EU lawmakers adopt news rules to combat late payment

European Union (EU) lawmakers adopted new rules on Wednesday to combat late payment, setting specific deadlines for public authorities or companies to pay the bill to their creditors.

Under the new legislation, which was approved with 612 votes in favor, 12 against and 21 abstentions at a plenary session of the European Parliament in Strasbourg of France, public authorities would have to pay for the goods and services that they procure within 30 days or, in very exceptional circumstances, within 60 days.

For business-to-business payments, the general deadline is also 30 days unless otherwise stated in the contract.

The new rules were aimed to give better protection to creditors, in most cases small and medium-sized enterprises (SMEs), which may face financial problems due to the late payment of bills by public authorities or companies.

"This directive will pave the way for a whole new payment culture. We have aimed to ensure that the rights of the smaller companies are enforced in order to improve liquidity and create a better climate for investments into new jobs," said Barbara Weiler, who led the legislative effort in the European Parliament.

For late payments, the creditors would automatically be entitled to claim interest, with the statutory rate increased to at least eight percentage points above the European Central Bank's reference. Public authorities are not allowed to fix an interest rate for late payment below.

The creditors are also entitled to obtain from the debtor, as a minimum, a fixed sum of 40 euros (55 U.S. dollars), as compensation for recovery costs.

"Who works must be timely remunerated. This is a basic principle of fairness but plays a crucial role in relation to the solidity of a company, its treasury, its access to credit and to finance. Therefore, the new directive will help the entire European economy," said European Commission Vice President Antonio Tajani, who is in charge of industry and entrepreneurship.

It was estimated that the new rules would result in an extra 180 billion euros (249 billion dollars) of liquidity being available to businesses.

The new rules now need to be formally adopted by EU governments to enter into force, after which the EU member states have two years to transpose the rules into national law.