LATE PAYMENT IN COMMERCIAL TRANSACTIONS
(20800)
6797/00
COM(00) 133
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Amended draft Directive combatting late payment in commercial
transactions.
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| Legal base: |
Article 95 TEC; co-decision; qualified majority voting
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| Document originated:
| 8 March 2000 |
| Forwarded to the Council:
| 8 March 2000 |
| Deposited in Parliament:
| 24 March 2000 |
| Department: |
Trade and Industry |
| Basis of consideration:
| EM of 28 March 2000 |
| Previous Committee Report:
| None, but see (19982); HC 34-xxi (1998-99), paragraph 5
(26 May 1999)
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| Discussed in Council:
| In Conciliation since 9 March 2000
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| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared |
Introduction
24.1 The purpose of this Directive is to
put in place a range of measures designed to discourage late payment
in commercial transactions.
24.2 We cleared the draft Common Position
text on 26 May 1999[43].
It was adopted by the Council in July after months of discussion
in COREPER and the Council Working Group. Several Member States,
including the UK, had serious concerns about some aspects of the
original proposal, particularly those relating to retention of
title, public procurement and civil justice procedures. Some of
these provisions were deleted, while those that remained were
in a form acceptable to the UK, according to the Minister for
Small Business and E-Commerce (Ms Patricia Hewitt).
European Parliament Second Reading and Conciliation
24.3 At its Second Reading on 16 December
1999, the European Parliament adopted 25 amendments to the Common
Position, of which the Commission has accepted 23. It seeks to
reinstate a number of the original provisions. The official text
we consider here is the Commission's amended text. It has been
rejected unanimously by the Council and the draft Directive has
been referred to the Conciliation Committee. This has six weeks
from 9 March, — the date of its first meeting — to
agree a Joint Text. The text must then be approved by a qualified
majority of the Council, and a simple majority of the EP.
The amended text
24.4 In her Explanatory Memorandum of 28
March, the Minister summarises the proposal as amended, commenting
on the UK's position and, in some cases, forecasting the likely
compromise. She notes that the amendments cover seven main areas:
— Interest in case
of late payment
24.5 Article 3 of the Directive provides
that Member States should ensure that interest is payable the
day following the date for payment fixed in the contract. The
Commission has supported the EP amendment which would reduce from
30 to 21 days the 'default' period after which interest
would become payable if the date of payment is not fixed in the
contract (Article 3(b)). However, the majority of Member States
share the UK's view that the 30 day period should be retained
as it is more compatible with the common commercial practice of
managing finances on a monthly basis. Acceptable compromises in
other areas mean that the EP is likely to accept this figure.
24.6 The Common Position also proposed a
level of statutory interest (Article 3(d)) which is the
sum of the main refinancing facility of the European Central Bank
plus at least 6%. The reference rate in the UK is the Bank of
England base rate. The additional rate now proposed, of 8%, does
not present difficulties for the UK. The Minister expects a compromise
between the two figures.
24.7 The Commission has supported the European
Parliament amendment which would allow creditors to claim compensation
for costs incurred through the debtor's late payment, in particular
the cost of bank loans, administrative costs of recovery within
the business, the costs of debt recovery agencies and the cost
of court proceedings. The UK has always argued that such a provision
strays beyond the scope of this Directive, the Minister recalls.
However a qualified majority of Member States are prepared to
agree a compromise on grounds that the costs of debt recovery
are not reimbursed fully by the right to claim interest. She says:
"The UK is therefore
seeking to ensure that the final wording of this provision leaves
flexibility to Member States regarding implementation and fully
respects the principle that costs awarded must be in reasonable
proportion to the size of the debt. In addition, it is likely
that the Directive will include a new recital which will make
clear that the right to claim reasonable compensation does not
prejudice national provisions according to which a national judge
can award the creditor any additional damage caused by the debtor's
late payment".
— Anti-abuse clause
24.8 The UK supports the principle of the
proposed amendment to Article 3.3 which would facilitate representative
actions by organisations representing SMEs, by allowing courts
to consider whether or not a contractual agreement can be regarded
as grossly unfair. The Joint Text is likely to include elements
of the EP amendment.
24.9 The UK has opposed inclusion of any
such provision on the grounds that it strays beyond the scope
of a Directive dealing with late payment and that previous proposals
have envisaged a simplistic harmonisation of elements of what
is a very complex area of law on the sale of goods. However, the
Minister says:
24.10 The Commission has accepted EP amendments
reinstating special provisions imposing stricter requirements
on the public than on the private sector. All the Member States
remain opposed to any provisions which would discriminate unjustifiably
against the public sector and are working to find a compromise
with the Parliament which would rather emphasise the fact that
the Directive applies equally to both the public and private sectors.
— Recovery procedures
for unchallenged claims
24.11 The Minister says that the EP have
proposed that:
"... Article 7 of the
Common Position be amended so that Member States must ensure that
an enforceable title can normally be obtained in respect of undisputed
debts within 60 days rather than the 90 days provided in the Common
Position. The Commission has not accepted this amendment, and
the Parliament has given indications that it may not insist on
the point. The UK could in fact accept a compromise figure as
long as the provision retains its references to the fact that
this duty is to be carried out by Member States in conformity
with national legislation. Correspondence in May 1999 between
Mr Wills and the House of Commons European Scrutiny Committee
confirmed that this Article would require some Member States to
amend their civil procedures, though amendments would not be required
in the UK."
— Transposition
24.12 The clarifications proposed by the
EP are likely to be accepted by the Council.
The Government's view
24.13 In a general comment, the Minister
says that:
"From discussions that
have taken place across Whitehall on the European Parliament's
amendments, and on the basis of the likely revised Presidency
text, it would appear that most of the difficulties identified
for the UK have now been addressed, particularly around retention
of title and public procurement contracts.
"Our concerns regarding the right to claim compensation
and retention of title are outlined above, but some compromise
is likely to be needed in order to reach agreement with the [European]
Parliament."
24.14 Addressing the financial implications
of the proposal, the Minister comments, with regard to the public
sector, that it is important that it sets an example on payment
practice. The Government, she says, has already set stringent
targets for the public sector to meet its bills on time (100%
of undisputed invoices to be paid within 30 days or other agreed
credit period). Provided bills are met on time, the expense of
interest and compensation charges computation will not be necessary
where the public body is a debtor.
Conclusion
24.15 Checking through these amendments,
we note that few give the Government real cause for concern and
we support the approach it has adopted in the cases set out here.
Furthermore, we believe that, in the case of recovery procedures
for unchallenged claims, it should be prepared to accept a period
of less than 90 days, which we regard as generous, given that
the proposal is intended to assist SMEs, in particular.
24.16 We thank the Minister for maintaining
the scrutiny reserve and now clear the document.
43 (19982) -: see HC 34-xxi (1998-99), paragraph 5 (26
May 1999). Back
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