COMMISSION STAFF WORKING DOCUMENT Evaluation of the Late Payment Directive/ REFIT Evaluation Accompanying the document Report from the Commission to the European Parliament and the Council on the implementation of Directive 2011/7/EU 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

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 26.8.2016  SWD(2016) 278 final   COMMISSION STAFF WORKING DOCUMENT Evaluation of the Late Payment Directive/ REFIT Evaluation Accompanying the document Report from the Commission to the European Parliament and the Council on the implementation of Directive 2011/7/EU on combating late payment in commercial transactions {COM(2016) 534 final}  
 
 
TABLE OF CONTENTS 

1 

2 

INTRODUCTION .................................................................................................................................... 3 

BACKGROUND TO THE INITIATIVE ......................................................................................................... 3 

2.1  BASELINE ..................................................................................................................................................... 3 
2.2  OBJECTIVES OF THE INITIATIVE .......................................................................................................................... 4 
2.3  DESCRIPTION OF THE INITIATIVE ........................................................................................................................ 5 

3 

EVALUATION QUESTIONS ..................................................................................................................... 9 

4  METHOD .............................................................................................................................................. 9 

4.1  DESK RESEARCH ........................................................................................................................................... 10 
4.2  COMPANY SURVEY ....................................................................................................................................... 10 
4.3  ADDITIONAL STAKEHOLDER CONSULTATION ....................................................................................................... 11 
4.4  ASSESSMENT OF ROBUSTNESS OF FINDINGS ....................................................................................................... 12 

5 

IMPLEMENTATION STATE OF PLAY ...................................................................................................... 12 

5.1  COMMUNICATION ACTIVITIES ORGANISED BY THE COMMISSION ............................................................................ 12 
5.2  TRANSPOSITION ........................................................................................................................................... 12 
5.3 
IMPLEMENTATION ........................................................................................................................................ 15 
5.4  APPLICATION OF THE DIRECTIVE ...................................................................................................................... 17 
5.5  UNEXPECTED RESULTS FOLLOWING IMPLEMENTATION OF THE DIRECTIVE ................................................................ 17 

6 

ANSWERS TO THE EVALUATION QUESTIONS ....................................................................................... 18 

6.1  EFFECTIVENESS: MEASURING THE EXTENT TO WHICH THE DIRECTIVE IS ACCOMPLISHING ITS OBJECTIVES ........................ 18 
6.2  EFFICIENCY: EVALUATING THE COST EFFECTIVENESS OF THE INITIATIVE .................................................................... 27 
6.3  COHERENCE: FITTING IN THE INITIATIVE WITH OTHER EU POLICIES ......................................................................... 30 
6.4  RELEVANCE: MEASURING THE CONTINUED NEED FOR THE INITIATIVE ...................................................................... 32 
6.5  EU ADDED VALUE: ASSESSING WHAT THE INITIATIVE BRINGS TO THE EU ................................................................. 33 

7 

CONCLUSIONS .................................................................................................................................... 33 

ANNEX 1: PROCEDURAL INFORMATION ....................................................................................................... 36 

ANNEX 2: INTERVENTION LOGIC .................................................................................................................. 37 

ANNEX 3: STAKEHOLDER CONSULTATION .................................................................................................... 38 

ANNEX 4: METHODS AND ANALYTICAL MODELS USED IN PREPARING THE EVALUATION .............................. 41 

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1 

INTRODUCTION 

In 2014, the evaluation of the Late Payment Directive1 (hereinafter the ‘Directive’) was linked 
to the Regulatory Fitness and Performance Programme of the Commission (REFIT),2 for the 
reason  that  the  Directive  is  a  REFIT  initiative  whose  implementation  is  monitored  in  the 
REFIT  Scoreboard3  to  ensure  it  delivers  on  its expected  benefits.  Reducing  late  payment  in 
commercial transactions would bring about extensive and permanent improvements, not only 
for  individual  businesses,  but  for  the  European  economy  as  a  whole.    Furthermore,  in 
accordance  with  Article  11  of  the  Directive,  the  Commission  is  required  to  report  to  the 
European Parliament and to the Council on the implementation of the legislation by 16 March 
2016.  

In  order  to  effectuate  the  twin  reporting  requirements,  DG  Internal  Market,  Industry, 
Entrepreneurship  and  SMEs  contracted  an  external  evaluation  of  the  Directive  in  January 
20154.  The  purpose  of  this  evaluation  was  to  assess  the  functioning  of  the  Directive  and  to 
determine whether it is on the right track – given its recent entry into force (15 March 2011) 
and  transposition  (16  March  2013)  –  to  achieve  its  objectives.  Specifically,  the  evaluation 
sought  to  assess  if  the  Directive  is  fit-for-purpose  in  terms  of  effectiveness,  efficiency, 
relevance, coherence and EU added value. With regards to scope, the Directive's initial impact 
on all sectors in all Member States was examined.  

2  BACKGROUND TO THE INITIATIVE 

2.1  BASELINE 

Payments  in  commercial  transactions  between  economic  operators  (business  to  business  or 
B2B) or between public authorities and economic operators (PA2B) are frequently made later 
than  initially  agreed.  Such  late  payment  negatively  affects  the  liquidity  of  enterprises  thus 
complicating  their  financial  management.  In  fact,  late  payment  permeates  all  levels  of  a 
company's functioning from cash flow to access to finance to employment strategies. This in 

1 Directive 2011/7/EU available at 
 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:048:0001:0010:en:PDF 

2 Commission communication ‘REFIT – results and next steps’ COM(2014) 910 

3 SWD(2015)110 – the Directive was already an item tracked in the SME Scoreboard (SWD(2013)60) and listed 
on the Commission's rolling programme for update and simplification of the acquis communautaire. 

4  Final 
pbET0415875/  

report 

available 

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

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turn  has  repercussions  for  the  wider  economy  with  growth,  employment,  financial  stability 
and competitiveness severely impacted by the phenomenon.  

Historically,  EU  Member  States  had  different  rules  regulating,  inter  alia,  payment  terms, 
interest  rates  and  sanctions  for  late  payment.  This  plethora  of  laws  and  the  associated 
uncertainty  did  not  facilitate  cross-border  trading  and  acted  as  an  obstacle  to  the  smooth 
functioning of the single market. Moreover, excessive payment terms and late payment were 
placing heavy administrative and financial burdens on businesses, in particular SMEs, leading 
many into insolvency. In 2000, there was a first attempt to streamline the rules regulating late 
payment  in  the  form  of  a  directive5,  which  was  adopted  further  to  the  Commission 
Recommendation of 19956. Whilst this Directive set up a framework for a common approach 
to  combat  late  payment,  its  provisions  were  frequently ruled  as  too  vague.  A  study7  carried 
out in 2006 on the operation of the legislation in practice concluded that payment delays had 
stabilised rather than improved under the Directive and that the situation in certain Member 
States and sectors remained worrying. Public authorities in Southern Europe were taking on 
average  between  five  and  six  months  to  pay  for  procured  goods  and  services.  In  the  same 
countries, figures showed that payments in the health sector often took up to one year to be 
completed. The Impact Assessment accompanying the original Commission proposal for the 
Directive,  carried  out  in  20098  confirmed  that  despite  implementation  of  Directive 
2000/35/EC  in  all  Member  States,  late  payment  remained  one  of  the  biggest  concerns  for 
European businesses. Rather than stabilising, payment delays had increased on average from 
16-17 days throughout Europe. The situation was worse for SMEs: 60% were regularly paid 
late  for  more  than  30%  of  their  turnover.  It  was  evident  that  companies  required  stronger 
measures  to  tackle  late  payment,  especially  against  the  backdrop  of  a  changing  economic 
climate.  

2.2  OBJECTIVES OF THE INITIATIVE 

Directive 2000/35/EC was therefore recast and on 16 February 2011 Directive 2011/7/EU was 
adopted,  with  strengthened  provisions,  aiming  to  protect  European  businesses,  in  particular 
SMEs,  against  the  negative  effects  of  delayed  payment  in  commercial  transactions.  The 
Impact  Assessment  identified  a  number  of  root  causes  of  late  payments  in  commercial 
transactions  such  as  the  market  structure,  the  business  cycle,  the  access  to  finance  and 

5 Directive 2000/35/EC 

6 Commission Recommendation of 12 May 1995 on payment periods in commercial transactions (OJ EU L (95) 
127)  

7 Hoche study carried out by DEMOLIN, BRULARD, BARTHELEMY for DG Enterprise in 2006. 

8 SEC (2009) 315 

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budgetary  constraints,  the  financial  management  practice  of  debtors  and  the  credit 
management practice of creditors as well as the absence of effective and efficient remedies. It 
was widely acknowledged that legislation alone could not be expected to tackle such elements 
that are firmly embedded in commercial societal structures. As explained in the twelfth recital 
of  the  recast  Directive,  a  decisive  shift  to  a  culture  of  prompt  payment  is  required  to 
permanently  eradicate  the  issue.  Where  a  strengthened  Directive  was  viewed  to  be  helpful 
was in providing effective and efficient remedies that would discourage 1) late payment and 
2)  the  establishment  of  excessively  long  contractual  payment  terms.  Legislation  could  also 
provide creditors with measures that enable an effective exercise of rights in the event of late 
payment.  

The  Directive  was  therefore  drawn  up  in  a  manner  that  would  aim  to  achieve  the 
aforementioned  specific  objectives,  which  would  ultimately  contribute  to  restoring  a  fair 
balance  in  commercial  transactions.  By  establishing  maximum  payment  periods,  automatic 
entitlement  to  interest  and  compensation  for  late  payment  and  defining  unfair  contractual 
terms/practices,  the  Directive  aims  to  arm  the  creditor  with  stricter  rights  and  prevent  the 
debtor  from  taking  advantage  of  a  (possible)  relatively  more  powerful  position  in  the 
commercial  relationship.  These  strengthened  provisions  were  expected  to  lead  to  shorter 
contractual  payment  periods  and  the  exercise  of  rights  in  the  event  of  late  payment,  whilst 
also  reducing  costs  to  businesses.  Long-term  effects  include  improved  liquidity  and 
competitiveness and reduced risk of bankruptcy for individual companies.  

By extension, the above positive outcomes of the new Directive should contribute to reducing 
administrative  burdens  on  businesses,  promoting  their  cash  flow  and  facilitating  the 
functioning  of  the  internal  market.  When  correctly  implemented  by  Member  States,  this 
Directive  will  have  a  positive  impact  on  employment  and  growth,  which  will  promote 
enterpreneurship  and  lead  to  a  smoother  integration  of  the  internal  market.  Overall,  the 
Directive seeks to invigorate the European economy, restoring its competitiveness.9 

2.3  DESCRIPTION OF THE INITIATIVE 

2.3.1  Scope and definitions 

The  Directive  (Article  1)  applies  to  "all  payments  made  as  remuneration  for  commercial 
transactions"  between  private  undertakings  or  between  undertakings  and  public  authorities. 
Business to consumer transactions are not regulated by the Directive as this domain is already 

9 Intervention logic presented as a figure in Annex 1 

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covered, to a large extent and mostly with a different objective (namely consumer protection), 
under Union law.10  

Key concepts including 'commercial transaction', 'undertaking' and 'amount due' are defined in 
the Directive (Article 2). An important definition is that of statutory interest for late payment, 
which is simple interest for late payment at a rate that is equal to  the sum of the reference 
rate  -  the  interest  rate  applied  by  the  European  Central  Bank  to  its  most  recent  main 
refinancing operations; or, for a Member State not in the Eurozone, the equivalent rate set by 
its  national  central  bank  -  plus  at  least  eight  percentage  points.  Businesses  can  fix  a 
different rate provided that it is expressly agreed in the contract and is not grossly unfair to the 
creditor. 

2.3.2  Transactions between undertakings 

According to the Directive (Article 3), B2B contractual payment periods should be limited, as 
a  general  rule,  to  60  calendar  days.  There  may  be  circumstances  in  which  longer  payment 
terms  are  required  and,  for  this  reason,  the  Directive  provides  for  continued  contractual 
freedom  in  this  domain.  The  legislation  stipulates  however,  that  any  payment  term  of  more 
than 60 calendar days must be expressly agreed between the parties and not grossly unfair  11 
to the creditor.  

Businesses  are  automatically  (i.e.  without  the  necessity  of  a  reminder)  entitled  to  claim 
interest for late payment from the day following the date or end of the payment term fixed in 
the contract. When no due date is fixed in the contract, the creditor is entitled to interest for 
late payment 30 calendar days following the date of receipt of the invoice or, if the invoice is 
received  before  the  goods  or  the  services,  30  calendar  days  after  the  date  of  receipt  of  the 
goods or services. 

The Directive foresees a period for acceptance or verification of the goods or services, which 
is limited to 30 calendar days, unless otherwise expressly agreed in the contract and provided 
it is not grossly unfair to the creditor. 

2.3.3  Transactions between undertakings and public authorities 

The Impact Assessment highlighted that late payment occurs frequently in the public sector. 
In fact, in the past five years, public authorities have systematically sustained their position as 

10  See  Directive  2005/29/EC  'concerning  unfair  business-to-consumer  practices  in  the  internal  market'  and 
Directive 93/13/EEC' on unfair terms in consumer contracts' 

11  Article  7  of  the  Directive,  which  will  be  dealt  with  later,  provides  guidance  as  to  what  constitutes  grossly 
unfair 

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the  worst  payers  in  the  EU,  taking  longer  on  average  to  pay  an  invoice  compared  to 
businesses.12 

The Directive (Article 4) harmonises the period for payment, in commercial transactions, by 
public  authorities  to  businesses:  Public  authorities  have  to  pay  for  goods  and  services  that 
they  buy  within  30  days.  In  very  exceptional  circumstances,  the  payment  period  can  be 
extended to a maximum of 60 days providing that it is expressly agreed in the contract and 
objectively  justified  in  the  light  of  the  particular  nature  or  features  of  the  contract.  Public 
entities  carrying  out  economic  activities  of  an  industrial  or  commercial  nature  and  those 
providing healthcare are permitted to use a derogation to provide for a payment term of up to 
maximum 60 days. 

Concerning interest  for  late  payment,  the  same  terms  apply  with  respect  to  the  deadlines  as 
established for debtors which are private entities; however, public authorities are not allowed 
to set a rate below the statutory interest rate.  

It is justified to implement stricter rules as regards commercial transactions for the supply of 
goods or services by businesses to public authorities for the following reasons: As explained 
in recital 23, public authorities benefit from more secure, predictable and continuous revenue 
streams than businesses. Furthermore, while enterprises are free to choose their commercial 
partners  and  must  build  stable  commercial  relationships,  public  authorities  are  bound  by 
administrative  and  budgetary  law.  They  must  follow  specific  rules  and  procedures  for  their 
public procurement. Finally, obtaining external financing is also an easier activity for public 
authorities.  

2.3.4  Payment schedules 

Parties of a commercial transaction have the possibility to agree on payment in instalments 
rather than in one lump sum (Article 5). It follows that each instalment should be paid on the 
agreed terms and should be subject to the rules for late payment as set out in the Directive. 

2.3.5  Compensation for recovery costs 

Under the Directive, the creditor has the right to automatically obtain compensation from the 
debtor  in  the  form  of  a  minimum  fixed  sum  of  EUR  40  in  cases  where  interest  for  late 
payment becomes payable (Article 6). In addition, the creditor is entitled to claim reasonable 
compensation  for  all  other  costs  incurred  as  a  result  of  the  late  payment.  Examples  of  such 
costs include the appointment of a lawyer or employment of a debt collection agency. 

12 Intrum Justitia European Payment reports 2010-2015 

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In both the public and private context, the Directive entitles creditors to make use of the rights 
described above but does not oblige them to do so. It is the creditor's choice to charge interest 
and claim compensation for recovery costs or not depending on the specific situation. 

2.3.6  Unfair contractual terms and practices 

It is the prerogative of a national judge to determine whether a contractual term or practice is 
grossly unfair by considering all circumstances of the case in question. The Directive defines 
certain parameters  within which businesses could challenge grossly unfair contractual terms 
and practices before courts (Article 7), for example: 

•  any  gross  deviation  from  good  commercial  practice,  contrary  to  good  faith  and  fair 

dealing, 

• 

the nature of the product/service, 

•  whether  the  debtor  has  any  objective  reason  to  deviate  from  the  rules  stated  by  the 

Directive (Article 7(1)c) and 

•  any  contractual  term  that  excludes  interest  for  late  payment  is  considered  to  be 
grossly unfair to the creditor and is either unenforceable or will give rise to a claim for 
damages; a contractual term that excludes compensation for recovery costs will also 
be presumed to be unfair. 

2.3.7  Transparency and awareness raising 

Member  States  are  encouraged  to  ensure  transparency  regarding  the  rights  and  obligations 
stemming  from  the  Directive,  including,  inter  alia,  running  information  campaigns  and 
publishing  the  applicable  rate  of  statutory  interest  for  late  payment  (Article  8).  Businesses 
should be made aware of their rights and the means by which they can be exercised.  

2.3.8  Recovery procedures for unchallenged claims 

In  the  case  of  undisputed  debts,  Member  States  must  ensure  that  businesses  can  obtain  an 
enforceable  title,  including  through  an  expedited  process,  within  90  calendar  days  of  the 
lodging of the creditor’s action at a court or other competent authority (Article 10).  

2.3.9  Transposition  

By  16  March  2013,  Member  States  were  due  to  bring  into  force  laws,  regulations  and 
administrative provisions necessary to comply with the Directive. Provisions which are more 
favourable  to  the  creditor  than  those  of  the  Directive  could  be  maintained  or  adopted  by 
Member States. 

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3  EVALUATION QUESTIONS 

In order to assess the functioning of the Directive and to evaluate whether it is, in effect, on 
course to achieve its objectives, the following questions were used to guide the analysis: 

  Effectiveness: To what extent has the Directive been effective in meeting, or moving 
towards,  the  defined  objectives  (ie.  to  what  extent  has  the  Directive  contributed  to  a 
reduction  in  payment  periods  and  in  the  average  delays  of  late  payments  in 
commercial  transactions?  To  what  extent  has  it  positively  influenced  liquidity/cash 
flow  and  facilitated  cross-border  trades?  To  what  extent  has  the  Directive  raised 
awareness  of  the  issue  and  to  what  extent  is  it  being  used  to  claim  interest  and 
compensation  for  late  payment  ?  What  are  the  factors  influencing,  positively  or 
negatively, the achievements observed?  

  Efficiency: To what extent are the regulatory costs (including administrative burden) 
proportionate to the benefits achieved? To what extent do the benefits of the Directive 
the 
outweigh 
implementation of the Directive? To what extent has the Directive delivered its results 
efficiently in terms of the resources used?   

its  costs?  To  what  extent  have  costs  been  reduced 

through 

  Coherence with other policies: To what extent is the Directive consistent with other 

policy actions at EU and national level? 

  Relevance: To what extent do the objectives of the legislation still correspond to the 
needs of the stakeholders? Is the Directive the right instrument to tackle this issue? 

  EU added value: What is the EU added value of the Directive for stakeholders? What 

would be the most likely consequences of repealing this Directive? 

4  METHOD 

Assessing causality between the Directive and the results on the ground is not straightforward. 
Indeed, when it comes to the issue of late payment, a large number of intervening factors are 
at play, making the isolation of the Directive's impact a difficult exercise. Coupled with the 
added limitation of the relatively recent implementation of the Directive, it was evident that 
measuring  its  impact  thus  far  would  prove  challenging.  Furthermore,  data  is  difficult  to 
obtain.  Both  primary  and  secondary  sources  are  scarce.  Ministries  in  most  Member  States 
responsible for the transposition of the Directive do not collect any official data regarding the 
application of the legislation nor figures presenting changes in average payment periods. The 
lack  of  a  compulsory  and  common  monitoring  system  also  makes  it  very  difficult  to  verify 
any progress made as a result of the application of the Directive.  

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Data is collected by some private business organisations, one of the most cited in the literature 
being  the  information  compiled  by  the  Swedish  credit  management  company,  Intrum 
Justitia13. The methodology employed and the robust response rate to their survey make their 
findings  representative and  dependable.  However,  a  lack of  official  comparable  information 
can  lead  to  an  over-reliability  on  Intrum  Justitia's  data  and  renders  a  deeper  analysis  of  the 
Directive's  impact  more  challenging.  There  is  also  limited  academic  literature  on  the 
economic impact of late payment in general and on the subject of the Directive in particular.  

Given  the  aforementioned  challenges,  it  was  clear  from  the  outset  that  the  methodology  for 
this evaluation had to be designed in a way that would ensure collection of both quantitative 
and  qualitative  primary  data  from  the  target  audience.  A  four-pronged  approach  to  data 
collection was drawn up by the external consultant, which included: desk research, an online 
survey, interviews at Member State level and follow-up interviews.  

4.1  DESK RESEARCH 

Despite  the  limitations  outlined  above  with  respect  to  the  availability  of  secondary  sources, 
desk  research  was  conducted  in  the  intial  data  collection  phase  of  this  evaluation.  National 
laws  transposing  the  Directive  and  associated  supporting  soft  measures  implemented  by 
Member  States  were  scrutinised.  In  addition,  national  sources  of  information  on  average 
payment  duration  and  delays,  impacts  on  economic  growth  and  employment  were  also 
assessed.  Finally,  cross-country  data  collected  by  private  organizations  such  as  Intrum 
Justitia,  Atradius,  EOS,  Euler  Hermes  country  reports  and  Grant  Thornton's  "European 
Business Survey" were examined. This phase took place over the course of three months.  

4.2  COMPANY SURVEY 

The scarcity of secondary data meant that the online company survey was a key element of 
this evaluation. The aim of the survey was to collect concrete evidence on the functioning of 
the Directive from a representative sample of companies 14 across all Member States to enable 
an assessment of the legislation's progress in achieving its objectives. Questions pertaining to 

13 Intrum Justitia is one of the market-leading credit management companies in Europe, who offer their clients 
risk reduction and financial services based on a strong debt collection foundation. Their mission is to ensure that 
payment  flows  function  as  they  should.  The  company  conducts  a  Europe-wide  survey  every  year  that  tracks 
trends in payment behaviour in the public and the private sectors. The results are presented in European Payment 
Reports,  which  are  available 
their  website  at  http://www.intrum.com/Press-and-
publications/European-Payment-Report/. 

to  download  from 

14 The chosen methodology, described in the Annex, was formulated to ensure representativeness at EU level. 

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awareness  of  the  Directive,  usage  of  its  provisions  and  its  perceived  impact  on  payment 
behaviour were formulated and sent to a representative sample of 26,000 companies.15 

The  survey  was  accessible  online  for  a  period  of  10  weeks  between  April  and  June  2015. 
Difficulties  were  faced  with  respect  to  the  response  rate,  which  remained  very  low  (below 
1%)  after  one  month.  To  solve  this  issue,  two  companies  were  sub-contracted  to  perform 
telephone interviews with the target group during which the questionnaires were completed. 
In  total,  2,677  complete  responses  were  collected  from  all  Member  States,  ensuring  a  fair 
representativeness across the EU. Over 90% of respondents were working in SMEs.  

4.3  ADDITIONAL STAKEHOLDER CONSULTATION 

Because  of  the  initial  low  response  rate,  as  a  further  mitigating  measure,  a  version  of  the 
online survey was made available to the general public throughout the month of June 2015 in 
the form of a public consultation. In total, 273 responses were received. In order to maintain 
the  integrity  of  the  sample  of  survey  respondents,  the  two  sets  of  results  were  not  merged. 
Nevertheless,  the  consultation  did  provide  information  that  corroborated  the  findings  of  the 
survey.  

The  ensuing  interviews  organized  by  the  external  consultant  with  stakeholders  from  public 
authorities  and  businesses  representatives  (135  across  EU)  and  follow-up  interviews  with 
companies that participated in the survey (31 across EU) took place as planned. 

In  the  context  of  the  6th  expert  group  meeting  of  24  November  201516
  the  Commission 
presented  the  results  of  this  evaluation  to  experts  from  the  Member  States  as  well  as  to 
representatives  of  EU  business  organizations.  There  was  a  broad  consensus  between  the 
participants  that  the  most  relevant  issues  were  addressed  in  the  report  and  that  the 
recommendations were useful. Written feedback was also provided following the meeting and 
has been incorporated into the analysis of this report (section 6). 

Additional details on the methodology and models used are provided in Annex 3. 

15 The full survey and the list of targeted companies are included in the Annex. 

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

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4.4  ASSESSMENT OF ROBUSTNESS OF FINDINGS 

The wide range and high number of companies consulted thanks to the outlined methodology 
ensured a satisfactory level of reliability of the results. As previously mentioned, the lack of 
similar studies on this subject matter means that a comparative analysis is not straightforward. 
Intrum Justitia's European Payment Report 2015 contains some overlap with this evaluation, 
the results of which appear to coincide. It can therefore be concluded that the data collected 
during this evaluation is valid, robust and, for the most part, innovative. 

5 

IMPLEMENTATION STATE OF PLAY 

5.1  COMMUNICATION ACTIVITIES ORGANISED BY THE COMMISSION 

5.1.1  Late payment expert group 

In order to assist Member States with a swift transposition of the Directive and to follow up 
on implementation measures, an Expert Group was set up in 2012. Representatives from the 
ministries  responsible  for  the  transposition  of  the  Directive  convene  with  Commission 
officials  twice  per  year  to  exchange  information  about  the  implementation  of  the  Directive. 
Further  measures  that  Member  States  are  devising  to  address  outstanding  debts,  fight  late 
payment and support SMEs are also discussed. 

5.1.2 

 Late payment information campaign 

At the request of the European Parliament, the Commission ran a pan-European information 
campaign  from  October  2012  until  November  2014  in  order  to  increase  awareness  among 
European  stakeholders  and  among  public  authorities  on  the  rights  granted  by  the  Directive. 
National seminars were held in the capital cities of all Member States. These events provided 
a forum for the exchange of best practices between businesses and allowed the Commission 
the opportunity to hear first hand experiences of the issues related to late payment faced by 
SMEs in particular. The campaign proved to be a successful means of consultation with over 
3,000  relevant  stakeholders  directly  reached  across  the  28  Member  States  and  many  more 
receiving  the  key  messages  through  the  extensive  media  coverage  secured  or  through  the 
multiplying efforts of organisations such as Enterprise Europe Network. 

5.2  TRANSPOSITION  

5.2.1  Communication and assessment of national measures 

Despite a  push  from the  Commission for Member  States to undertake early  transposition of 
the  Directive,  few  countries  heeded  this  advice.  Some  Member  States  even  delayed 
communication  of  transposition  measures,  which,  following  reminders  sent  by  the 
Commission,  led  to  the  launching  of  four  infringement  procedures  for  non-communication. 

- 12 - 

 
 
 
Complete national measures transposing the Directive were communicated to the Commission 
by all Member States by August 2014.  

Initial assessments of the measures found a number of cases of non-conformity, often related 
to more than one article of the Directive. Investigations through an exchange of letters were 
instigated with the relevant national authorities and the majority of cases were swiftly closed. 
Infringement procedures for incorrect transposition of the Directive were opened against five 
Member States. As of May 2016, the Directive is fully and correctly transposed in the national 
laws of all Member States.  

5.2.2  Stricter national provisions 

According  to  Article  12(3),  in  transposing  the  Directive,  Member  States  may  maintain  or 
bring  into  force  provisions  which  are  more  favourable  to  the  creditor  than  the  provisions 
necessary  to  comply  with  this  Directive.  This  proved  to  be  a  pertinent  addition  to  the 
legislation as, during the negotiations, some Member States argued that the payment periods 
specified  in  the  Directive  are  longer  than  those  currently  in  force  at  national  level.  This 
derogation  allowed  Member  States  to  retain  already  established  rules  and  regulations  or  to 
legislate  more  strictly  than  the  Directive's  requirements  provided  that  the  outcome  is  more 
advantageous to the creditor. 

a) 

Payment periods 

i 

B2B transactions 

The  Directive  establishes  that  contractual  payment  periods  in  B2B  transactions  should  be 
limited to 60 calendar days but allows for a more extensive payment period provided that it is 
expressly agreed in the contract and is not grossly unfair to the creditor. Some Member States 
went further than the Directive by setting up, by law or by court practice, maximum payment 
terms for transactions between businesses as shown in the following table: 

- 13 - 

 
 
 
Table 1: Examples of Member States' legislation measures stricter than the Directive's requirements 

Country 

Maximum payment term 
(calendar days) 

Conditions 

Austria 

60 

Longer payment terms, whilst legally possible, 
are likely to be considered unreasonable in 
case of a dispute 

France 

Germany 

Spain 

60 or  
45 days end of month17 

None 

30 

60 

Longer payment terms, whilst legally possible, 
are likely to be considered unreasonable in 
case of a dispute 

None 

ii 

PA2B transactions 

The Directive establishes a period of 30 calendar days within which an invoice must be paid 
in a commerical transaction between a public authority and a business. An extension of this 
time limit is foreseen up to a maximum of 60 calendar days in exceptional circumstances and 
in the case of certain public entities such as those providing healthcare or those carrying out 
economic activities of an industrial or commercial nature.  

However,  Ireland,  the  Netherlands  and  the  United  Kingdom  opted  not  to  include  this 
extension possibility in their legislation. France limited the payment period for public entities 
providing healthcare to 50 rather than 60 calendar days. 

b) 

Interest for late payment 

According to the Directive, statutory interest for late payment is the sum of the reference rate 
and  at  least  eight  percentage  points.  Some  Member  States  opted  for  calculations  of  the 
statutory interest rate which would result more favourably for the creditor. 

17  45  days  following  the  end  of  the  month  that  the  invoice  was  issued.  For  example,  an  invoice  issued  on  15 
December 2015 would have to be paid by 14 February 2016. 

- 14 - 

 
 
 
 
                                                 
Table 2: Penalty interest for late payment in selected Member States 

Country 

Austria 

Bulgaria 

France 

Germany 

Hungary 

Romania 

Slovakia 

Penalty interest for late payment  
(in percentage points above central bank reference rate) 

9 

10 

10 

9 

10 

9 

Dual system:  
9 for fixed interest rates,  
8 for variable interest rates 

Overall, there are a limited number of Member States that transposed more strict provisions 
than the minima set out in the Directive. This demonstrates that the terms of the legislation are 
generally deemed to be adequate in relation to their appropriateness to combat late payment.  

5.3 

IMPLEMENTATION 

The  Directive  encourages  Member  States  to  set  up  prompt  payment  codes  or  any  other 
initiatives that would contribute to tackling the issue of late payment and developing a culture 
of  prompt  payment  in  the  public  and  the  private  sectors18.  In  implementing  the  Directive, 
several Member States advanced such measures. 

5.3.1  Prompt payment codes 

The  British  and  Irish  authorities  have  set  up  policies  to  support  the  implementation  of  the 
Directive, which aim to ensure that central government departments pay their suppliers within 
5 and 15 days respectively. In 2011, this non-binding government requirement was extended 
to  all  public  bodies  in  Ireland.  19  Statistics  from  both  countries  indicate  that  these  prompt 
payment policies are being respected. 

18 Article 8 

19  At  the  end  of  2015,  the  Irish  authorities  are  examining  the  possibility,  through  a  public  consultation,  of 
incorporating  the  government  decision  into  national  legislation,  which  would  oblige  all  public  bodies  to  pay 
suppliers within 15 days 

- 15 - 

 
 
 
 
                                                 
In the field of B2B transactions, the UK and Ireland have introduced similar initiatives in the 
form of prompt payment codes (joint public-industry initiatives), which are accompanied by a 
prompt  payment  portal  (Ireland)  and  a  fair  payment  campaign  (UK).  These  codes  include 
clearly  defined  time  limits  for  payment  in  addition  to  well  defined  responsibilities  for  the 
debtor in case of late payment. Sign up to the code is on a voluntary basis and the authorities 
conduct awareness raising campaigns to encourage participation. 

5.3.2  Electronic invoicing 

Measures  implementing  electronic  invoicing  are  gradually  being  devised  by  European 
governments  for  public  authority  contracts  under  procurement  legislation.  At  the  end  of  the 
year 2015, the use of electronic invoicing is mandatory in Sweden, Italy and Spain for public 
authorities. In the case of Sweden, the same obligation applies to companies of more than 50 
employees.  France  is  putting  measures  in  place  to  introduce  a  similar  obligation  for 
companies  in  the  near  future.  Such  an  investment  should  prove  worthy  in  terms  of 
simplifying, inter alia, the administrative follow up of invoices.  

5.3.3  Penalties/fines 

Whereas  the  initial  proposal  by  the  Commission  for  this  Directive  included  penalties  to  be 
foreseen  and  imposed  by  Member  States  in  the  case  of  late  payment,  this  suggestion  was 
finally not adopted. This has not prevented Member States from setting up such initiatives at 
national level as, for example, France did in the transport sector. In road transport of goods, 
failure to comply with a 30 day payment term carries fines up to EUR 15,000. Similarly, in 
Italy, a system of administrative sanctions in cases of late payment by public authorities has 
been introduced through legislation in 2014.  

5.3.4  Transparency measures 

Arrangements to monitor payment behaviour have been put in place in some Member States: 

•  The observatory for payment periods in France examines payment behaviour in B2B 

transactions once a year.  

•  The Prompt payment indicator in Italy is available for all government departments to 

calculate the exact time they are taking to pay their creditors. 

•  The Spanish Federation of Small and Medium Enterprises (CEPYME), together with 
the department for enterprise and SMEs (DGPYME), publishes a quarterly bulletin on 
late payment in B2B transactions with an analysis into the reasons behind this issue. 

•  Monthly  monitoring  research  is  in  place  in  Poland  to  monitor  the  debt  of  Polish 

enterprises and the level of obligations paid by Polish companies. 

•  The  Danish  Ministry  of  Finance  issued  an  administrative  order  in  2015  concerning 

transparency measures for late payment by public authorities. 

- 16 - 

 
 
 
5.4  APPLICATION OF THE DIRECTIVE 

Despite correctly transposing the Directive into national law, there is proof that some Member 
States  are  not  correctly  applying  the  legislation.  The  Commission  performs  continual 
horizontal  screening  of  the  situation  in  all  Member  States  as  regards  the  application  of  the 
Directive.  Where  data  indicates  non-respect  of  the  payment  periods  as  established  by  the 
Directive, the Commission investigates the evidence with the concerned Member States via a 
structured  dialogue  between  the  Commission  and  the  Member  State(s)  and,  in  parallel, 
conducts research of other publicly available material such as studies, reports and surveys as 
information 
well  as  complaints  received  from 
communicated  via  other  institutions  such  as  the  European  Parliament.  In  some  instances, 
visits  to  Member  States  were  undertaken  to  facilitate  an  open  dialogue  with  the  authorities 
and to better understand the context of a particular case. When the gravity of the situation is 
such  that  it  cannot  be  promptly  resolved,  and  this  fact  is  acknowledged  by  the  concerned 
Member  State,  infringement  proceedings  for  bad  application  of  the  Directive  are  launched. 
Thus far, proceedings have been launched against three Member States. These cases remain 
open in August 2016. 

the  concerned  Member  States  and 

5.5  UNEXPECTED RESULTS FOLLOWING IMPLEMENTATION OF THE DIRECTIVE 

In  this  evaluation,  across  the  consulted  stakeholders  in  the  Member  States,  there  was  little 
evidence  of  unintended  consequences  of  the  Directive.  It  is  possible  that,  given  the  limited 
time to measure the impact of the Directive since its adoption, unexpected results may not yet 
have materialized or at least, are not yet clearly identifiable. 

However, one negative outcome that surfaced was the fact that in some Member States that 
have  traditionally  had  a  prompt  payment  culture,  the  Directive  is  perceived  to  have 
normalised  longer  payment  periods.  Some  stakeholders  argue  that  the  Directive  may  have 
given  larger  companies  more  leverage  to  demand  longer  payment  periods.  This  point  is 
supported by other  industry sources, who alleged that  some public entities known for being 
‘good payers’ have reportedly extended their payment terms to reach the maximum allowed 
under the Directive. It should be noted that prolongations of payment terms can be due to a 
number of different factors and are not necessarily directly attributable to the introduction of 
the Directive.  

- 17 - 

 
 
 
 
6  ANSWERS TO THE EVALUATION QUESTIONS 

6.1  EFFECTIVENESS: MEASURING THE EXTENT TO WHICH THE DIRECTIVE IS 

ACCOMPLISHING ITS OBJECTIVES 

6.1.1  Reduction in average payment periods 20 

One of the main objectives of the Directive is to shorten payment periods. Excessively long 
payment periods unnecessarily strain businesses' liquidity and can lead to a range of problems 
as  described  earlier.  According  to  the  Directive,  the  payment  period  for  PA2B  transactions 
should not exceed 30 days21 and for B2B transactions should not exceed 60 days.22 

a) 

To what extent has the Directive contributed to a reduction in payment 
periods? 

The following graph depicts changes in the average payment period in PA2B as well as B2B 
transactions since the adoption of the Directive (baseline - 2010 - is also provided).  

Figure 1: Average payment period in the EU 2010-2014. Source: based on Intrum Justitia, EPI (2010-2014) 

As  the  graph  clearly  illustrates,  reductions  in  average  payment  periods  have  been  minimal 
since the entry into force of the Directive but the trend is decreasing, which is a positive sign. 
The somewhat stable situation could be explained by the lack of time that has passed since the 
implementation of the Directive. Indeed data collected in 2015 by Intrum Justitia, through a 

20 Payment period is the actual duration for payment incurred by the debtor between receipt of the invoice until 
the payment of the goods or services. This is not to be confused with the payment delay, which is the difference 
between the payment period and the agreed contractual terms. 

21 Aside from in exceptional circumstances when it can be extended to a maximum of 60 days 

22 Unless both parties expressly agree and provided the terms are not grossly unfair to the creditor 

- 18 - 

 
 
 
 
                                                 
slightly  modified  methodology,  shows  improving  figures  throughout  the  EU.  A  direct 
comparison is not possible due to the change of methodology that year but it is safe to say that 
the  overall  picture  is  improving.  A  detailed  breakdown  of  the  average  payment  period  per 
country23  in  PA2B  and  B2B  is  provided  in  the  following  graphs  and  shows  that  it  is  the 
excessively  long  average  payment  periods  in  some  Member  States  that  drive  up  the  EU 
average,  particularly  in  the  case  of  PA2B  transactions.  This  indicates  that  despite  the  good 
political  intention  in  the  same  Member  States  to  eradicate  late  payment  through  legislative 
measures,  the results are still not  being transmitted on the ground. For now there remains a 
tension between the overarching laws and the day-to-day practices when it comes to payment 
behaviour in these Member States. 

Figure 3: Average payment period in PA2B transactions by country in 201524 (Source: based on Intrum Justitia, EPR 
(2015) 

This graph shows that public sector payment periods are, on average, far from the limit of 30 
days as specified by the Directive (red dotted line). Less than half of all Member States are 

23  Data  from  Malta  and  Luxembourg  is  not  included  because  Intrum  Justitia  does  not  collect  data  from  these 
countries. 

24  This  graph  also  includes  data  about  contracts  that  used  the  derogation  rule  of  up  to  60  days  maximum 
payment term; a fact that should be taken into account when interpreting the figures. (See section 2.3.3 for more 
details about the use of this derogation).   

- 19 - 

 
 
 
 
                                                 
 
paying  within  the  Directive's  time  limit  of  30  calendar  days  on  average  and  several  are  not 
even respecting the 60 day maximum, which should be used only on an exceptional basis25. It 
should  be  noted  nevertheless  that  public  authorities  in  Member  States  that  pay  with  a  large 
delay are in a decreasing trend: 

Table 3: Changes in payment duration PA2B transactions (2011 to 2014, in days). Source: based on Intrum Justitia, 
EPI (2011-2014) 

Large decrease 

Small 
decrease 

Stable 

Small increase 

Large increase 

Italy (-15) 

Lithuania (-4) 

Hungary (-2) 

n/a 

Slovenia (+9) 

Greece (-13) 

Belgium (-4) 

Denmark (-2) 

Bulgaria (+5) 

Portugal (-10) 

The Netherlands (-1) 

Latvia (+5) 

Austria (-9) 

Finland (0) 

United Kingdom (-7) 

Germany (0) 

France (-5) 

Ireland (-5) 

Poland (0) 

Sweden (0) 

Spain (+1) 

Romania (+1) 

Slovakia (+1) 

Cyprus (+1) 

Croatia (+2)26 

Czech Republic (+1) 

Estonia (+1) 

As  mentioned  earlier,  the  decrease  observed  in  average  payment  periods  since  the 
introduction of the Directive is moderate . Stakeholders in several countries (AT, BG, DK, FI, 
SE,  SK,  ES,  RO,  UK)  indicated  that  the  Directive  has,  to  date,  only  had  minor  effects  on 

25 The figures from Greece are noteworthy as there appears to be a significant reduction in the average payment 
period compared to recent previous years when public entities were taking over 100 days to pay their invoices. 
This marked improvement is due to the reduced number of suppliers on the market and the fact that those still 
operating are tending to request for payment in advance. 

26 Data available 2013-2014  

- 20 - 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
payment behaviour and late payment practice in their Member State.  However, at least two 
key aspects must be taken into consideration: 

1) 

2) 

the  severe  impact  and  prolonged  repercussions  of  the  financial  crisis  on 
commercial transactions and 

the  fact  that  modifying  legislation  does  not  lead  to  immediate  changes  in 
payment behaviour and that this legislation is just one driver of the change 

In  the  following  detailed  breakdown  of  the  average  payment  periods  in  B2B  transactions, 
there is a clear correlation emerging: Countries that have a low average payment duration in 
B2B transactions also tend to have relatively low payment durations in PA2B transactions. 

This  suggests  that  payment behaviour  is  something  that  is deeply rooted in  culture and will 
therefore  take  time  to  change.  On  a  positive  note,  the  below  graph  shows  that,  on  average, 
businesses in the majority  of all Member States are respecting the 60 calendar days general 
rule as specified by the Directive.  

Figure 5: Average payment period in B2B transactions by country in 2015 (Source: based  on Intrum Justitia, EPR 
(2015) 

Overall,  the  trend  is  positive  when  it  comes  to  average  payment  periods  in  the  EU.  The 
situation of most Member States is stable, with many improvements noted also. Whilst it is 
not possible to single out the Directive as the sole factor contributing to this outcome due to 
other  external  influences  such  as  the  emergence  from  the  financial  crisis  and  an  increasing 
number of companies  familiarising themselves  with  their rights  in  the face of late payment, 

- 21 - 

 
 
 
 
nevertheless Member States have made concerted efforts to correctly apply the Directive. The 
improving  trend  is  therefore  expected  to  continue.  A  similar  evaluation  in  a  few  years  time 
would provide more clarity on the above assumptions. 

b) 

To what extent has the Directive contributed to a reduction in the average 
delays27 of late payments in commercial transactions? 

The  Directive  aims  to  eliminate  payment  delays  by  establishing  strengthened  rights  for  the 
creditor  in  the  event  of  late  payment,  thus  encouraging  the  debtor  to  pay  within  the 
contractually agreed terms. It is important to note that companies and public authorities have, 
in many cases, had to substantially reduce their contractually agreed payment terms to align 
with the rules of the Directive. Under the previous regime, contractual terms over 30/60 days 
were acceptable and therefore, delays may not have been so pronounced. It is in this context 
that results of a pan-European study28 should be analysed: data shows a very small decrease in 
payment delays in both PA2B and B2B transactions of 1.8 days and 1.2 days respectively in 
the years since the adoption of the Directive. The results of the external evaluation show that 
the  perceived  change  is  in  line  with  reality:  half  of  all  respondents  perceived  no  change  in 
average  payment  delays  in  the  last  three  years.  34%  perceived  a  deterioration  in  payment 
delays  in  B2B  transactions,  whereas  21%  provided  similar  feedback  in  PA2B  transactions. 
Before the adoption of the Directive a company could, in theory, apply a very long contractual 
payment term and pay within the pre-decided deadline. This same company should now apply 
a contractual term of 60 days and, even if the invoice is not paid on time, the creditor may still 
receive the payment in a shorter timeframe despite the non-respect by the debtor of the due 
date. For this reason, the overall payment period is a key indicator of the effectiveness of the 
Directive. 

It is however, very difficult to ascertain that the decreasing trend in both payment periods and 
payment delays is attributable to the Directive. Other factors such as national level initiatives 
and the emergence from the financial crisis may also have contributed to improving results. 
However, the former efforts most likely stemmed from a need to comply with the rules of the 
Directive.  While  isolating  the  direct  impact  of  the  Directive  is  challenging,  the  knock-on 
effect following its adoption in the form of changes in attitude towards late payment is a clear 
achievement. 

6.1.2  Raising Awareness 

The Impact Assessment identified awareness raising activities as an important policy option 
to accompany legislation. Furthermore, Article 8 of the Directive also lays down obligations 

27 Reminder: Delay is the difference between the payment period and the agreed contractual terms 

28 Intrum Justitia 

- 22 - 

 
 
 
                                                 
to  this end. Many  owners  of small  businesses were  unfamiliar with  the  rules  regulating late 
payment  and  therefore  a  concerted  effort  to  spread  information  about  the  Directive  was 
deemed  essential  in  order  that  they are  aware  of  their  rights  when  faced  with  late payment. 
Whilst the indicators already presented require a certain degree of supposition with respect to  
the  influence  of  the  Directive29,  there  is  an  important  success  that  can  be  attributed  to  the 
introduction of the legislation. A recurring theme that emerges from the evaluation is that the 
overall awareness of the rules regulating late payment is relatively high. Almost two thirds of 
companies are aware of the Directive's provisions and 86% of companies at least know about 
their  right  to  claim  compensation and/or interest in  the  event  of  late  payment.  A  significant 
contributer  to  this  high  level  of  awareness  (almost  30%)  was  the  EU-wide  information 
campaign run by the Commission (See section 5.1 for more details).  It must be recognized 
that legislation regulating such rights existed prior to the introduction of the Directive, but the 
laws were not harmonised. The results of the evaluation show that: 

1.  SMEs and companies in their early years of business are less likely to be aware of the 

rules regulating late payment. 

2.  Companies  that  are  closest  to  the  public  sector  (utilities,  public  administration)  are 

most aware of late payment rules.  

3.  Companies that are aware of the rules related to late payment are less likely to have 
experienced a deterioration of average payment delays over the last three years (odds 
ratio of 0.78%). 

At first glance, these results appear not to be in line with the findings of Intrum Justitia, who 
found that only 30% of respondents to their survey are aware of the Directive. The inference 
here is that while there is a high level of awareness of the rules regulating late payment, there 
is  not  necessarily  knowledge  that  these  rules  have  now  been  harmonised  by  EU  legislation. 
Regardless of the source of the rules, the important fact is that, overall, creditors are aware of 
the norms when it comes to payment periods and their rights when faced with late payment. 

Perhaps one of the biggest achievements of the Directive is that it has raised the issue of late 
payment in commercial transactions high in the political agenda. Although this was not a goal 
in  and  of  itself,  it  is  through  political  pressure,  media  attention  and  societal  debate  that  the 
culture of late payment can start to change. Excessively long payment terms and delays are no 
longer  being  accepted  as  the  norm  in  Member  States  where  creditors  were  accustomed  to 
waiting  months  for  payments.  Thanks  to  the  light  shone  on  this  deep-rooted  issue  in 
commercial relations, a perception of shame is now being associated with the practice of late 

29  Due  to  influencing  external  factor,  a  reduction  in  average  payment  periods  cannot  be  ascribed  solely  to 
Directive. See section 6.1(a). 

- 23 - 

 
 
 
                                                 
payment. Add to this the strengthened provisions governed by law, and businesses are better 
supported to claim their rights, either informally or though the procedures provided.  

6.1.3  Usage of the Directive's rights to claim interest and compensation for 

late payment 

Whilst awareness of rights stemming from the Directive is fairly high, the evaluation found 
that  exercise  of  its  provisions  is  not  widespread.  The  act  of  claiming  interest  and 
compensation is a deterrent to the debtor to pay late again in the future, which suggests that 
incidences of late payment should decrease with increased usage of the rights conferred by the 
Directive. Exercise of the Directive's provisions is therefore an indication of the effectiveness 
of the legislation in terms of reaching its objectives. The external evaluation found that: 

1.  60%  of  survey  respondents  indicated  that  their  company  never  claims  compensation 

and/or interest in the event of late payment.  

2.  SMEs  are  much  less  likely  to  exercise  their  rights  under  the  Directive  than  larger 

companies. 

3.  Creditors in countries that traditionally have a prompt payment culture are more likely 

to apply their rights. 

Creditors  gave  as  the  main  reason  for  not  exercising  their  rights  the  need  to  maintain  good 
commercial  relationships  with  their  customers.  Claiming  compensation  or  interest  is  not  a 
simple  case  of  exercising  one’s  rights  but  often  involves  a  complex  calculation  of  multiple 
clashing interests. The risk to lose future business by tarnishing a relationship with a customer 
is  very  often  too  costly.  This  outcome  was  also  seen  in  the  evaluation  of  the  previous  late 
payment Directive, which proves that a change of legislation will not necessarily effectively 
address this problem. 

Findings show that when a payment is excessively delayed, the creditor will often invest time 
and energy in recovering the debt and will not insist on receiving interest and compensation 
also.  The  notion  is  that  requesting  interest  and  compensation  would  be  viewed  as  'pushing 
their luck' and an invoice is more likely to  be paid by the debtor when there is no threat of 
additional fees.  

In  the  case  of  unpaid  debts,  stakeholders  noted  that  a  lack  of  efficient  national  remedy 
procedures  in  many  countries  and  in  particular  in  those  where  late  payment  is  a  serious 
problem  is  another  barrier  preventing  creditors  from  exercising  their  rights.  Despite  the 
expedited  recovery  procedure  for  unchallenged  claims  laid  down  in  Article  10  of  the 
Directive,  the  evaluation  found  that  creditors  are  still  discouraged  from  taking  a  debtor  to 
court  due  to  the  length  of  time  and  the  costs  involved  in  particular  in  cases  of  small  sums 
where  they  risk  spending  more  money  than  they  would  recover.  Consequently,  creditors 
prefer  to  write  off  unpaid  bills  rather  than  go  to  court  and  sue  for  a  bad  debt.  Indeed, 

- 24 - 

 
 
 
according  to  the  results  of  the  evaluation,  more  than  half  of  all  companies  surveyed  never 
engage in litigation or use alternative dispute resolution methods to recover unpaid invoices.  

6.1.4  To  what  extent  has  the  Directive  positively  influenced  liquidity/cash 

flow?  

Receiving  payment in  a shorter  period of time should  lead to increased cash flow,  which is 
particularly important for SMEs. However, a comparison of recent Pan-European data shows 
that  the  number  of  companies  with  liquidity  problems  has  risen  by  10%  since  2011.30  This 
deterioration is not necessarily an indication that the Directive is not having an impact but is 
most likely linked to the restricted access to finance for companies as a result of the financial 
crisis.  It  is  fair  to  conclude  that  due  to  its  recent  entry  into  force,  the  Directive  has  not  yet 
achieved its full impact on payment behaviour. For this reason the wider objectives - such as 
improved liquidity - have yet to materialise before being measurable. Increased cash flow is a 
goal of the Directive that will undoubtedly take more time to achieve. Moreover, as with other 
objectives, ascribing any future positive changes in liquidity/cash flow of businesses directly 
with the Directive is a challenge that will remain regardless of the passage of time. 

With respect to the effect of late payment on EU firms' exit rates, simulation performed by the 
Commission's services31 found that if average delays in commercial transactions were reduced 
to  zero  (i.e.  compliance  with  the  Directive),  exit  rates  of  companies  in  a  Member  State 
particularly  impacted  by  late  payment  would  decrease  to  6.18%  in  the  case  of  B2B 
transactions  and  5.37%  in  the  case  of  PA2B  transactions.  This  equates  to  the  survival  of 
41,451  companies.  Likewise,  in  another  Member  State  where  late  payment  is  a  common 
problem, a reduction of payment delays to zero would reduce the exit rate of firms to 7.52% 
for  B2B  transactions  and  7.39%  for  PA2B  transactions,  meaning  that  31,747  firms  would 
remain operational. The findings are in line with the Directive's rationale that late payment in 
commercial  transactions  in  the  public  and  private  sectors  have  detrimental  effects  on  the 
business  environment.  Solving  this  issue  through  a  correct  implementation  of  the  Directive 
can therefore have far-reaching positive effects. 

6.1.5  To  what  extent  has  the  Directive  facilitated  cross-border  trades?  To 
what  extent  do  businesses  feel  more  confident/encouraged  to  trade 
across European borders?  

The  streamlining  of  payment  practices  across  the  EU  should  lead  to  increased  intra-Europe 
trading. Businesses are now aware of the rules regulating late payment in other countries and 

30 Intrum Justitia 

31 Full study can be found at 
http://ec.europa.eu/economy_finance/publications/economic_paper/2014/pdf/ecp531_en.pdf 

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thus, greater opportunities for cross-border trading should be available. The evaluation did not 
find any clear data to support this hypothesis. Stakeholders were unable to quantify the impact 
of the Directive on facilitating cross-border trading at this early stage. Feedback indicated that 
the  financial  crisis  and  current  economic  situation  of  some  Member  States  are  bigger 
deterrents to intra-EU trading than lack of knowledge of the rules regulating late payment in 
other  Member  States.  It therefore appears that  the  Directive has  not  yet  been  able  to  play  a 
crucial role in this domain due to the overbearance of these critical issues.  

6.1.6  Analysing factors influencing an effective application of the Directive 

and the achievements observed 

i) Factors preventing an effective application of the Directive 

There  are  different  factors  preventing  an  effective  application  of  the  Directive  in  the  public 
and private sectors but there is also a factor common to both. All these elements are described 
below: 

In  the  public  sector,  Member  States  under  adjustment  programmes  are  facing  difficulties  to 
adhere  to  the  rules  of  the  Directive  because  prompt  payment  of  current  invoices  has  to  be 
balanced against  accumulated debt  repayment. This  conflict of interest has  no easy solution 
other  than  strict  and  careful  management  of  funds  until  the  slate  is  wiped  clean.  Some 
Member  States  have  implemented  laws  to  facilitate  the  swift  repayment  of  debts  and  inject 
vital liquidity to companies. These laws sometimes contain provisions that pose questions as 
to their full compliance with the Directive.32 (See section 5.4 above) 

In  B2B  transactions,  the  biggest  obstacle  to  an  effective  application  of  the  Directive  is  the 
existence of an inherent power struggle between (generally) large and small businesses. This 
power  imbalance  means  that  larger  companies  often  dictate  the  terms  of  the  contract  to  the 
smaller  supplier,  imposing,  inter  alia,  long  payment  terms  and  low  interest  rates.  Since 
businesses do not  want to strain  their  commercial relationship  with  a large customer, unfair 
contractual terms, which Member States should prevent under Article 7 of the Directive, are 
nevertheless  often  accepted  and  subsequently  the  rights  of  the  Directive  are  not  exercised 
either. 

In all cases, the external evaluation found that the ambiguity or vagueness of certain concepts 
of the Directive  is an obstacle to  an effective application of its provisions.  One of the  most 
problematic notions is 'grossly unfair,' which is judged to be unclear and open to a wide range 

32 See ECFIN report "Market Reforms at work in Italy, Spain, Portugal and Greece" European Economy 5/2014 
for an explanation of the measures taken by Spain, Portugal and Italy against late payment of commercial debt 
by the public administration, as well as some figures of the impact of such measures. 

- 26 - 

 
 
 
                                                 
of interpretation.This central concept of the Directive is used to guide commercial relations. 
The  Directive  permits  derogations  from  its  guidelines  in  relation  to  payment  terms  and  the 
verification period provided that the resulting terms are 'expressly agreed in the contract and 
not  grossly  unfair  to  the  creditor.'  In  the  opinion  of  stakeholders,  the  notion  is  difficult  to 
streamline as what is grossly unfair in one country/sector/commercial relationship may not be 
easily  transferable  to  another.  The  Directive  provides  some  guidance  as  to  what  constitutes 
grossly  unfair  (see  section  2.3.6  above)  but  clearly,  more  clarity  is  required.  Likewise  the 
word 'expressly' causes confusion throughout the Member States. The legislator's intention in 
using this word was to mean 'in writing' but this is not evident in many cases. Stakeholders are 
also unsure of the start point in the calculation of payment periods.  

ii) Factors contributing to a more effective application of the Directive 

Voluntary  measures  such  as  the  creation  of  prompt  payment  codes  and  the  introduction  of 
incentives  such  as  positive  naming  and  shaming  for  parties  who  respect  the  terms  of  their 
contracts are proving to contribute towards an effective application of the Directive in the UK 
and Ireland. 

Facilitating  the  exchange  of  best  practices  between  Member  States  helps  increase  the 
effectiveness of the Directive. Forums such as the late payment expert group in which tips for 
tackling late payment are discussed encourage a speedier resolution of outstanding issues and 
create long-lasting solutions. 

The Commission clarifies concepts of the legislation through discussions in the context of the 
expert  group  meetings  and  through  correspondence  with  Member  States  via  a  structured 
dialogue between the Commission and the Member State(s) . A Frequently Asked Questions 
document33    is  also  available  on  the website  as  a  form  of  general  guidance  in  order to  help 
reach a common understanding of the concepts 

Finally,  maintaining  awareness  of  the  repercussions  of  late  payment  and  presenting  the 
Directive  as  a  remedy  is  essential  to  keep  the  momentum  going.  Whenever  possible,  the 
Commission participates in national awareness raising campaigns on this issue and provides 
expertise when approached.  

6.2  EFFICIENCY: EVALUATING THE COST EFFECTIVENESS OF THE INITIATIVE 

This section is central to the objectives of the REFIT programme, which aims to make EU law 
simple - one common rule to apply in all Member States - and to reduce regulatory costs. This 

33 http://ec.europa.eu/growth/smes/support/late-payment/index_en.htm 

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refers  specifically  to  the  costs  associated  with  reporting  and  administrative  burden,  costs  to 
public authorities related to the transposition and implementation of the Directive, costs to the 
public purse associated with voluntary measures that are linked to the Directive and costs to 
businesses of any  activities that result directly from the Directive (i.e. the exercise of rights 
granted  by  the  Directive).  Measuring  the  efficiency  of  the  Directive  means  evaluating  to 
which  extent  the  costs  implicated  by  the  usage  of  the  legislation  are  proportionate  to  the 
benefits achieved. Stakeholders consulted throughout the evaluation were unable to quantify 
the cost-saving brought about by the introduction of the Directive. This presents a limitation 
in evaluating the efficiency of the Directive in a measureable way. Qualitative feedback was 
however provided and points towards the assessment that overall, the Directive is an efficient 
instrument. 

6.2.1  Costs to businesses 

The  external  evaluation34  found  that,  for  businesses,  the  benefits  reaped  from  using  the 
Directive with regards to clear rules regulating late payment and strengthened rights generally 
outweigh the associated regulatory costs.35  

The  main  direct  cost  to  business  as  a  result  from  the  Directive  is  that  companies  have  to 
become familiar with the provisions of the Directive, possibly align their contracts with these 
rules  and  follow  up  on  delayed  payment.  This  cost  is  largely  perceived  as  negligible  by 
stakeholders.  The  Directive  has  not  resulted  in  any  specific  additional  requirement  that 
companies  need  to  adjust  to.  Furthermore,  there  are  no  administrative  or  reporting  burdens 
resulting  directly  from  the  Directive.  The  Directive  provides  two  important  legal  tools  that 
can be applied by companies in case of late payment, i.e. the possibility of claiming interest 
and a compensation fee for recovery costs. In line with the fact that there are no costs directly 
associated with them, companies consider these provisions as generally quite efficient. 

Costs are in fact coming from chasing late payments in terms of effective credit management, 
which was likely to have already been part of the everyday business before the introduction of 
the  Directive.  With  its  clarified  provisions  and  strengthened  rights,  the  legislation  provides 
companies  with  more  chances  of  successfully  recovering  their  debts.  However,  it  is 
noteworthy  to  remember  that  external  debt  recovery  in  the  form  of  alternative  dispute 
resolutions and litigation is governed by national law and therefore, success rates vary across 

34 See paragraph “9.1. Costs for businesses as a result of the Directive”, 59, of the quoted “Ex-post evaluation of 
Late Payment Directive” available at http://bookshop.europa.eu/en/ex-post-evaluation-of-late-payment-directive-
pbET0415875/  

35 Earlier, this document examined businesses' usage of the Directive and the cost in terms of risk associated with 
possibly damaging a commercial relationship. Here, only regulatory costs are considered. 

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the EU. This factor does touch on the efficiency of court procedures but this issue is out of the 
scope of the Directive.  

Costs associated with correctly applying the Directive are more relevant for businesses than 
public authorities. Businesses that were previously paying according to long payment terms, 
should now pay in 60 days. The cash transfer resulting from shorter payment terms amounts 
to large sums of money that have to be released.  

Overall, businesses view the Directive as efficient and, in the best case scenario involving a 
full  functioning  of  the  Directive,  rate  the  costs  as  even  negligible  compared  to  the  possible 
benefits  achieved.  The  results  of  the  external  evaluation  indicated  that  even  a  moderate 
reduction  in  payment  delays  could  lead  to  substantial  benefits.  The  Directive's  Impact 
Assessment estimated that a total of EUR 1,864 billion in company turnover is paid late each 
year.  If  companies  use  overdraft  facilities  offered  by  their  financial  institutions,  this  would 
lead  to  a  total  cost  of  about  EUR  158  million  per  day36.  In  other  words,  for  each  day  of 
reduction  in  payment  delays,  EUR  158  million  is  saved  by  European  companies  in  finance 
costs. These savings are very much worth the relatively negligible costs incurred.  

6.2.2  Costs to public authorities 

The  transposition  of  the  Directive  by  the  relevant  national  authorities  was  a  standard 
legislative  procedure  and  thus  did  not  incur  any  out  of  the  ordinary  costs.  The  external 
evaluation  concluded  that  costs  for  public  authorities  mainly  pertain  to  awareness  raising 
campaigns  and  adoption  of  supplementary  measures  to  support  the  Directive  such  as 
electronic  invoicing.  Any  technological  advancements  entail  an  initial  investment,  which 
should in the long term lead to cost reductions, in particular related to time management. As 
these initiatives are voluntary, the costs associated with transposition of the Directive remain 
minimal. This is confirmed by the national authorities themselves that consider such costs as 
marginal. 

Public  authorities  also  feel  the  squeeze  of  the  shortened  payment  terms.  The  more  regular 
release  of  funds  inevitably  necessitates  a  careful  cash  management  and  costs  will  likely  be 
incurred  where  structural  reorganisation  is  needed.  However,  businesses  that  supply  public 
authorities will ultimately benefit from these reduced payment terms. 

36 Figure calculated by external consultant. It should be noted that these estimates are based on a large number 
of assumptions, they need to be interpreted with caution and they should only be seen as an indication of the 
order of magnitude of costs related to late payments. 

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6.2.3  Comparing costs and benefits 

There  are  very  little  administrative  or  regulatory  costs  resulting  directly  from  the  Directive. 
For  public  authorities,  since  the  Directive  was  transposed  using  the  normal,  existing  legal 
procedures  in  the  Member  States,  there  were  no  extraordinary  costs  involved.  All  costs  to 
public  authorities  and  to  businesses  alike  result  from  the  application  of  the  Directive. 
Businesses,  especially  SMEs  who  are  the  key  target  group  of  this  Directive,  should  benefit 
most  from  a  correct  application  of  this  Directive  as,  in  principle,  payments  should be  made 
promptly, avoiding the need to use overdraft facilities. Set against these negligible costs, the 
Directive has the potential to deliver significant benefits. 

6.3  COHERENCE: FITTING IN THE INITIATIVE WITH OTHER EU POLICIES 

This  section  is  also  highly  relevant  with  regards  to  REFIT's  aims  as  EU  laws  should  be 
consistent with other policies and avoid creating overlaps that would lead to inefficiencies or 
barriers to reaching the policy objectives.  

To  what  extent  are  there  contradictions/overlaps/complementarities  between  the  Directive 
and any other Community action?  

The evaluation found that there is little evidence of contradiction between the Directive and 
other  EU  policies  for  combating  late  payment.  In  fact,  the  legislation  complements  and  is  
coherent  with  a  number  of  EU  initiatives  such  as  the  Single  Market  Strategy37  and  the 
Entrepreneurship 2020 Action Plan38. The objectives of these policies - to provide an impetus 
to overcome the effects of the financial crisis, create a level and competitive playing field for 
SMEs  and  develop  and  improve  the  single  market  -  are  carefully  interlaced,  with  each 
initiative supporting but not usurping the other. 

With respect to debt recovery, which is dealt with under Article 10 of the Directive, there are 
some EU Regulations already in place such as: 

•  European Payment Order (EOP)39 

37 Commission Staff Working Document, SWD(2015) 202, “A Single Market Strategy for Europe - Analysis and 
Evidence”, http://ec.europa.eu/growth/single-market/index_en.htm  

38 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social  Committee  and  the  Committee  of  the  Regions,  COM(2012)  795,  “Entrepreneurship  2020  action  plan”, 
http://ec.europa.eu/growth/smes/promoting-entrepreneurship/action-plan/index_en.htm  

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

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•  European Enforcement Order (EEO)40 

•  European Small Claims Procedure (ESCP)41 

As  a  reminder,  Article  10  of  the  Directive  establishes  a  right  for  businesses  to  obtain  an 
enforceable  title  through  an  expedited  process  in  the  case  of  an  undisputed  debt.  This  duty 
should  be  carried  out  in  accordance  with  the  Member  States'  "respective  national  laws, 
regulations and administrative provisions". On the contrary, the EOP and the ESCP are used 
only in the case of cross-border trades (i.e. when at least one party is domiciled in a MS other 
than  that  of  the  competent  court)  as  an  alternative  to  domestic  payment  orders  or  domestic 
claims  procedures.  The  EOP  is  a  simple  written  procedure  that  allows  creditors  to  recover 
uncontested civil and commercial claims according to a uniform procedure available in 27 42 
Member States. As expressly foreseen in Article 10, the provisions of the Directive shall be 
without  prejudice  to  the  provisions  of  the  EOP  Regulation,  which  therefore  acts  as  “lex 
specialis”  in  so  far  as  its  procedures  and  deadlines  are  concerned.  The  ESCP  is  a  written 
procedure  that  allows  creditors  to  contest  claims  of  up  to  €2,000  without  the  need  to  go 
through formal mutual recognition of the judgements. Feedback from stakeholders indicated 
that SMEs in particular find the ESCP to be of high importance and welcome an increase of 
the threshold. 

Whereas the external evaluation found that there could be an overlap between the Directive 
and  the  EOP,  the  Commission,  following  a  detailed  analysis  with  the  relevant  services, 
believes that this is not entirely accurate for the reasons described above. There is a synergy 
that can be observed in the interaction between these EU laws. The EEO works as a checklist 
for the national civil proceedings; if the conditions are fulfilled, the certificate must be issued 
upon  the  request.  In  conclusion,  from  the  internal  analysis  performed  by  the  Commission, 
there is no overlap between Article 10 and the aforementioned instruments: EOP and ESCP 
contain  own  deadlines  that  are  fully  coherent  with  Article  10  and  the  EEO  works  in 
conjunction with the Directive.  

Stakeholders  consulted  throughout  the  evaluation  suggested  exploiting  potential  synergies 
between the late payment Directive and the public procurement Directives. Every year, over 
250,000 public authorities in the EU spend around 18% of GDP on the purchase of services, 
works  and  supplies,  yet  there  is  little  or  not  enough  follow  up  to  ensure  that  enterprises 
engaging with this process are paid on time. A closer collaboration between these files could 
only be beneficial for companies competing for state contracts.  

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

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

42 Denmark not included 

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Overall, the Directive is found to be coherent with other EU initiatives and emphatically not 
surplus to requirements. 

6.4  RELEVANCE: MEASURING THE CONTINUED NEED FOR THE INITIATIVE 

a) 

To what extent do the objectives of the legislation still correspond to the 
needs of the stakeholders?  

The findings of the external evaluation clearly demonstrate that late payment remains a very 
relevant  issue  for  companies  across  the  EU.  The  survey  showed  that  four  out  of  five 
companies  experienced  incidences  of  late  payment  in  the  last  three  years,  i.e.  since  the 
adoption  of  the  Directive.  This  result  is  backed  up  by  Intrum  Justitia's  European  Payment 
Report  2015,  which  concluded  that  49%  of  companies  experience  a  liquidity  squeeze  as  a 
result  of  late  payment.  These  statistics  alone  should  be  enough  to  justify  continued  and 
concerted efforts to eradicate late payment from commercial transactions once and for all. It is 
recognized that the extent of the problem varies across countries, with Member States in the 
south  of  Europe  particularly  hard  hit.  Vast  differences  between  sectors  are  also  cited  with 
entities  working  in  construction  and  health  experiencing  excessive  payment  delays.  The 
external  evaluation  results,  however,  showed  no  statistically  significant  differences  in  the 
likelihood of experiencing late payment depending on the sector. The size of the business and 
the country in which it operates are much more likely indicators of late payment possibilities. 
However, business organisations representing Member States that traditionally pay promptly, 
confirm that late payment exists in their countries and therefore initiatives to find solutions at 
EU level must be pursued.  

b) 

Is the Directive the right instrument to tackle this issue? 

Whilst there remains support for a legislative instrument in the form of a Directive to combat 
late  payment43,  stakeholders  are  not  under  the  illusion  that  a  solution  will  be  found  solely 
through  this  route.  Late  payment  is  a  multi-faceted  problem  and  thus  there  cannot  be  a  one 
size fits all solution. That late payment is a norm and accepted as part of the culture of certain 
Member States will take time and further efforts to change. Furthermore, there is a school of 
thought that claims that late payment as trade credit is an innate part of business relationships, 
which can benefit both the debtor and the creditor. The advantages of trade credit to a debtor 
are obvious, but the acceptance of unfair contractual terms and delayed payment can also put 
the creditor in a position of power vis-à-vis the debtor. In accepting to turn a blind eye to long 
payment terms and delayed  payment,  the creditor can  demand from the debtor in  return the 
guarantee  of  future  business.  In  conclusion,  using  legislation  to  tackle  a  problem  that  is  in 
many ways driven by the nature of business negotiations is unlikely to find a swift solution. 
Instead, focusing on ways to instil the idea of prompt payment as a norm in society must also 

43 No respondent to the survey was in favour of repealing the Directive 

- 32 - 

 
 
 
                                                 
be part of tackling the problem. Legislation most certainly has its place amongst the remedies 
but it must be supported by other 'softer' intitatives as well. 

6.5  EU ADDED VALUE: ASSESSING WHAT THE INITIATIVE BRINGS TO THE EU 

What  is  the  EU  added  value  of  the  Directive  for  stakeholders?  What  would  be  the  most 
likely consequences of repealing this Directive? 

There  is  a  general  consensus  among  stakeholders  that  the  Directive  generates  significant 
added value to the EU. With very few exceptions, payment terms are now streamlined across 
Europe. The Directive has removed uncertainty with regards to payment practices and created 
a level playing field for businesses operating in the single market. It is widely acknowledged 
that these objectives could not have been achieved by Member States acting individually.  

A significant added value of the implementation of the Directive is that it has catapulted the 
issue of late payment high in Europe's political agenda. Member States are making concerted 
efforts to tackle this phenomenon so as to ensure, in many cases, the survival of their SMEs. 
Indeed, the President of the Commission has set a new boost for jobs, growth and investment 
amongst  his  10  priorities.  Ridding  Europe  of  late  payment  will  help  achieve  this  goal.  The 
Commission  will  therefore  continue  to  communicate  to  Member  States  why  a  correct 
implementation of this Directive is a vital contribution for Europe's future. 

Throughout  the  consultation  process,  stakeholders  were  almost  unanimous  in  their  call  to 
maintain  the  Directive  in  its  current  form  and  to  allow  more  time  to  pass  in  order  for  its 
effects  to  come  to  fruition.  Despite  the  moderate  effect  the  Directive  has  had  thus  far  on 
payment  behaviour,  repealing  it  at  this  stage  would  be  hasty  and  would  likely  have  a 
destabilising effect on Europe's economy. The Directive has its place in the fight against late 
payment and another evaluation in the near future would indicate much more clearly where, if 
any, legislative changes should be made.  

7  CONCLUSIONS 

Several  factors  render  a  definitive  assessment  of  the  Directive's  achievements  a  challenge. 
The  first  factor  concerns  the  timing  of  this  evaluation:  the  Directive  was  adopted  on  16 
February  2011, with  a transposition deadline of 16 March 2013. However, the last Member 
State  to  communicate  their  national  measures  transposing  the  Directive  did  so  on  6  August 
2014. Therefore, more time is required before being able to decisively assess the effects of the 
Directive.  The  second  factor,  which  will  remain  despite  the  passage  of  time,  is  that  it  is 
difficult to isolate the role of the Directive in any changes seen on the ground. There are other 
elements such as the financial crisis and the economic situation of certain Member States that 
may be more dominant drivers. A third factor is the lack of data collection systems in place, 
which means that any progress or diminishment in average payment periods is not recorded 

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and assessments must therefore be made on the basis of a compilation of different data and a 
number of assumptions. These factors hinder a conclusive assessment of the effectiveness of 
the Directive.  

Despite  these  limitations  in  assessing  the  impact  of  the  Directive,  there  are  already  results 
available at this early stage that make for encouraging analysis.  

With  respect  to  the  specific  objective  of  reducing  contractual  payment  periods  and  delays, 
moderate progress is noted in both the public and private sectors. On average, public entities 
appear to be paying in consistently shorter timeframes but approximately half of all Member 
States are still not respecting the 30-day deadline.  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. It can be posited that the Directive had a role to play 
in these observable positive trends. 

In  relation  to the specific objectives of enabling  creditors to exercise their  rights  when paid 
late, there is still work to be done. Although the Directive provides the means to claim interest 
for  late  payment  and  compensation  for  recovery  costs,  around  half  of  all  creditors  do  not 
exercise these rights when paid late for fear of damaging the commercial relationship. Many 
SMEs continue to have long payment terms imposed on them by larger companies. This is an 
inherent aspect of business culture brought about by the different place 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.  This matter cannot be fully addressed by legislative actions 
alone  because  SMEs  tend  not  to  exercise  their  rights  established  by  law  nor  would  they 
consider  taking  legal  action  against  an  important  customer.    A  more  systematic  use  of  soft 
measures  and  out  of  court  settlement  procedures  such  as  mediation  and  alternative  dispute 
mechanisms would prove useful. 

With respect to the wider objectives of the Directive of increasing the liquidity of businesses 
and  reducing  barriers  to  cross-border  transactions,  due  to  the  modest  changes  in  payment 
behaviour, there was not enough data available at this early stage to draw clear conclusions. 

When it comes to the effective application of the Directive, the external evaluation identified 
certain  barriers.  Member  States  experiencing  significant  public  debt  have  difficulties  in 
correctly applying the Directive. From a political stance, debt repayment may take precedence 
over  the  payment  of  current  invoices  but  the  Directive  does  not  foresee  any  such 
interpretation.  Another  factor  preventing  an  effective  application  of  the  Directive  is  the 
ambiguity  of  certain  key  concepts  of  the  legislation  such  as  'grossly  unfair'  and  'expressly'. 
Despite  Commission  guidance  on  these  notions,  stakeholders'  feedback  indicates  continued 
difficulty with these terms.  

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Factors contributing to an effective application of the Directive include the implementation of 
supporting measures at national level by Member States (i.e. prompt payment codes), which 
complement the objectives of the Directive. Forums that enable the exchange of best practices 
between  Member  States  on  how  to  tackle  late  payment  also  facilitate  the  application  of  the 
Directive. Finally, continued awareness raising and expertise-sharing by the Commission and 
by national experts prove beneficial. 

Overall, the external evaluation found that the Directive is an efficient instrument and that it 
does  not  create  unnecessary  administrative  burden  nor  regulatory  costs.  For  each  day  of 
reduction in payment delays, an estimated EUR 158 million is saved by European companies 
in  finance  costs.  Initial  costs  of  correctly  applying  the  Directive  (i.e.  shortening  payment 
terms  to  align  with  the  Directive's  deadlines) may  squeeze  the  budgets  of  public  authorities 
and businesses but in the long run the benefits including increased liquidity and a more secure 
business environment will outweigh the costs. 

The Directive is coherent with other EU policies and has a key place in commercial relations 
and  company  liquidity.  The  harmonisation  provided  by  the  Directive  establishes  a  basis  on 
which it should be easier for companies trading throughout EU to understand their rights and 
be able to act on them. In the area of debt repayment, the legislation is complemented by a 
number of EU regulations such as the European Payment Order, the Small Claims Procedure 
and  the  European  Enforcement  Order.  Overall,  such  legislation  promotes  different 
fundamental rights, including in particular freedom to conduct a business laid out in Article 
16 of the Charter of Fundamental Rights and freedom to property mentioned in Article 17 of 
the Charter of Fundamental Rights. 

The  Directive's  objectives  of  combating  late  payment  remain  largely  relevant.  The  external 
evaluation found that four out of five companies consulted have experienced late payment in 
the past three years. The Directive is playing its part in the fight against late payment but, due 
to the multi-faceted nature of the phenomenon, 'softer' initiatives are also needed.  

Overall  the  Directive has  added  value to  the EU: the rules  regulating payment practices are 
largely  streamlined  across  Europe.  Combating  late  payment  is  now  a  key  priority  for 
European  governments.  The  timely  introduction  of  the  legislation  during  the  financial  crisis 
created an impetus for governments to come up with further national measures that, together 
with the Directive, aim to permanently eradicate late payment in commercial transactions. 

The Directive appears to be on track to reaching its objectives. European governments have 
acknowledged  the  critical  need  to  address  the  issue  of  late  payment,  not  only  to  safeguard 
SMEs,  but  also  to  ensure  the  continued  recovery  of  the  economy  and  restoration  of  its 
competitiveness.  Whilst there remains work to be done, the future already looks brighter. 

- 35 - 

 
 
 
 
ANNEX 1 – PROCEDURAL INFORMATION 

In  January  2015,  DG  Internal  Market,  Industry,  Entrepreneurship  and  SMEs  launched  an 
evaluation  of  the  Late  Payment  Directive.  The  evaluation  of  the  Directive  is  part  of  the 
Commission's Agenda Planning (2016/GROW/026) and Work Programme (COM(2014) 910 
final – Annex 344). It was decided that the evaluation would be supported by an external study 
which was initially planned for a period of 9 months, ending in  September 2015. However, 
due  to  a  data  collection  issue,  which  will  be  elaborated  in  Annex  3,  the  external  evaluation 
was extended by two months until November 2015. 

An  inter-service  group  steering  group  was  set  up  at  the  launch  of  the  evaluation.  The 
Secretariat-General, then DG Markt (now DG Internal Market, Industry, Entrepreneurship and 
SMEs)  and  DG  Internal  Market,  Industry,  Entrepreneurship  and  SMEs  participated  in  the 
group. The group met four times during the evaluation process (22 January 2015, 27 February 
2015, 19 May and 20 October 2015.) 

The evaluation was carried out by an external consultant – Technopolis Group. Their results 
were counter-checked with national experts and business organisations during an expert group 
meeting held by the Commission on 24 November 2015. 

44 http://ec.europa.eu/atwork/pdf/cwp_2015_refit_actions_en.pdf 

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ANNEX 2: INTERVENTION LOGIC 

The following figure presents the intervention logic: 

- 37 - 

 
 
 
 
 
 
ANNEX 3: STAKEHOLDER CONSULTATION 

Stakeholders were consulted through the following means: 

a) 

b) 

c) 

d) 

Online survey  

Public consultation 

Interviews 

Expert group meetings 

THE ONLINE SURVEY 

The  online  survey  of  companies  was  a  key  element  of  the  evaluation.  The  objective  of  the 
survey  was  to  collect  primary  data  from  a  representative  sample  of  companies  across  all 
Member States regarding: 

  awareness of late payment regulations; 

  payment terms applied by companies; 

  experience of delays by other companies/public authorities; 

  awareness and exercise of the provisions in the directive; and 

  impact of late payments on companies. 

The  questions  have  been  discussed,  reviewed  and  agreed  with  the  consultants  following  a 
meeting held in Brussels and subsequent exchanges of mails. 

targeted  companies  was  developed,  by 

to  ensure 
The  sample  of 
representativeness in terms of the European industrial structure (different strata were created 
for company size and country group). 26,000 companies were contacted and 2,677 complete 
responses  were  received.  More  details  on  the  survey  including  the  sample,  list  of  questions 
and results can be found in the evaluation report45. 

the  consultant, 

THE PUBLIC CONSULTATION 

A version of the online survey was made available to the general public from June 2 to July 
19  in  the  form  of  a  public  consultation.  European  and  national  industry  associations  were 

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

- 38 - 

 
 
 
                                                 
provided  links  to  this  consultation  to  be  shared  with  their  members.  273  responses  were 
received in this open consultation. Due to the representative nature of the company survey, it 
was important to maintain the integrity of the sample of survey respondents. Hence it was not 
possible  to  merge  survey  and  consultation  results.  However,  the  consultation  provided 
interesting  corroborating  information  to  the  survey  and  its  results  are  described  in  the 
evaluation report46. 

INTERVIEWS 

a) 

Interviews at Member State level: 

The  objective  of  the  interviews  was  to  gain  a  richer,  in-depth  qualitative 
understanding of the issues faced by businesses in terms of late payment.  

Overall  135  telephone  interviews  with  companies,  industry  and  sector  associations, 
agreed between the Commission and consultants, were conducted: 

  111 business representatives were interviewed, including chambers of commerce, 
sector  associations,  SME  associations,  European  Enterprise  Network  members, 
or  general  business  associations.  Given  the  focus  of  the  study  on  construction, 
public  health  and  food  sector,  the  team  focused  on  these  three  sectoral 
associations.  
Interviews  with  22  public  authorities  collected  key  information  regarding 
transposition measures.  
In  2  cases  (in  Croatia  and  in  Spain)  individual  experts  on  late  payment  were 
interviewed. 

 

 

These  interviews  included  2  round  table  discussions  -  one  in  London  and  one  in 
Brussels. 18 organisations (11 national industry associations and 7 companies) were 
present at these meetings with the consultants. 

The  names  of  the  organisations  that  were  consulted  during  the  study  as  well  as  a 
breakdown of stakeholders by country and type of organisation are available in the 
evaluation report47. 

b) 

Follow-up interviews 

Finally,  following  closure  of  the  survey,  31  follow-up  interviews  between  the 
consultants  and  volunteering  companies  took  place  between  June  and  September 
2015.  The  follow  up  interviews  focused  on  the  responses  provided  in  the 
questionnaire  and  the  study  team  aimed  at  discussing  the  costs  incurred  by 

46 idem 

47 idem 

- 39 - 

 
 
 
                                                 
companies due to late payment. For this reason, the consultants contacted companies 
which indicated awareness of the possibility to claim interest and compensation (Q17 
of  the  survey),  experience  with  claiming  interest  or  compensation  (Q18  of  the 
survey) and other activities undertaken in case of late payment (Q20 of the survey). 
The  list  of  companies  that  participated  in  follow-up  interviews  is  available  in  the 
evaluation report48. 

EXPERT GROUP MEETINGS 

One expert group meeting took place throughout the consultation phase on 13 April 2015 and 
the second meeting occurred following the completion of the final report of the evaluation on 
24  November  2015.  Participants  in  the  latter  meeting  included  representatives  of  EU  level 
business  associations  who  were  consulted,  along  with  the  experts,  on  the  results  of  the 
evaluation. The former meeting was a standard expert group meeting in which the evaluation 
and its objectives and methodology were presented. 
SUMMARY 

The  Commission's  minimum  standards  are  considered  to  have  been  met  in  this  evaluation. 
The proof of this assertion came through the stakeholder consultation at the end of the process 
during  which  participants  agreed  that  the  evaluation  covered  all  pertinent  elements  of  the 
topic and were satisfied with the results.  

Overall, stakeholders agree on the main conclusion of the evaluation: that the Directive, in its 
current form, is a useful tool to combat late payment and that more time should be given to 
allow the full effects to come to light. There were some contradictory views by a minority of 
representatives of SMEs who would prefer to see legislative change that properly remedy the 
power imbalance between big and small businesses. Suggestions to harmonize payment terms 
in  B2B  transactions  were  made  in  this  respect.  This  idea  was  refuted  by  other  business 
organizations who argued that it would be impossible to impose one maximum payment term 
across  all  sectors.  Sector  specificities  are  too  important  and  this  idea  would  most  likely  not 
work in practice.  

48 idem 

- 40 - 

 
 
 
 
 
                                                 
ANNEX 4. METHODS AND ANALYTICAL MODELS USED IN PREPARING THE EVALUATION 

OVERVIEW OF DATA COLLECTION ACTIVITIES  

As already mentioned, the data collection activities included: 

•  Desk research 

•  Online survey 

•  Interviews at Member State level 

•  Follow up interviews 

These activities have been elaborated in Annexes 1 and 2 above. 

OVERVIEW OF THE ANALYTICAL APPROACH 

It was difficult to directly attribute changes in payment duration, terms or delay over time to 
the Directive. There were indeed a large number of intervening factors, such as the impact of 
the financial crisis, national and sectoral differences, business culture and social norms, which 
make  it  impossible  to  quantify  the  direct  impact  of  the  Directive  on  payment  behaviour.  In 
addition,  the  Directive  was  only  implemented  recently  and  its  effects  have  not  yet  fully 
materialised.  

The  evaluation  was  therefore  a  first  step  to  establish  the  état  des  lieux  regarding  payment 
behaviour following the implementation of the Directive, to understand the direction of travel 
in  the  key  variables  that  the  Directive  aims  to  influence  and  to  identify  key  drivers  and 
obstacles with respect to improving payment behaviour in B2B and PA2B transactions.  

No  single  analytical  method  could  have  delivered  all  of  the  objectives  of  the  evaluation. 
Hence, in addition to a descriptive survey analysis (i.e. cross-tabs) and extensive qualitative 
analysis  of  interview  findings,  a  multivariate  regression  analysis  based  on  survey  data  was 
conducted, by the consultants, to identify explanatory factors related to different dimensions 
of  late  payment.  Regression  analysis  allows  to  examine  the  statistical  significance  and  the 
relative  magnitude  of  the  impact  of  different  factors  on  a  dependent  variable  or  on  the 
probability of occurrence of an event.  

As  a  result,  though  it  stops  short  of  enabling  the  study  to  directly  attribute  impacts  to  the 
Directive, the regression complements and – indeed - adds significant value to the descriptive 
bi-variate survey analysis and the qualitative information gathered through interviews.  

Different regression model specifications were estimated to identify inter alia:  

- 41 - 

 
 
 
•  what factors explain awareness of the rules regulating late payments across European 

countries;  

•  which types of companies are more likely to experience late payments;  

•  which types of companies are more likely to exercise their rights under the Directive;  

•  what  factors  increase  the  probability  of  companies  facing  difficulties  to  pay  within 

contractually agreed terms; and  

•  what factors explain payment terms applied by companies?  

Age,  size,  turnover  of the  company  (%  in  own country)  and  type  of  customer  were  used  as 
explanatory  factors  when  performing  the  analysis.  Dummy  variables  for  each  country  and 
sector were also included to control for country specific impacts (business culture, regulatory 
framework, etc.) and sector heterogeneity.  

Results  and  conclusions  should  be  approached  with  some  caution  as  self-reporting  of  late 
payment experiences and behaviours related to late payment can be subject to mis-reporting, 
particularly since the survey questionnaire asked for late payment experiences over a period 
of three years. Furthermore, additional non-observed factors are not taken into account in the 
model. However, non-observed factors that are related to country or sector characteristics are 
captured by the corresponding fixed-effect variables. 

Full details of the regression methods are available in the evaluation report 49.  

Hard  economic  data  on  the  subject  (average  payment  periods/quantitative  impact  of  the 
Directive) is scarce and when available, the different methodologies used in the calculations 
do not allow for direct comparisons across the board. Data collected by the Swedish company, 
Intrum  Justitia  is  the  most  cited in  this  evaluation.  At  European  level, the  data  collected  by 
this  credit  management  company  and  presented  in  the  European  Payment  Reports  50  is  the 
most comprehensive to date. The consultant acknowledged the following caveats in relation to 
the usage of this data, namely:  

  Intrum  Justitia's  results  up  to  2014  were  based  on  the  responses  of  6,000-10,000 
companies  across  Europe.  Since  the  sample  can  vary  from  year  to  year,  this  could 
have affected findings on the potential scope of late payment trends in some Member 
States. The Payment Index is calculated from eight differently weighted sub-indices, 
which are based on a total of 21 individual values.  

49 idem 

50 Named European Payment Index up to 2014 

- 42 - 

 
 
 
                                                 
  Not  all  EU  Member  States  were  covered  in  the  Index.  Data  from  Luxembourg  and 
Malta were missing and some Member States such as Bulgaria, Croatia, Romania and 
Slovenia were only covered from 2012 or 2013 onwards.  

  Pan-European  average  figures  available  in  the  Index  report  were  not  (entirely) 
relevant  for  the  evaluation.  These  figures  were  based  on  data  from  26  EU  Member 
States  and  other  countries  including  Bosnia-Herzegovina,  Norway,  Russia,  Serbia, 
Switzerland and Turkey.  

  EPI  2015  followed  a  different  methodology  than  previous  years  making  a  historical 
comparison  impossible.  Changes  included  adjustments  and  improvements  to  the 
weighting of data and sample size was increased by about 10 percent in 2015. As a 
result  of these changes, no historical comparison  could be drawn between 2015 and 
previous years. 

In addition to Intrum Justitia, other cross-country data used in the evaluation included: 

  EOS  -  “European  Payment  Practices”  asked  2,600  companies  in  12  European 
countries about payment practices in their respective countries. 200 companies in each 
of  the  following  countries  UK,  Spain,  France,  Austria,  Greece,  Romania,  Russia, 
Slovakia,  Bulgaria,  Poland  and  Belgium,  and  400  companies  from  Germany, 
answered questions about their own payment experiences, economic developments in 
their  countries  and  on  issues  relating  to  risk  and  receivables  management.  These 
results  were  used  throughout  the  evaluation  report,  but  it  should  be  noted  that  EOS 
averages included non-EU countries.  

  Atradius  -  Atradius  conducts  annual  reviews  of  international  corporate  payment 
practices  through  a  survey  called  the  “Atradius  Payment  Practices  Barometer”.  The 
evaluation  report  presented  the  results  of  the  survey’s  2015  edition  conducted  in  13 
countries across Western Europe based on a sample of 2,713 interview respondents. 
Due to a change in research methodology no year-on-year comparison was feasible. 

  Euler  Hermes  Country  Reports  present  economic  profiles  of  individual  countries, 
including  sections  on  economic  strengths  and  weaknesses,  country  rating  based  on 
country  grade  and  country  risk  level,  main  activity  sectors  and  trade  partners, 
economic  forecasts  and  more.  Relevant  information  from  these  reports,  was  used 
throughout the evaluation. 

  Grant  Thornton's  "European  Business  Survey"  is  a  survey  of  6,000  European 
companies, which  provides  a  comparative  analysis  of  the  opinions  of  small  and 
medium-sized enterprises in 17 European countries on a wide range of issues relevant 
to  their  competitiveness.  The  Grant  Thornton  survey  results  were  derived  from: 
Conway  L.  (1997):  Late  Payment  of  Commercial  Debt,  Research  Paper  97/25,  12 
February 1997. 

To the greatest extent possible, national sources of information on average payment duration 
and  delays,  impacts  on  economic  growth  and  employment  were  also  assessed  by  the 
consultant during the desk research phase.  

- 43 - 

 
 
 
There  is  also  limited  academic  literature  on  the  subject  of  the  Directive.  Whilst  numerous 
dissertations on the subject of late payment exist, few deal with the topic from the viewpoint 
of  the  Directive  as  the  central  and/or  unique  variable.  Nevertheless,  the  available  literature 
allowed for a greater understanding of how the Directive coincides with established business 
practices and, by extension, the legislation's impact on business culture. 

Evidence in the form of complaints received by the Commission in relation to bad payment 
practices in Member States was incorporated into the analysis. The findings of the evaluation 
justify  the  open  infringements,  and  thus  corroborate  the  information  communicated  through 
the complaints received. 

External expertise in the form of the Commission's expert group on late payment was used in 
the process. The experts collaborated with the consultants to direct them to the key national 
business organisations and available data. In this way, the main target groups were guaranteed 
to be reached and consulted.  

- 44 -