Czech Parliament finally passed an amendment to its soon-to-be-replaced Commercial Code imposing stricter deadlines for payments of invoices to 30, respectively 60 days (in minority of cases which may be judged worth of special consideration). The amendment, driven by the Directive 2011/7/EU on combating late payment in commercial transactions, has already been overdue for several months. Besides introducing uniform payment deadlines, it also introduces new sanctions, if payments are delayed, as is often the norm in the Czech Republic.

As indicated above, there is a possibility, in exceptional cases, to extend payment to 60 days. In situations where the subject of the obligation is to provide goods or services for compensation to public authority, the payment deadline may extend beyond the 30 days only when it may be justified by the nature of the obligation and in no case it may exceed 60 days. This rule applies also for subcontractors involved in public contracts.

In order to avoid attempts at evading these short payment deadlines, the amendment also imposes the maximum deadline for acceptance of goods or services to 30 days. Further incentive not to process payments later than mandated is also represented by the newly introduced minimum fixed fee on top of late interest and cost of proceedings in a way of compensation for costs related to enforcement of claims. What will be the minimum “overhead” fee will be defined at a later stage by government regulation. The parties may contractually deviate from the amount of the “overhead” fee and late interest, but not to the extent that would abolish these two sanctions altogether or to a degree that would constitute a “grossly unjust” agreement violating the creditor’s rights. Similar rules have been transposed also into the new Civil Code, which will in large part replace the Commercial Code at the beginning of 2014.

Czech Republic is known for its lacklustre payment morale, as the average payment on invoices just dropped below 70 days, especially in situations where smaller contractors claim payment from large players having significant economic power. This measure should therefore help in creating a healthier environment for the smaller players and independent contractors on the markeplace.