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6.10.

1999 EN Official Journal of the European Communities C 284/1

I
(Information)

COUNCIL

COMMON POSITION (EC) No 36/1999

adopted by the Council on 29 July 1999

with a view to adopting Directive 1999/.../EC of the European Parliament and of the Council of ...
on combating late payment in commercial transactions

(1999/C 284/01)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE (4) Whereas on 4 June 1997 the Commission published an
EUROPEAN UNION, action plan for the single market, which underlined that
late payment represents an increasingly serious obstacle
for the success of the single market;
Having regard to the Treaty establishing the European
Community, and in particular Article 95 thereof,
(5) Whereas on 17 July 1997 the Commission published a
Having regard to the proposal from the Commission (1), report on late payments in commercial transactions (7),
summarising the results of an evaluation of the effects of
the Commission’s recommendation of 12 May 1995;
Having regard to the opinion of the Economic and Social
Committee (2),
(6) Whereas heavy administrative and financial burdens are
Acting in accordance with the procedure laid down in Article placed on businesses, particularly small and medium-sized
251 of the Treaty (3), ones, as a result of excessive payment periods and late
payment; moreover, these problems are a major cause of
insolvencies threatening the survival of businesses and
(1) Whereas in its resolution on the integrated programme in result in numerous job losses;
favour of SMEs and the craft sector (4), the European
Parliament urged the Commission to submit proposals to
deal with the problem of late payment; (7) Whereas the differences between payment rules and
practices in the Member States constitute an obstacle to
the proper functioning of the internal market;
(2) Whereas on 12 May 1995 the Commission adopted a
recommendation on payment periods in commercial
transactions (5),
(8) Whereas this has the effect of considerably limiting
commercial transactions between Member States; this is in
(3) Whereas in its resolution on the Commission recommen- contradiction to Article 14 of the Treaty as entrepreneurs
dation on payment periods in commercial transactions (6), should be able to trade throughout the internal market
the European Parliament called on the Commission to under conditions which ensure that transborder opera-
consider transforming its recommendation into a pro- tions do not entail greater risks than domestic sales;
posal for a Council directive to be submitted as soon as distortions of competition would ensue if substantially
possible; different rules applied to domestic and transborder opera-
tions;

(1) OJ C 168, 3.6.1998, p. 13 and OJ C 374, 3.12.1998, p. 4.


(2) OJ C 407, 28.12.1998, p. 50. (9) Whereas the most recent statistics indicate that there has
(3) Opinion of the European Parliament of 17 September 1998 (OJ been, at best, no improvement in late payments in many
C 313, 12.10.1998, p. 142), Council common position of 29 July Member States since the adoption of the recommendation
1999 and Decision of the European Parliament of … (not yet of 12 May 1995;
published in the Official Journal).
(4) OJ C 323, 21.11.1994, p. 19.
(5) OJ L 127, 10.6.1995, p. 19.
(6) OJ C 211, 22.7.1996, p. 43. (7) OJ C 216, 17.7.1997, p. 10.
C 284/2 EN Official Journal of the European Communities 6.10.1999

(10) Whereas the objective of combating late payments in HAVE ADOPTED THIS DIRECTIVE:
the internal market cannot be sufficiently achieved by
the Member States acting individually and can, therefore,
be better achieved by the Community; this Directive
Article 1
does not go beyond what is necessary to achieve
that objective; this Directive complies therefore, in its
entirety, with the requirements of the principles of Scope
subsidiarity and proportionality as laid down in Article
5 of the Treaty; This Directive shall apply to all payments made as remuner-
ation for commercial transactions.
(11) Whereas this Directive should be limited to payments
made as remuneration for commercial transactions and
does not regulate transactions with consumers, interest Article 2
in connection with other payments, for example pay-
ments under the laws on cheques and bills of exchange, Definitions
payments made as compensation for damages including
payments from insurance companies;
For the purposes of this Directive:
(12) Whereas the fact that the liberal professions are covered
by this Directive does not mean that Member States have 1. ‘commercial transactions’ means transactions between
to treat them as undertakings or merchants for purposes undertakings or between undertakings and public auth-
not covered by this Directive; orities which lead to the delivery of goods or the provision
of services for remuneration; ‘undertaking’ means any
organisation acting in the course of its independent
(13) Whereas this Directive only defines the term ‘enforceable economic or professional activity, even where it is carried
title’ but does not regulate the various procedures of on by a single person;
forced execution of such a title and the conditions under
which forced execution of such a title can be stopped or
suspended; 2. ‘late’ payment means exceeding the contractual or statu-
tory period of payment;
(14) Whereas late payment constitutes a breach of contract
which has been made financially attractive to debtors in 3. ‘enforceable title’ means any decision, judgment or order
most Member States by low interest rates on late for payment issued by a court or other competent
payments and/or slow procedures for redress; a decisive authority, whether for immediate payment or payment by
shift is necessary to reverse this trend and to ensure that instalments, which permits the creditor to have his claim
the consequences of late payments are such as to against the debtor collected by means of forced execution;
discourage late payment; it shall include a decision, judgment or order for payment
that is provisionally enforceable and remains so even if the
debtor appeals against it.
(15) Whereas there may exist certain categories of contracts
where a longer payment period in combination with a
restriction of freedom of contract or a higher interest
rate can be justified; Article 3

Interest in case of late payment


(16) Whereas this Directive should prohibit abuse of freedom
of contract to the disadvantage of the creditor; this
Directive does not affect national provisions relating to 1. Member States shall ensure that:
the way contracts are concluded or regulating the
validity of contractual terms which are unfair to the
(a) interest in accordance with point (d) shall become payable
debtor;
from the day following the date or the end of the period
for payment fixed in the contract;
(17) Whereas the consequences of late payment can be
dissuasive only if they are accompanied by procedures (b) if the date or period for payment is not fixed in the
for redress which are rapid and effective for the creditor; contract, interest shall become payable automatically with-
in conformity with the principle of non-discrimination out the necessity of a reminder:
contained in Article 12 of the Treaty, those procedures
should be available to all creditors who are established (i) 30 days following the date of receipt by the debtor of
in the Community; the invoice or an equivalent request for payment,

or
(18) Whereas Article 4 of this Directive requires that the
recovery procedure for unchallenged claims be com- (ii) if the date of the receipt of the invoice or the equivalent
pleted within a short period of time in conformity with request for payment is uncertain, 30 days after the date
national legislation, but does not require Member States of receipt of the goods or services,
to adopt a specific procedure or to amend their existing
legal procedures in a specific way, or
6.10.1999 EN Official Journal of the European Communities C 284/3

(iii) if the debtor receives the invoice or the equivalent Article 4


request for payment earlier than the goods or the
services, 30 days after the receipt of the goods or Recovery procedures for unchallenged claims
services,

1. Member States shall ensure that an enforceable title can


or be obtained, irrespective of the amount of the debt, normally
within 90 calendar days of the lodging of the creditor’s action
(iv) if a procedure of acceptance or verification, by which or application at the court or other competent authority,
the conformity of the goods or services with the provided that the debt or aspects of the procedure are not
contract is to be ascertained, is provided for by statute disputed. This duty shall be carried out by Member States in
or in the contract and if the debtor receives the invoice conformity with their respective national legislation, regu-
or the equivalent request for payment earlier or on the lations and administrative provisions.
date on which such acceptance or verification takes
place, 30 days after this latter date; 2. The respective national legislation, regulations and
administrative provisions shall apply the same conditions for
all creditors who are established in the European Community.
(c) the creditor shall be entitled to interest for late payment to
the extent that: 3. The 90-calendar-day period referred to in paragraph 1
shall not include the following:
(i) he has fulfilled his contractual and legal obligations,
(a) periods for service of documents,
and
(b) any delays caused by the creditor, such as periods devoted
to correcting applications.
(ii) he has not received the amount due on time, unless
the debtor is not responsible for the delay;
4. This Article shall be without prejudice to the provisions
of the Brussels Convention on jurisdiction and enforcement of
judgments in civil and commercial matters (1).
(d) the level of interest for late payment (‘the statutory rate’),
which the debtor is obliged to pay, shall be the sum of the
interest rate of the main refinancing facility of the Euro-
pean Central Bank (ECB) in the form of two-week-tenders Article 5
at fixed interest rates in force on the first ECB business day
of the half-year in question (‘the reference rate’), plus at Transposition
least six percentage points (‘the margin’), unless otherwise
specified in the contract. For a Member State which is not
participating in the third stage of economic and monetary 1. Member States shall bring into force the laws, regulations
union, the reference rate referred to above shall be the and administrative provisions necessary to comply with this
equivalent rate set by its national central bank. In both Directive before ... (*). They shall forthwith inform the Com-
cases, the reference rate in force on the first central bank mission thereof.
business day of the half-year in question shall apply for
the following six months. When Member States adopt these measures, they shall contain
a reference to this Directive or shall be accompanied by such
reference on the occasion of their official publication. The
methods of making such reference shall be laid down by
2. For certain categories of contracts to be defined by Member States.
national law, Member States may fix the period after which
interest becomes payable to a maximum of 60 days provided
that they either restrain the parties to the contract from 2. Member States may maintain or bring into force pro-
exceeding this period or fix a mandatory interest rate that visions which are more favourable to the creditor than the
substantially exceeds the statutory rate. provisions necessary to comply with this Directive.

3. In transposing this Directive Member States may exclude:


3. Member States shall ensure that an agreement on the
date for payment or on the consequences of late payment (a) debts that are subject to insolvency proceedings instituted
which is not in line with the provisions of paragraphs 1 and 2, against the debtor,
either shall not be enforceable or shall give rise to a claim for
damages if, when all circumstances of the case, including good and
commercial practice, are considered, it is grossly unfair to the
creditor. If such an agreement is determined to be grossly
unfair, the statutory terms will apply, unless the national (1) Consolidated version (OJ C 27, 26.1.1998, p. 3).
courts determine different conditions which are fair. (*) 24 months after this Directive enters into force.
C 284/4 EN Official Journal of the European Communities 6.10.1999

(b) contracts that have been concluded prior to ... (*). Article 6
Entry into force
This Directive shall enter into force on the day of its publication
in the Official Journal of the European Communities.
4. Member States shall communicate to the Commission
the text of the main provisions of national law which they
adopt in the field covered by this Directive. Article 7
Addressees
This Directive is addressed to the Member States.
5. The Commission shall undertake for at least the first
three years after ... (*) an annual review of, inter alia, the Done at ...
statutory rate to assess the impact on commercial transactions
and the operation of the legislation in practice. The results of For the European Parliament For the Council
this review and of other reviews will be made known to the
European Parliament and the Council. The President The President

(*) 24 months after this Directive comes into force.


6.10.1999 EN Official Journal of the European Communities C 284/5

STATEMENT OF THE COUNCIL’S REASONS

I. INTRODUCTION

1. On 24 April 1998, the Commission submitted a proposal for a Directive of the European Parliament and of
the Council combating late payment in commercial transactions.

The proposal was then based on Article 100a of the Treaty (and is now based on Article 95 of the Treaty),
and the co-decision procedure applies (qualified majority requested).

2. The European Parliament adopted its opinion in first reading on 17 September 1998.

The Commission then submitted an amended proposal.

3. The Council fixed its common position in accordance with Article 251(2)(3) on 29 July 1999.

II. OBJECTIVE

The objective of the coming Directive is, inter alia, to combat late payment by harmonising the interest that shall
become payable, after the payment period has expired. The Directive also requires that the recovery procedure
for unchallenged claims be completed within a short period of time in conformity with national legislation, but
does not require Member States to adopt a specific procedure or to amend their existing legal procedures in a
specific way. It goes without saying that this Directive fully respects the principle of contractual freedom.

III. COMMENTS

A. GENERAL REMARKS

The Council tried to improve the situation of the creditor in the three areas where the need for harmonised
rules is the most urgent. These are the period after which interest shall become payable, the level of interest
payable on arrears and the need of recovery procedures for unchallenged claims to be completed normally
within 90 days. In the other areas covered by the proposal of the Commission, the Council could not
confirm the need or even possibility of harmonisation. This concerns the retention of title (Article 4 of the
amended proposal of the Commission), a special procedure for claims for amounts up to EUR 20 000
(Article 6 of the amended proposal of the Commission) and special rules for the public sector (Articles 7
and 8 of the amended proposal of the Commission).

With regard to the amendments proposed by the European Parliament and which were not retained by the
Commission in its amended proposal (1) (Amendments 5, 6, 17, 23, 25, 27, 29, 33, 34) the Council decided
not to retain these amendments also for the abovementioned reasons.

The Council focused its examination of the amended proposal on the amendments proposed by the
European Parliament which were retained by the Commission.

The detailed account of the results of the discussion within the Council is set out hereafter in paragraph B
(comments on the articles).

(1) Doc. 12571/98.


C 284/6 EN Official Journal of the European Communities 6.10.1999

B. COMMENTS ON THE ARTICLES

The texts referred to in the following paragraphs concern the amended proposal of the Commission.

(i) Article 1

(Scope)

Article 1 remains nearly unchanged. The Council merely inserted a clarification that only payments are
meant that are made as remuneration for commercial transactions.

(ii) Article 2

(Definitions)

Amendments 9, 10, 11, and 13

Article 2 now contains definitions of ‘commercial transactions’, of ‘late payment’ and of ‘enforceable
title’. The first two definitions are now more concise, but they were kept largely unchanged in substance.
The definition of ‘enforceable’ title did not appear in the amended proposal of the Commission. The
Council inserted this definition to clarify the scope of Article 5. The definitions of ‘retention of title’,
‘public authority’ and of ‘public procurement’ have become superfluous. These definitions were needed
for the application of Articles 4, 7 and 8 of the amended proposal of the Commission, which the
Council could not accept and which have been deleted. European Parliament Amendment 9 is partially
covered in the definition retained by the Council in its common position. However, Amendments 10,
11 and 13 could not be retained.

(iii) Article 3

(Interest in case of late payment)

Amendments 14, 15 and 17

The Council could follow the main points of Article 3 of the amended proposal of the Commission.
These consist of the following. An interest rate shall become payable without the necessity of a reminder
after a certain period of time has expired. The level of interest has been defined by reference to a
statutory rate and a margin. The contracting parties should have the freedom to stipulate other payment
periods and interest rates, if they think this would be more appropriate to their contractual relations.

The Council could not confirm the proposed length of the period of time and certain details of the
proposed provision. The Council agreed after an intensive discussion that a period of 30 days after the
receipt of an invoice or an equivalent request for payment would be reasonable. The Council shared the
concerns of the Commission and the European Parliament about a possible abuse of the freedom of
contract with regard to the period of time for payment. The Council decided that the anti-abuse
mechanisms provided for in the amended proposal of the Commission could be simplified and would
in this way be much more affective. Contractual clauses, which are grossly unfair to the creditor shall
not be enforceable or shall give rise to damages, unless the national judge determines different conditions
which are fair.

The Council decided to take into consideration special situations in some Member States. In these
situations the 30-day rule combined with the freedom of the parties to stipulate other rules in their
special contract sometimes does not work in a satisfactory way. There are cases, where one of the parties
is so dominant that the other party is de facto unable to negotiate a balanced contract. In other cases
one party may lack sufficient professional expertise to use its freedom of contract properly. This is the
reason why the Council inserted a rule, which allows Member States to extend the period after which
interest becomes due to up to 60 days, under the condition that the respective Member State in its
national legislation either reduces the freedom of contract and prevents the parties to foresee a further
extension of the 60-day period in their contract or instead provides for a significantly higher interest
rate.
6.10.1999 EN Official Journal of the European Communities C 284/7

In the end the Council could not accept the provision in Article 3(1)(j) of the amended proposal of the
Commission. This provision would oblige Member States to enable the creditor to claim not only
interest but also compensation for all other damage incurred as consequence of late payment. Only a
few Member States were prepared to accept such a broad approach. Several Member States requested
instead the reinsertion of a simpler provision obliging Member States to ensure that the creditor is
entitled to claim reasonable compensation for debt collection costs. These Member States argued that
the interest rate fixed in Article 3(1)(d) of the common position would not strengthen sufficiently the
position of the creditor and a new subparagraph (e) should be inserted that would be limited to debt
collection costs only. Other Member States disagreed with this view and pleaded against such a provision
arguing the fact that any text dealing with compensation would introduce several legal uncertainties
into the text of the Directive.

Taking into account the above, European Parliament Amendments 14, 15 and 17 could not be retained.

By way of political compromise the Council decided not to insert a compensation clause, but, on the
other hand, fix the margin at a substantially higher lever. In the previous discussion the opinions among
the Member States had diverged from a 2 % margin to an 8 % margin. The Council finally agreed on a
6 % margin.

The Commission, by way of compromise, accepted these amendments and alternations.

(iv) Article 4 (deleted)

(Retention of title)

Amendments 18, 19 and 21

The Council could not accept Article 4 of the amended proposal of the Commission on the retention of
title. Member States had strong doubts, that such a clause would really accelerate payments. They felt,
that the retention of title was rather an instrument to protect the creditor against the risks of the debtor’s
insolvency. They also feared that clauses on the retention of title, especially an extended clause on this
issue would interfere with their national property and insolvency law, which the Directive should leave
unaffected. The Commission finally accepted the absolute lack of majority to maintain this in the
Directive. This article was thus deleted from the common position. Therefore, European Parliament
Amendments 18, 19 and 21 do not apply.

(v) Article 5

(Recovery procedures for unchallenged claims)

The Council experienced strong difficulties with the text of Article 5, in particular relating to the original
wording contained in the amended proposal of the Commission. The Council’s Legal Service examined
this article and took the view that this was not within the competence of the Community. Nevertheless,
the Council felt that this provision was essential to the Directive and therefore should not be deleted.
Thus, to take into account the opinion of the Council’s Legal Service, the wording was amended in the
sense that Member States are not obliged to introduce into their national law of civil procedure a new
special procedure for the recovery of undisputed debts nor to amend their existing legal procedures in a
specific way. They only have to ensure that an enforceable title for such debts can normally be obtained
within 90 days.

It is recalled that Parliament did not submit any amendment to this article.
C 284/8 EN Official Journal of the European Communities 6.10.1999

(vi) Article 6 (deleted)

(Simplified procedure for disputed claims up to the amount of EUR 20 000)

Amendments 22 and 23

The Council could not accept Article 6 of the amended proposal of the Commission. This article would
have obliged Member States to introduce into their national law of civil procedure a new procedure. In
the view of the Council’s Legal Service this would have exceeded the Communities legal competencies.
Member States also could not see the need for such a new procedure and considered a provision dealing
with recovery procedures for disputed claims out of place in a directive dealing only with payments that
are late. The intended structure of such a procedure was also considered unclear . Under such conditions,
the provision did not gather support within the Council. Thus this article was deleted from the common
position. Therefore, European Parliament Amendments 22 and 23 do not apply.

(vii) Articles 7 and 8 (deleted)

(Special provision for public procurement)

(Amendments 24, 25, 26, 27, 28 and 33

Articles 7 and 8 of the amended proposal of the Commission provided for special rules for public
procurement. The Council was firmly convinced, that there was no justification for such special rules
and that the general rules should apply to both the public and private sector. The Council also pointed
out, that the limits between private and public commercial transactions have become blurred because of
the growing number of privatisations. Finally the Council did not see a satisfactory solution for the
problem of subcontractors. The special rules should, following the original proposal, apply only to the
direct contractors of the public authorities. The contractors themselves were not obliged to offer the
same conditions to their subcontractors. In Article 7 of its amended proposal the Commission
introduced such an obligation, which would have led to the result that a huge part of the private sector
would have been subject to the special rules for public procurement. The Council decided that it was
much simpler and much more convincing to improve the general rules and to renounce the special rules
for the public sector. However, it should be stressed that an anti-abuse clause was included in Article 3
of this Directive. The Commission finally accepted this decision. Taking into account the above these
two articles were deleted from the common position.

Therefore, European Parliament Amendments 24, 25, 26, 27, 28 and 33 do not apply.

(viii) Article 9 (deleted)

(Committee)

Amendments 29 and 34

Article 9 of the amended proposal of the Commission provided for a committee procedure, which
would have allowed the Commission to raise the interest rate and the amount, up to which the simplified
procedure for disputed claims should apply. Since the latter procedure did not gather support within
the Council, the Committee procedure became superfluous. With regard to the interest rate, the Council
decided that, given the importance of the question, the normal legislative procedure should apply for
any change in the interest rate. Thus, this article was deleted from the common position. Therefore,
Amendments 29 and 34 do not apply.

(ix) Article 10

(Transposition)

Amendment 31

The Council agreed on a longer transposition period. In addition the Council agreed on two exceptions,
that the Member States should be able to introduce. First, Member States should be allowed to maintain
special rules for the handling of payments in case of the insolvency of the debtor. Second, Member
States should have the possibility to exclude contracts of the scope of their implementing legislation,
which had been concluded prior to the expiry of the transposition period.

It is recalled that European Parliament Amendment 31 was fully taken into account in new Article 5(2)
(former Article 10(2)).