On 1 July 2013, amendments to the Latvian Civil Law came into force; these have an immense impact on contracts between businesses and public contracting authorities. The new regulations apply to contracts for supply, purchase of goods, or provision of services concluded after 1 July 2013 (for contracts concluded as a result of a procurement or concession procedure, then these regulations apply if the procurement or concession procedure was announced after 1 July 2013). We draw your attention to what appear to be the most significant innovations:
- Compliance of a delivered product, purchase or service with the contract must be verified within 30 days as of the day when the product or service is received, unless the parties have agreed otherwise and this disclaimer is obviously unfair towards the company (for example – with the aim of delaying payment for goods or services).
- A limit is applied to the payment term, thus protecting companies’ interests. This results from Civil Law amendments that the payment term for delivery and purchase of goods or services may not exceed 30 days. The payment term can be extended up to 60 days only as far this can be justified by taking into account the obligation to be performed. Contractual parties may not amend these terms by mutual agreement.
- If a public contracting authority delays payment, companies may claim late payment interest from the public contracting authority without a special reminder; the amount of late payment interest is calculated by a principal rate set semi-annually by the Bank of Latvia (the principal interest rate set on 1 July 2013 is 2.5% a year).
- In addition to statutory late payment interest (as well as a contractual penalty if any and compensation of losses), if the public contracting authority delays payment, then even without a special reminder companies may claim “costs of debt recovery” in the amount of LVL 30 (after introduction of the euro in Latvia – EUR 40) from the public contracting authority. Until now, this automatic compensation due to late payments did not exist in Latvian law.