REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions
Date: 2016-08-26
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: commercial transaction, competitiveness, large business, national implementing measure, payment, single market, small and medium-sized enterprises

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   EUROPEAN COMMISSION  Brussels, 26.8.2016  COM(2016) 534 final   REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions {SWD(2016) 278 final}  
 
 
1.  PURPOSE OF THE REPORT 

In  accordance  with  Article  11  of  Directive  2011/7/EU  on  combating  late  payment  in 
commercial  transactions1  (hereinafter  the  "Directive"),  the  Commission  shall  submit  a 
report  to  the  European  Parliament  and  the  Council  on  the  implementation  of  the 
Directive, accompanied by any appropriate proposals, by 16 March 2016. Since the Late 
Payment Directive is an initiative adopted under the Regulatory Fitness and Performance 
Programme  (REFIT)  of  the  Commission2,  this  evaluation  also  falls  under  REFIT  to 
monitor progress on the implementation of the Directive and to ensure that it is on track 
to deliver its expected benefits.  

This report is provided in response to the requirement established in the Directive. 

2.  ASSESSMENT  OF  EFFECTIVENESS,  EFFICIENCY,  COHERENCE,  RELEVANCE  AND  EU 

ADDED VALUE  

The Directive was adopted on 16 February 2011 with a deadline for transposition into the 
national laws of all Member States of 16 March 2013. 

The specific objectives of the Directive are: 

  To provide creditors with timely payments and measures that enable them to fully 

and effectively exercise their rights when paid late 

  To confront debtors with strict measures that discourage them from paying late or 

from establishing excessively long contractual payment terms 

The Directive also pursues the following general objectives: 

  To  facilitate  the  functioning  of  the  internal  market  by  streamlining  payment 

practices across the EU 

  To  develop  a  legal  and  business  environment  supportive  of  timely  payments  in 

commercial transactions in order to facilitate access to finance for SMEs  

This report assesses whether the Directive is on track to achieve its intended objectives 
and  includes  recommendations  on  how  to  improve  its  implementation.  There  are  three 
key factors that rendered a definitive ex-post evaluation a challenge: the recent entry into 
force of the Directive; the difficulty to isolate the role of the Directive in changes seen on 
the ground; external conjuncture such as the financial crisis and the economic situation of 
certain Member States.  

In the context of this evaluation the Commission used: 

(1) 

An external study3, carried out in 2015, which included: 

1   OJ L 48, 23.2.2011, p. 1–10, http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32011L0007  
2  
3  

http://bookshop.europa.eu/en/ex-post-evaluation-of-late-payment-directive-pbET0415875/  

http://ec.europa.eu/smart-regulation/refit/index_en.htm  

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  Desk research of the national laws transposing the Directive and associated soft 
measures,  cross  country  data  on  average  payment  periods  collected  by  private 
organisations  and  other  publicly  available  information  (e.g.  academic  literature, 
national sources).   

  An  online  representative  survey  as  well  as  a  public  consultation  with  a  total  of 

2950 full responses. 

  135  interviews  with  stakeholders  from  public  authorities  and  businesses  across 

the EU and 31 follow-up interviews. 

Consultation  of  national  experts  and  EU-level  business  organisations  in  the 
context of the Late Payment expert group4 meeting on 24 November 2015. 

Complaints, feedback and queries received from stakeholders. 

Publicly available information: reports, surveys, studies etc. 

(2) 

(3) 

(4) 

The  evaluation  of  the  Directive  was  conducted  against  five  criteria:  effectiveness, 
efficiency, coherence, relevance and EU added value. It  reveals that: 

(1) 

(2) 

(3) 

The Directive has raised awareness of the problem of late payment and has 
placed  the  issue  high  on  the  political  agenda.  Due  to  its  strengthened 
measures  and  new  requirements  for  public  authorities  in  particular,    the 
implementation of the Directive has sparked considerable interest at Member 
State level.  In response, governing authorities in a number of Member States 
are adopting structural and voluntary measures to support the provisions of 
the  Directive  in  order  to  bolster  the  tranposing  law  and  to  address  specific 
national  issues  in  this  context.  As  a  result,  companies  are  becoming 
increasingly familiar with the rules related to late payment and their rights. 

The EU average payment period is slowly decreasing in both the public and 
private sectors. However, the external ex-post evaluation revealed that public 
entities in more than half of all Member States are not yet respecting the 30-
day limit imposed by law. In some of these cases, supplementary efforts are 
being  undertaken  and  the  overall  trend  is  already  showing  signs  of 
improvement.  In  the  private  sector,  with  the  exception  of  a  handful  of 
Member States that record poor figures in this area, the periods established 
in the Directive appear to be broadly respected.  

Approximately half of all creditors do not exercise their rights to claim late 
payment  interest,  compensation  and  recovery  costs  as  provided  for  by  the 
Directive for fear of damaging their commercial relationships. The external 
evaluation  also  revealed  that  many  SMEs  continue  to  accept  long  payment 
terms imposed by larger companies for the same reason. This is an inherent 
aspect  of  business  culture  brought  about  by  the  different  position  of 
companies in the supply chain, their size and degree of dependency on each 
other, as well as other factors such as the market sector specificities.  

4 http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetail&groupID=2710  

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(4) 

(5) 

liquidity  and  facilitated  cross-border 

There  is  little  evidence  to  date  that  the  Directive  has  had  a  measureable 
trades. 
impact  on  businesses' 
Recognising  that  the  Directive  has  so  far  not  had  any  major  impact  on 
payment  behaviour,  it  is  likely  to  take  more  time  before  these  general 
objectives are attained. Furthermore, due to the multi-faceted nature of late 
payments, it will remain challenging to determine whether observed changes 
on the ground are due exclusively to the Directive or are also dependent on 
other  factors  such  as,  for  example,  a  general  improvement  in  economic 
conditions. 

On the one hand, several factors have contributed to an effective application 
of  the  Directive.  These  include  measures  adopted  at  national  level  (i.e. 
prompt  payment  codes)  that  have  successfully  supported  the  objectives  of 
the Directive. Additionally, forums that enable the exchange of best practices 
between  Member  States  on  how  to  tackle  late  payment,  such  as  the  Late 
Payment expert group prove beneficial. Finally, continued awareness raising 
and expertise-sharing by the Commission and by national experts was found 
to be useful. 

(6) 

On  the  other  hand,  certain  obstacles  have  been  noted  that  may  hinder  an 
effective application of the Directive: 

  With  respect  to  public  authorities,  Member  States  under  adjustment 
programmes  where  prompt  payment  of  current  invoices  has  to  be 
balanced against accumulated debt repayment, appear to have difficulties 
in respecting the Directive.  

  With  respect  to  businesses  –  because  the  Directive  maintains  a  certain 
amount  of  flexibility  in  business  to  business  transactions,  this  is  being 
exploited in a number of cases by larger companies that take advantage of 
their stronger market position by dictating often unfair contractual terms 
to smaller suppliers. Furthermore, as explained above,  in the event of late 
payment  smaller  companies  do  not  exercise  their  rights  for  fear  of 
damaging  the  commercial  relationship.  This  inherent  market  imbalance 
cannot  by  fully  remedied  by  legislative  actions  alone  and  a  more 
systematic  use  of  soft  measures  and  out-of-court  settlement  procedures 
such  as  mediation  and  alternative  dispute  mechanisms  would  appear 
useful. 

  The evaluation indicated that stakeholders need clarity on how to interpret 
several  key  concepts  of  the  Directive  such  as  "grossly  unfair", 
"expressly", and "objectively justified in the light of the particular nature 
or  features  of  the  contract."  The  starting  point  in  the  calculation  of 
payment periods was also considered unclear. 

  The lack of a compulsory and common monitoring system makes it very 
challenging to  verify  progress  made  as  a  result of  the  application  of  the 
Directive. 

(7) 

The  Directive  is  proving  to  be  an  efficient  tool  to  the  extent  that  there  are 
limited regulatory costs resulting directly from its usage for both businesses 
and public authorities. Regulatory costs include, for example, reporting and 
administrative  burden,  transposition  and  implementation  and  voluntary 

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measures that support the Directive. However, costs related to application of 
the  Directive  may  be  more  significant  particularly  for  busineses  if  a 
reduction  in  payment  periods  is  required  to  respect  the  limits  of  the 
Directive.  This  would  entail  an  initial  large  financial  transfer,  which  is 
expected to have  an impact on a company's liquidity. Overall  however, the 
costs  are  deemed  to  be  ultimately  offset  by  the  expected  benefits.  The 
external evaluation found that, for each day of reduction in payment delays, 
an  estimated  EUR  158  million  is  saved  by  European  companies  in  finance 
costs5.  

The  Directive  is  coherent  with  other  EU  policies  that  aim  to  create  a  level 
playing field and facilitate competitiveness for businesses. The legislation is 
complemented  by  a  number  of  EU  regulations  related  to  debt  recovery. 
Initiatives  such  as  the  Small  Claims  Procedure6,  the  European  Payment 
Order7  and  the  European  Enforcement  Order8  provide  creditors  with 
simplified  procedures  for  debt  collection  that  are  fully  coherent  with  the 
provisions of the Directive.   

Late  payment  remains  a  highly  pertinent  and  relevant  issue  for  companies 
across the EU. The external evaluation found that four out of five businesses 
continue to experience late payments since the Directive was first transposed 
into  Member  State  legal  systems.  Whilst  the  Directive  has  its  place  in  the 
fight  against  late  payment,  'softer'  remedies  that  could  address  matters 
related  to  business  culture,  such  as  market  imbalances,  including  those 
resulting from the varying size of businesses, are also needed. 

(8) 

(9) 

(10)  There  is  a  general  consensus  that  the  Directive  generates  significant  EU 
added  value.  Payment  practices  have  been  streamlined  across  Europe, 
removing uncertainty, which should gradually lead to increased cross-border 
trading.  Such  objectives  could  not  have  been  achieved  by  Member  States 
acting differently. 

3.  CONCLUSIONS/RECOMMENDATIONS 

The Directive is at an early stage of its lifecycle. The improvements in average payment 
periods  remain  modest  to  date.  Although  companies  are  highly  aware  of  their  rights 
stemming from the Directive, usage of them is not yet widespread. Several factors appear 
to  prevent  an  effective  application  of  the  Directive  such  as  the  lack  of  a  common 
monitoring system, lack of clarity on some key concepts of the Directive and the market 
imbalance between bigger and smaller companies. However, the Directive is found to be 
coherent  with  other  EU  legislations  and  policies,  is  still  relevant  and  has  achieved  EU 
added value. 

5 http://bookshop.europa.eu/en/ex-post-evaluation-of-late-payment-directive-pbET0415875/  p.59 

6 Regulation (EC) N°861/2007, http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Al16028 

7 REGULATION (EC) N°1896/2006,  https://e-justice.europa.eu/content_order_for_payment_procedures-41-en.do  

8 Regulation (EC) N°805/2004, http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Al33190  

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On this basis, it is recommended that the Directive is maintained in its current form 
and  that  more  time  is  needed  to  allow  all  its  effects  to  bear  fruit.  In  order  to 
accelerate  the  hitherto  positive  impact  of  the  Directive,  the  following  actions  are  being 
suggested to Member States and will be taken by the Commission : 

For Member States: 

  Set  up  a  system/procedure  to  monitor  progress,  report  and  publish  information  on 
average payment periods in both the public and private sectors. The Commission will 
provide  guidance  for  the  establishment  of  a  common  methodology  for  calculating 
payment  periods  and  will  facilitate  the  exchange  of  best  practices  on  reporting 
methods in the context of the bi-annual expert group meetings.  

  Maintain the issue of late payment high on the political agenda by continuing to raise 

awareness of the topic at national level.  

  Encourage  the  development  and  implementation  of  supporting  initiatives  such  as 
prompt  payment  codes,  mediation,  incentives  for  timely  payment  (positive  naming 
and shaming), etc. 

For the Commission: 

  Run  targeted  studies  in  Member  States  to  identify  best  practices  in  different  sectors 
that contribute to a more effective implementation of the Directive, take stock of the 
results and disseminate the information via various channels. 

  Continue to provide guidance to stakeholders and exchange good practices in different 

forms (expert group meetings, interpretative notes). 

  Explore  the  possibility  to  collect  comparable  information  on  how  national  justice 
the  expedited  recovery  procedure  for 

systems  function  when 
unchallenged claims and present the results in the EU Justice Scoreboard. 

implementing 

  Assess  at  a  regular  basis  the  Directive's  impact  and  its  success  in  reaching  its 
objectives,  bearing  in  mind  that  some  effects  are  likely  to  take  a  longer  time  to 
materalisise fully. 

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