Payment periods: do public authorities receive special treatment?
12/01/2022

Late payments in commercial transactions harm companies’ competitiveness, especially SMEs, as they affect liquidity. Late payments are said to be the cause of a quarter of all SME insolvencies.[1] In 2000 the European legislator drafted a directive to combat such late payment (directive 2000/35/EC), which was later updated in 2011 by Directive 2011/7/EU. This directive on combating late payment in commercial transactions was transposed into Belgian law by the federal law of 2 August 2002. As discussed in our Newsflash of 1 October 2021, the federal law was recently amended to introduce a general maximum payment term of 60 calendar days (including the verification period).

Following on from our previous Newsflash, we thought it would be interesting to take a look at the rules which apply to public authorities with regard to payment periods. After all, in a country where public spending represents more than 50% of GDP[2], the impact that this has on the economy should not be underestimated.

A special responsibility

The objective of the directive on payment periods is to combat late payment in commercial transactions. This ensures the proper functioning of the internal market, thereby fostering the competitiveness of undertakings and in particular SMEs.[3]

In the introductory provisions of directive 2011/7/EU, the EU is clear: public authorities have a special responsibility in this regard. Public authorities benefit from more secure, predictable and continuous revenue streams than undertakings and can obtain financing at more attractive conditions than undertakings.[4] It is therefore logical that public authorities fall within the scope of the directive.

The directive refers to public procurement regulations for the definition of the term ‘public authority’.[5] The public procurement concept of a public authority traditionally entails a very broad, functional interpretation of the term. It includes the State, all government bodies with legislative, executive or judicial powers, the local public authorities, bodies governed by public law and all legal entities, whatever their form or type, whose operations are for the most part dependent on a public authority (financially or operationally). The following rules on payment periods apply to these public authorities.

Three regimes

Belgium chose to transpose the directives on combating late payment in commercial transactions as follows. On the one hand, it amended the Royal Decree of 26 September 1996 laying down general implementing rules for public contracts and public works concessions (currently in force as the Royal Decree of April 1, 2013 or ‘‘RD GIR 2103’), and on the other hand, it adopted the aforementioned law of 2 August 2002 on combating late payment in commercial transactions. The transposition and the later updates led to three different regimes which now form the current legal framework.

1)    B2B

The first regime applies to transactions between companies. The law of 2002 provides for a default payment period of 30 calendar days if the parties themselves have not agreed on a payment period. The parties may derogate from this payment period. The maximum payment period is now 60 calendar days where the creditor is an SME and the debtor is not. As of 1 February 2022, the general maximum payment period of 60 calendar days will apply in all situations and will also include the verification period.

2)    B2G: non-public procurement

Next are the commercial transactions between companies and public authorities in which the public authority is the debtor and the commercial relation does not fall within the scope of the public procurement and concessions regulations.

Given the special responsibility of public authorities, this regime is currently stricter than the first one. The default payment period also consists of 30 calendar days. The parties may derogate from this payment period, but the agreed period of payment should not exceed 60 calendar days.

The verification period of this second regime is also 30 calendar days from the date of receipt of the goods or services. When the creditor is an SME, the full period (including verification) is limited to a maximum of 60 calendar days.

As of 1 February 2022, the regimes for B2B and B2G (non-public procurement) will be aligned and the maximum payment term will be 60 calendar days (including the verification period)..

3)    B2G: public procurement

Commercial transactions resulting from a public contract follow the regime set out in the public procurement regulations, namely the rules set out in articles 95 (works), 120 and 127 (supplies) and 156 and 160 (services) of the RD GIR 2103. These articles stipulate that the full payment period shall not exceed 60 calendar days. This period of 60 calendar days includes the verification period and the payment period, each limited to 30 calendar days.

Given that, in accordance with article 9, §2, 1° and 2° RD GIR 2103, these verification and payment periods cannot be extended, the payment period in public procurement transactions will always be limited to a maximum of 60 calendar days, including verification.[6]

Alignment

With the amending law published in the Belgian Monitor on 30 August 2021 (entry into force on 1 February 2022) the first two regimes will be aligned with the last one.

From 1 February 2022, the payment period in all three regimes shall be limited to a maximum of 60 calendar days. If the law or the contract includes a procedure to verify the conformity of the goods or services, that verification period shall be an integral part of this payment period. Contractual provisions which provide for a payment period of more than 60 days, or for a verification period in addition to a 60-day payment period, will be considered null and void.

Do you have any concerns or questions about this topic? Get in touch with our specialists listed below.

Bart Vanstaen

Bart Vanstaen - Advocaat Vennoot / Avocat Associé,

 

Els Empereur

Els Empereur Advocaat Vennoot / Avocat Associé, PwC Legal BV/SRL

 

 

[1] SME United, Late Payments, https://www.smeunited.eu/policies/policies/single-market/late-payment (consulted on 01/11/2021).

[2] EUROSTAT, 4.2 Government expenditure to GDP ratio down since 2010 , https://ec.europa.eu/eurostat/cache/digpub/european_economy_2018/trad/be_nl/bloc-4b.html (consulted on 01/11/2021).

[3] Art. 1, 1 Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions, PB. L. 48/1, nr. 23.

[4] Directive 2011/7/EU, nr. 23.

[5] Art. 2, 2 Directive 2011/7/EU

[6] The only legal exception concerns health organisations; this is not covered in the context of this Newsflash.

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