally, securities always involve additional cost. For all these reasons, SMEs relying on trade-credit transactions may end up not 
being able to compete with larger companies  which are more likely 
to be able to pay on delivery (i.e. large companies could benefit more 
than smaller SMEs and public services).  
These factors lead to the conclusion that the promotion of such 
securities did not meet the pro portionality and subsidiarity 
requirements.  
One of the most frequently used securities in international sales 
transactions is where the seller insists on payment by letter of credit . A 
letter of credit is essentially an authorization made by a buyer to his 
agent (usually a bank) to make paym ent to a seller. The letter of credit 
is often used when there is a subs tantial time lag between the dispatch 
of goods by a seller and their receip t by the buyer. The seller, having 
sent the goods off, has fulfilled his part of the contract and seeks 
payment. The buyer, not having r eceived the goods and being unable to 
inspect them, will be reluctant to pay. To overcome this difficulty, the buyer and seller arrange to have in termediaries operating in each of the 
two countries involved make settlement . The buyer instructs his bank to 
issue a letter of credit authorizing payment to be made to the seller when the latter’s part of the contr act has been fulfilled (usually when 
the seller has dispatched the correct  quantity of suitable goods). The 
buyer’s bank (the “issuing” bank) ascertains whether or not this has 
been done by obtaining the cooperation of a bank in the seller’s country. This bank (the “corresponding”  bank), having inspected all the 
relevant documents of title and bills of lading to ensure that the seller 
has performed the contract, makes payment to the seller, often by 
means of a bill of exchange or other credit device. The document of title, bills of lading, and so forth are then mailed to the buyer. The 
buyer then reimburses his bank, which in turn reimburses the corresponding bank for making payment to the seller. In 1933 the International Chamber of Commerce in Paris published the Uniform 
Customs and Practice for Documentary Credits, which was revised 
several times. The latest revision was approved by the Banking Commission of the ICC at its meeting in Paris on 25 October 2006. This latest version, called the UCP600, formally commenced on 1 July 2007 (see http://www.iccwbo.org/
). It has been adopted by banks and 
by banking associations in almost all countries of the world. Therefore, 
 
EN 92   EN there is no further need to promote letters of credit. 
Consequently, this option did not m eet the proportionality requirement 
and was discarded. 
Developing and Promoting Credit 
and Financial Management Programmes (non-legislative option) SMEs currently with poor practi ces could benefit from an improved 
ability to manage cash flows and to manage finance requirements more 
generally. This should improve thei r profitability and hence increase 
the potential for growth. Training and support may also make it more likely that SMEs are able to apply the principles of the late payment 
directive. For example, three quart ers of the 1,476 businesses surveyed 
by www.payontime.co.uk admitted that they were unable to calculate 
the interest due to them from late payments. This means that many SMEs are not benefiting from the legislation designed to protect them. 
In order to help SMEs with limited resources and staff to spend time on 
administrative and legal issues, pr ogrammes could be developed aimed 
at enhancing SME capabilities in evaluating clients and in account 
receivables management. Such programmes could provide training and 
advice on issues and systems for: - accountancy and financial mana gement to improve individuals 
abilities to prepare and monitor accounting information, with including a discussion on the IT tools and systems available; 
- how to develop a credit management strategy, what its function is and 
who should be responsible; - setting up payment collection processes and ensuring that they provide timely information on late  payments, performance against 
targets, etc. (including information on the available IT tools); - negotiating contracts, agreeing payment terms, addressing retention of 
title issues, and explaining pa yment procedures to suppliers; 
- how to calculate late payment inter est and to apply other provisions of 
the Directive, including a discussion on intra-EU trade;  - the advantages and disadvantages of different financing alternatives, 
including the use of bank loans and other service such as factoring; 
- how to undertake credit checks and to monitor customer payment 
performance; and - how to manage debt recovery , including the development of 
collection strategies, details of the tools available, taking legal action, 
garnishment of accounts, etc.  
The services currently being offered by representative organisations 
and credit and service providers vary  considerably across countries, 
with some providing free or affordable and readily accessible advice and others giving no business support to members. However, it is understood that many of the ‘free services’ have hidden costs, such as charges for credit worthiness ch ecks, sending of invoices and 
calculating interest on a late payment; or advice may involve a referral 
to professional consultants/advisors who charge for their services. It is therefore difficult to determine the likely costs to SMEs of increasing 
access to business management support. The costs will depend on what form the support takes. For example, schemes might include free guides 
on credit management, a website w ith credit management and debt 
recovery information or a nati onal seminar programme on credit 
management.  
At one end of the spectrum, th ere may be value in expanding 
 
EN 93   EN programmes such as that being operated by the EU/EBRD to all EU 
MS where there appear to be significant late payment problems due to 
inadequate financing being made av ailable by financial institutions. 
Increased technical assistance to banks to increase the rate of lending to SMEs could help break the cycle of companies relying on ‘trade credit’; in addition, the increase in skills within financial institutions 
may transfer through to an incr eased skill base within their SME 
clients. 
More direct programmes could expand on those already in use. For 
example, in Estonia, electronic banking systems are well established and many banks provide options for “Economic Resource Planning”, 
such as management of cash flow and invoices. The IT solutions themselves are free, but customers pa y to use the services. The price 
depends on the volume of use, but is about 3EKK (about €0.20) to send 
out an e-invoice – making a payment is free. Compare this with the cost of out-sourcing credit and financing to a large corporation such as PriceWaterhouseCoopers, which may come as a fixed price or be a proportion of a company’s total turnover for a year. Other services 
come in the form of guides for credit management such as Croner’s 
Guide to Credit Management at around £700 (€910). Free programmes aimed at SMEs can also be found on the internet, such as the SME 
Toolkit which offers software, business forms, training, etc to SMEs, covering topics such as accounting and finance (including credit and collections), financial manageme nt, business planning, etc. The 
divergence between what is currently offered and what could be offered 
is thus enormous.  
In the UK, account receivables management and commercial 
development are seen more as an issue of awareness, education and training, as opposed to a lack of available technology. For example, the 
Institute of Credit Management (ICM), SME representative 
organisations (e.g. FPB), regiona l business development authorities, 
and banks, including other lending in stitutions and the centralised 
business support hub - Business Link – website, are known to provide or promote training and education in these areas.  
Information on the annual funding received by Business Link provides 
an indication of the potential magnitude of the costs that could be 
involved in MS organisations provi ding free business advice to SMEs. 
The budget for the UK Business Link network in 2003 was around £300 million (roughly €390 million), with approximately £27million (€35 million) funded by the EU (including under the Single 
Regeneration budget). This budge t covered all services provided 
(website, local centres, advice and training, etc. covering issues ranging from regulation to export to innovation), not just those related to financial management. The services provided by Business Link are free, but it is clear that many issues involve referral to consultants who may then charge the user. This figure of €390 million compares to €204 
billion in late payments to UK SMEs and translates into an investment 
by the funding organisations of around €245 (£196) per SME company in terms of providing free advisory services.  
It is impossible to identify any basis for calculating the costs of 
developing and promoting credit a nd finance management programmes 
for EU-wide roll out. Therefore, th e Business Link funding figure is 
 
EN 94   EN used here to provide an indication of possible levels of expenditure.  
If it is assumed that only 10% of this  actual expenditure figure related 
to credit and financial management services, and that this level of 
investment per SME company (i.e. €25 per company) was made in the 10 countries with the worst late payment problems, this would translate into costs of around €0.26 billion; or if such a programme of support was rolled out across all 27 MS, it would cost around €0.48 billion, roughly 0.04% of the total value of late payments to SMEs across the 
EU. 
This figure is high compared to th e total EU budget for the Enterprise 
Europe Network –aimed at help ing SMEs develop their innovation 
potential - which is €320 million over 7 years. It is therefore likely that the funding of any support programme in relation to late payments 
would be at a lower level than  this, or at least no higher. 
To put these figures into perspectiv e, the on-line survey found that 
smaller companies are willing to pay for improved credit and finance management systems (24% for SM Es as opposed to 9% for larger 
companies). However, an equal numbe r of SMEs is not willing to pay 
(22%). The results of the survey suggest that those SMEs who would 
be willing to pay would generally pay up to <€2,500, but that interest 
wanes as the price increases beyond this. In contrast, 10% of larger companies would be willing to pay <€5,000 for these services.  
The weakness of this option is that it addresses the problem of late 
payments indirectly. The willingness of creditor companies to actually 
charge late payment interest may not necessarily increase. It also 
requires voluntary up-take by SMEs and it would be difficult to monitor its impact. Furthermore, many Member States already have programmes in place so that care would need to be taken to ensure that advice is consistent across such programmes. Programmes involving a 
charge or involving referral to external and paid advisory services may 
deter SMEs . 
Therefore, this option did not meet the proportionality requirement and 
was discarded. 
 
Table concerning the discarded option “A new programme to enhance SME capabilities” 
Protection against payment risks: does your company take deliberate steps in order to protect 
itself from bad debt?  
 Yes No 
Overall 65% 35% 
Germany 72% 28% 
Belgium 66% 34% 
France 74% 26% 
Italy 53% 47% 
The Netherlands 65% 35% 
U.K. 60% 40% 
Source : Altradius Payment Practices Barometer – Winter 2007  
 
EN 95   EN 8.6. Annex 6: overview of the jurispruden ce of the Court of Justice about the 
Directive  
Article of the Directive Case references Analysis of the Court of Justice 
Article 3(1)(e) :  
The creditor is entitled to 
claim reasonable compensation from the 
debtor for all relevant 
recovery costs  incurred 
through the latter’s late 
payment.  Judgment of 10 
March 2005 
 
QDQ Media SA v 
Alejandro Omedas 
Lechan 
 
Case C-235/03 In a case which relates to a dispute between individuals, 
where it is not possible on the basis of national law to 
include, in the calculation of th e costs which an individual 
who owes a business debt might be ordered to pay, the 
expenses arising from representation by an abogado  or 
procurador of the creditor in judici al proceedings for the 
recovery of that debt, Directive 2000/35 cannot of itself 
serve as the basis for the inclusion of such expenses, since 
a directive cannot of itself impose obligations on an individual and cannot be relied on against an individual. 
Article 3(1)(c)(ii): 
The creditor is entitled to 
interest for late payment to the extent that he has not 
received the amount due 
on time , unless the debtor 
is not responsible for the 
delay.  Judgment of the 
Court of 3 April 
2008 
 
01051 Telecom 
GmbH v Deutsche 
Telekom AG  
 
Case C-306/06. It is explicit in the wording of that provision that a debtor’s 
payment is regarded as late, for the purposes of entitlement 
to interest for late payment, where the creditor does not have the sum owed at his disposal on the due date. In the 
case of payment by bank tran sfer, only the crediting of the 
amount due to the creditor’s account will enable him to 
have that sum at his disposal. 
Article 3(1)(c)(ii) is to be interpreted as meaning that it 
requires, in order that a payment by bank transfer may 
avoid or put an end to the application of interest for late 
payment, that the sum due be credited to the account of the 
creditor within the period for payment. 
Article 3(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.  Judgment of the 
Court of 11 
December 2008  
 
Commission of the 
European 
Communities 
v 
Kingdom of Spain 
 
Case C-380/06 As is clear from Article 3(1)(a) of Directive 2000/35, the 
parties are generally free to fix in their contract the date or 
the period for payment. It is  therefore only in the absence 
of a relevant contractual clause  that the statutory period of 
30 days prescribed by Article 3(1)(b) of that directive must 
apply.  
Article 3(2) of Directive 2000/35 then allows the Member 
States to extend that 30-d ay period, but makes that 
possibility subject to a twofold condition. First, the option 
must be limited to certain categories of contracts. Second, 
with regard to the duration of the derogating period, it may be extended to a maximum of 60 days, if the parties are 
prohibited from derogating from this by contract or on 
condition that a mandatory interest rate that substantially 
exceeds the statutory rate is applicable. 
 Article 3(2) of Directive 2000/35 governs exclusively the 
possibility afforded to Member States of fixing, in certain 
limited cases, a statutory period exceeding the 30-day period applicable in the absence of a contractual clause on 
the date or the period of payment. In other words, only 
where the parties are silent on the matter does the situation fall within the scope of Article  3(2) of that directive. 
 
EN 96   EN  
Article 4(1): 
The seller retains title to 
goods until they are fully paid for if a retention of 
title clause has been 
expressly agreed between the buyer and the seller 
before the delivery of the 
goods. Judgment of the 
Court of 26 October 
2006  
 
Commission of the 
European 
Communities v 
Italian Republic  
 
Case C-302/05. In view of the wording of Article 4(1) of Directive 
2000/35 and the purpose of that directive, it cannot be 
inferred from that provision that  it is intended to affect any 
rules other than those which expressly provide, firstly, that 
it is possible for the seller and the buyer expressly to agree 
a retention of title clause before the goods are delivered and, secondly, that it is possible for the seller to retain title 
to the goods until they have been paid for in full. 
 Accordingly, the national rules which concern the 
enforceability of retention of title clauses against third 
parties, whose rights are not a ffected by Directive 2000/35, 
are still governed exclusively by the national legal orders 
of the Member States.  
Article 5(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.  Judgment of the 
Court of 11 
September 2008  
 
Caffaro Srl v 
Azienda Unità 
Sanitaria Locale 
RM/C 
 
Case C-265/07. 
 As regards the recovery procedures for unchallenged 
claims, the directive harmonise s only the period within 
which an enforceable title can be obtained, but does not 
govern forced execution procedures, which remain subject 
to the national law of the Member States. 
Directive 2000/35/EC is to be interpreted as not precluding 
a national provision […] pursuant to which a creditor in possession of an enforceable title in respect of an 
unchallenged claim against a public authority as 
remuneration for a commercial  transaction cannot proceed 
to forced execution against the public authority before a 
period of 120 days has elapsed since service of the 
enforceable title on the authority. 
 
 
 
EN 97   EN 8.7. Annex 7: Transposition of Article 3(5) (organizations representing SMEs) and 
Article 6(3)(c) (threshold of €5) 
Member State Threshold Representing organizations 
Belgium no 
Bulgaria no 
Czech Republic no 
Denmark no 
Germany no 
Estonia no 
Ireland yes 
Greece no 
Spain no  
 
Possibility exists under national law, but the role of representative organizations is strictly limited to asking the 
court to grant an injunction against contractual terms 
drawn up for general use on the ground they are grossly unfair.  
France no 
(but 
usually 
appears in 
contracts)  Professional organizations may introduce an action 
before the civil or commercial  courts on the basis of 
facts which cause direct or indirect detriment to the collective interests of the pr ofession or sector which 
they represent, or to fair competition. 
Italy yes 
Cyprus no 
Latvia no 
Lithuania yes 
Luxembourg no 
Hungary no 
Malta yes 
Netherlands no 
Austria no  
 
Possibility exists under national law, but the role of 
representative organizations is strictly limited to asking the court to grant an injunction against contractual terms 
drawn up for general use on the ground they are grossly 
unfair. 
Poland no The payment of interest referred to in Articles 5 to 7 
may be claimed in the na me and on behalf of the 
creditor referred to in Arti cle 3 by the national or 
regional organisation acting on his request, provided that the Statute of the organisation concerned provides 
for the protection of interests of the entities such as the 
creditor. 
Portugal no 
Romania no 
Slovenia no 
Slovakia no 
Finland no 
Sweden no 
United Kingdom no  
 
Possibility exists under national law, but the role of 
representing organizations is strictly limited to asking the court to grant an injunction against contractual terms 
drawn up for general use on the ground they are grossly 
unfair. 
 
EN 98   EN 8.8. Annex 8: the SME test 
a) Consultation with SMEs representatives • The options were discussed at the regular 
meeting between the SME Envoy and SME 
organisations on 22 October 2008. The discussion focused on the causes of late 
payment, the role of business organisations in 
informing SMEs, the need to clarify the rules so that businesses understand them, and on the 
possibility to extend the coverage of the directive 
to business – customer relations (currently only business to business transactions).  
• The European Business Test Panel (EBTP) was 
consulted. See Annex 2. Stakeholders were also consulted through the I.P.M. consultation, the 
results of which are shown in Annex 1. 
• The consultation period for the I.P.M. 
consultation was extended from 8 to almost 12 
weeks in order to allow SME organisation to 
consult their members, cons idering also that they 
often have to translate and explain legislative 
proposals for their members. 
b) Preliminary assessment of businesses likely to 
be affected : during this stage, it should be 
established whether SMEs are among the affected 
population. If the preliminary assessment leads to the conclusion that SMEs are amongst the affected 
parties, the initial presumption is that costs fall 
disproportionately on small businesses. See sections 2.2.1, 2.3.1, 2.3.3 and Tables 3.1 and 3.2 
in Annex 3. 
c) Measurement of the impact on SMEs 
 The distribution of the potential costs and benefits of 
the proposals (policy options) over the businesses size, 
differentiating between SMEs and large enterprises is 
analysed in the light of the SME's competitiveness (section 3.2) in sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 
5.9, 5.10 and in chapter 6. Cost and impacts identified 
for SMEs were compared with those of large enterprises.  
d) Assess alternative options and mitigating 
measures At the end of the impact assessment, there was no 
indication that the selected options might result in a 
disproportionate burden for SMEs. Consequently, there is no element showing the need for SME specific 
measures in order to ensure compliance with the 
proportionality principle.