Today, the European Commission decided to refer Portugal and Slovakia to the Court of Justice of the European Union for not correctly applying the rules under the Late Payment Directive (Directive 2011/7/EU).
Late payments have negative effect on businesses, as they reduce the liquidity of companies, preventing growth, hampering resilience and potentially impeding efforts to become greener and more digital. In the current economic context, businesses and in particular SMEs rely even more on regular payments to operate and keep employment. The Late Payments Directive obliges public authorities to pay their invoices within 30 days (or 60 days for public hospitals). By complying with these payment deadlines, public authorities set a good example in the fight against bad payment culture in the business environment.
Following extensive monitoring procedures undertaken in 2022, the Commission is now referring Portugal and Slovakia to the Court of Justice of the European Union, given the continued non-compliance.
In the case of Slovakia, the Commission is referring it to the Court of Justice due to excessive payment delays by public hospitals to their suppliers. The Commission launched the infringement procedure in 2017. These excessive payment delays by public hospitals hamper the competitiveness and resilience of businesses working in the health sector, especially SMEs. During the COVID-19 crisis, these businesses have played a crucial role in keeping hospitals operational.
In the case of Portugal, the Commission is referring it to the Court of Justice due to late payments from several layers of the public administrations. Following the launch of the procedure in 2017, the Commission has monitored the situation closely, but finds that insufficient improvement has been made, in particular in the two autonomous regions Azores and Madeira.
Background
Late payment causes administrative and financial burdens, which are particularly acute when businesses and customers are in different EU countries. Cross-border trade is inevitably impacted. To address this, the EU adopted Directive 2011/7/EU on combating late payment in commercial transactions in February 2011. The Directive puts in place strict measures which, when properly implemented by EU countries, will contribute significantly to employment, growth and an improvement in the liquidity of businesses.
Member States have a special responsibility in ensuring that public authorities pay on time the goods and services that they procure. The Commission supports Member States in enforcing more effectively the Directive's provisions, including by making available stronger monitoring and enforcement tools. The Commission is currently setting up a European Observatory of payments in commercial transactions as announced in the Update to the Industrial Strategy adopted in May 2021. In addition, the Commission is also working on a revision of the Late Payment Directive, as announced by the President of the Commission in the latest State of the Union 2022. The revision aims to address the regulatory shortcomings and gaps, foster more timely payments and bring better balance between large and small operators.
