As previously advised in our article of 19 February last, the European Communities (Late Payment in Commercial Transactions) Regulations 2012 have been published and became operative on 16 March

The Regulations implement Directive 2011/7/EU on Combating Late Payment in Commercial Transactions into law in Ireland. The European Communities (Late Payment in Commercial Transactions) Regulations 2002 (S.I. No. 388 of 2002), which transposed Directive 2000/35/EC, have now been repealed. 

The new legislation is aimed at addressing the continuing and significant problem of late payments in business to business transactions across the EU.

The Key provisions in the Regulations are as follows:

  • The Regulations will apply to commercial transactions in both the public and private sectors;
  • The Regulations provide that interest shall be payable in respect of a late payment. In addition, it will be an implied term of every contract that interest is payable if debts are not paid on time. A payment is regarded as late when 30 days have elapsed unless an alternative payment period is specified in an agreed contract. The interest rate chargeable for late payment is the European Central Bank main refinancing rate plus 8 percentage points unless otherwise agreed;
  • For business-to business payments, the general deadline is 30 days unless otherwise stated in the contract. It is possible, if both parties agree, to extend payment terms up to 60 days. The period may be extended beyond 60 days only if “expressly agreed” by the parties in the contract and provided that it is not grossly unfair to the supplier;
  • The standard deadline for public authorities to business payments is 30 days. Payment can be extended up to 60 days only if it is “expressly agreed” and justified in light of the nature or feature of the contract;
  • The supplier is also entitled to compensation costs from defaulting purchasers. Suppliers are entitled to charge a minimum of €40 in relation to expenses incurred as a result of the late payment and may also be able to claim any reasonable recovery costs incurred;
  • Where a contract provides for a verification or acceptance period, the Regulations provide that interest does not run until verification or acceptance has taken place;
  • Where payment is made by instalments, the Regulations provide that the late payment of an instalment will attract interest and compensation but only in respect of that instalment and not the whole contract price; and
  • Any clause in a contract which seeks to exclude interest for late payment or compensation is held to be grossly unfair and the Regulations provide that such a clause is either unenforceable or gives a rise to a claim for damages.

The Dept of Jobs, Enterprise and Innovation has published further information, including information on the relevant interest rate, on its website.