EU Directive 2011/7 aims at combating late payments in commercial transactions. Member States have transposed its provisions enabling a creditor to obtain interest on late payments and a compensation for recovery costs, by way of a fixed sum of EUR 40 in minimum. All this without the necessity of issuing a reminder to the debtor.
The European Court of Justice (ECJ) rendered four different cases in the last months of 2022, two decisions handed down on 20 October 2022 and two others on 1 December 2022. Different national courts referred to the ECJ for preliminary rulings concerning the interpretation to give to various provisions of the directive. The ECJ brought clarifications regarding the minimum fixed sum of EUR 40 (1), the unfair contractual terms (2), and the temporal scope of Directive 2011/7 (3).
1) Fixed sum payable for each late payment
Directive 2011/7 applies to all payments made as remuneration for commercial transactions. Interest and compensation for recovery costs are due for each late payment, i.e. payment not made within the contractual or statutory period of payment, when the creditor has fulfilled its obligations, unless the debtor is not responsible for the delay.
As for compensation of recovery costs, the debtor must pay the minimum sum of EUR 40 to the creditor for a late payment. A question remained in the case of a single contract which provides for successive periods of supplies of goods or services and therefore successive payments. The ECJ was asked whether the fixed minimum sum, due for several delays in payment, applies only once for the whole contract or applies for each successive delay.
To answer that question, the ECJ had to define what a commercial transaction was. Per Article 2 of the directive, two cumulative conditions are required. A transaction must be carried out either between private companies or between a private company and a public authority. Further, it must lead to the delivery of goods or the provision of services against remuneration. The Court, making interpretation of this article, determined that each delivery or provision carried out under the same contract may be classified as a commercial transaction . As a consequence, the fixed sum of EUR 40 is payable for each late payment stemming from a single contract .
This solution also applies when a debt collection company makes a single claim covering several invoices due by a debtor. The fixed sum in this event is payable for each late payment of remuneration evidenced in an invoice .
Such an interpretation abides by the directive’s general goal. Late payments must not be financially attractive for debtors because of a lack of interest being charged in such situations. Therefore, creditors are entitled to the fullest possible compensation for recovery costs incurred.
2) Unfair contractual terms
In line with those objectives, Article 7 prohibits contractual clauses aiming at diminishing or excluding interests and compensation owed by the debtor in case of late payment. These contractual provisions are deemed unfair and are either unenforceable or give rise to a claim for damages.
Nevertheless, if the purpose is to prevent a creditor’s waiver of rights to interests for late payment or compensation for recovery costs occurring at the time upon which the contract is entered into, such a provision cannot compel the creditor to ask for such compensation. The creditor shall remain free to exercise his rights. As an example, a creditor may decide to waive his rights in exchange for immediate payment of the principal sum due.
This was the case in a matter pertaining to successive deliveries resulting in equal late payments. In this instance, the ECJ considered that the creditor could freely agree to waive payment of sums in respect of interests and compensation. Though such waiver cannot be stipulated at the time of conclusion of the contract .
3) Temporal scope
Further, the ECJ also clarified the temporal scope of the directive. Per the provisions of Article 12, Member States had to apply Directive 2011/7 by 16 March 2013, giving them the choice to exclude from its scope those contracts concluded before such date. Thus, late payments resulting from prior contracts but occurring after that date are also excluded from the scope of Directive 2011/7.
In presence of a tacit contractual agreement between two parties for the regular supply of goods which began before 16 March 2013, the applicable national law of the Member State must determine if the agreement is to be considered as a single contract or if each successive transaction corresponds to an individual contract. If considered a single contract concluded before entry into force of Directive 2011/7: each of the following transactions fall outside its scope. Whereas if each transaction is deemed an individual contract, those occurring after 16 March 2013 must comply with Directive 2011/7 requirements .
For all other remaining contracts concluded before 16 March 2013, Directive 2000/35 on combating late payment in commercial transactions applies.