Calling for no exemptions to late payments

The amendment of the Late Payment Directive is one of the legislative initiatives forming part of the Small Business Act - a package of non-binding recommendations aimed at enhancing the business regulatory environment. The original Commission proposals envisaged a tightening-up of the rules, consequently holding out the prospect of proper clamp-down of the practise of late payments particularly by public authorities.

The recast proposals endorsed the shortening of the payment period for public administrations and reinforced the incentives for public authorities to pay on time. A payment deadline of 30 days following which a flat-rate compensation of five per cent of the amount due in addition to interest was also contemplated.

As a result of the discussions at the European Parliament, the retention of the initial Commission text appears now very unlikely. The main outcome of the EP's vote is the extension of the scope of the draft law to cover also business-to-business transactions. The vote also exempts in an exclusive manner the healthcare sector from the rules governing the payment time frames as well as the proposed financial sanctions in case of default.

While the Malta Business Bureau welcomes the EP's stance that 30 days should become the norm for payments by public authorities, it also has a number of reservations. Primarily, the proposed extension of the scope of the directive to cover business-to-business transactions contravenes the basic principle of contractual freedom, whereby businesses should benefit from absolute freedom in deciding and mediating the ways and means of settling bills.

The MBB also disagrees with the exemption of the public healthcare sector. According to the findings from the Report On Settling Late Payments On Time, it is evident that the greatest and most extensive of default payments are registered in the healthcare sector, where the public health procurement authorities fail to pay on time.

The Malta Business Bureau is calling for a reversal of the EP's position on the extension of the scope of the draft legislation to also cover business-to-business transactions. The MBB is also of the conviction that the recast of the Late Payment Directive can only yield the desired objectives if there are no exemptions to particular sectors as it ultimately renders the legislation futile for securing enforcement at member-state level.

For more information on EU affairs related to business, one may contact the Malta Business Bureau on 2125 1719 or via e-mail on info@mbb.org.mt.

One can also visit the business portal www.mbb.org.mt.