Ireland recently transposed a revised EU Directive combating late payment in commercial transactions (Directive 2011/7/EU) into Irish law. The Directive was transposed by the European Communities (Late Payment in Commercial Transactions) Regulations 2012, which apply with effect from 16 March 2013. It applies to all payments made as remuneration for commercial transactions in both the public and private sectors.
The new legislation has been welcomed by Ministers Richard Bruton TD and John Perry TD. Speaking on the eve of the transposition, Mr Perry TD, Minister for Small Business, commented that:
“…the Late Payments legislation is a welcome mechanism that can help improve cash flow for businesses. It is particularly valuable for small firms. Its implementation by all parties will make a real difference to business in these troubled times.”
The Regulations provide for specific deadlines for the payment of invoices and also makes provision for compensation for suppliers of goods and services in the form of interest where payment terms are breached. For business to business transactions, the general payment deadline is 30 days, unless the contract states otherwise. Where the contract provides for a payment term in excess of 60 days, such term must be “expressly agreed” and must not be “grossly unfair” to the supplier. The standard deadline for public authority payments is 30 days, which may also be extended to 60 days if expressly agreed.
The Regulations provide that it is an implied term of every commercial transaction that the supplier is entitled to “statutory late payment interest” in circumstances where the purchaser does not pay for the goods or services concerned by the relevant payment date. This entitlement arises automatically, without the necessity of a reminder. The interest rate chargeable is set at the ECB reference rate plus 8 percentage points, unless otherwise specified in the contract.
The Regulations also establish an entitlement for creditors to compensation for expenses incurred as a result of late payment, plus additional reasonable recovery costs. Provision is made for a minimum fixed charge of €40 where the debt is less than €1,000; €70 where the debt is between €1,000 and €10,000; and €100 where the debt is greater than €10,000. The supplier is not required to adduce evidence of having incurred relevant recovery costs.
In circumstances where a supplier considers a waiver of (or variation to) contractual payment terms to be grossly unfair, he may bring an application to the Circuit Court or to an arbitrator to vary the term.
The Regulations do not apply to transactions with consumers; contracts made before 16 March 2013; or debts that are subject to insolvency proceedings instituted against a debtor, including proceedings aimed at debt restructuring.
Contributed by: Paul Hughes
