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EU debt Directive passed

The EU has finalised a Directive updating the previous Directive of 2000 specifying what member states must do to deal with late payment of debts.

The EU Parliament and the Council of Ministers (that's the place where member states wield the notorious veto) passed the Directive in October and it was published in February. Member states have to implement the Directive in their national laws by 16 March 2013.

The Freelance Rights Experts Group (FREG) of the European Federation of Journalists met with the EU civil servants responsible, and made it clear that the proposals were not sufficient, despite the expressed intention to make the law fairer for small and medium-sized enterprises. They are, nevertheless, a marginal improvement on what went before.

The Directive is largely based on UK law. It sets the the default period for payment - in the absence of an explicit term in a contract - at 30 days. This follows UK law, in which the default payment date is 30 days after the day when the client becomes aware of how much it owes, or after the delivery of the work, whichever is later.

It provides that "Member States shall ensure that the period for payment fixed in the contract does not exceed 60 calendar days, unless otherwise expressly agreed in the contract and provided it is not grossly unfair to the creditor". UK law is currently at least as vague as this, leaving what may be an unfair term in a contract as a matter for a court case. The Directive defines "grossly unfair" as "any gross deviation from good commercial practice, contrary to good faith and fair dealing" and specifies that associations (such as the NUJ) must be allowed to bring cases to clarify this in national law.

It provides that the interest chargeable on late payments must be at least 8 per cent over bank rate - the same as in UK law, and leading to an increase in Ireland and France, for example.

On top of interest, compensation must be paid, of at least €40. In the UK compensation is £40 (€44.48 today) on debts up to £1000. It is currently politically extremely unlikely that a UK government would use the Directive as an excuse to reduce this.

Last modified: 27 Apr 2011 - © 2011 contributors
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