Subject: Payment deadlines between contractors and subcontractors in Spain
The new public procurement law (Ley de Contratos del Sector Público), which transposes Directives 2014/23/EU and 2014/24/EU into Spanish law, allows for an improvement of the conditions governing payment deadlines between contractors and subcontractors. Under this law, the tenderer may approve the payment deadlines agreed between the contractor and subcontractor, and deals may not be struck between parties based on the means of payment used.
Large-scale contractors have come up with a payment practice which we have called ‘confirmation of an obligatory advance (confirming)’ which allows them to continue abusing their dominant position while stating that payments are being made within the statutory deadlines (60 days).
This is how it works: payment is agreed in the form of a long-term confirming (with deadlines of over 200 days); the creditor is obliged to agree to the payment of an advance within the 60-day deadline; the creditor must then meet the costs of this advance.
This new practice is very popular, particularly in the construction and retail sectors, and shows that large companies are acting with impunity.
1. Does the Commission believe that this grossly unfair practice should go unpunished, or does it believe that Member States should be required to take action against it themselves?
2. Does the Commission not think that allowing this practice to continue will undermine the transparency and legality of payment deadlines in Spain?
Answer given by Ms Bieńkowska on behalf of the European Commission (28 February 2019)
As confirmed by the study on the effectiveness of national measures to combat late payment in Business to Business (B2B) transactions (1), unfair payment practices and clauses relating to payments are still widespread in the EU. Also, smaller businesses often accept unfair payment conditions out of fear of losing their business partners and future contracts.
This situation hampers the effectiveness of Directive 2011/7/EU (2). As pointed out in the Commission’s Implementation Report of 2016 (3), the flexibility that the directive maintains to safeguard the freedom of contract between businesses is being exploited by larger companies ‘to dictate unfair contractual terms to smaller suppliers’.
The Commission has put in place a strict enforcement policy of Directive 2011/7/EU, both between public authorities and businesses and between businesses. Infringement procedures have been opened and an active dialogue with Member States and businesses is maintained.
However, the practice demonstrates that legislation alone is not enough to combat late payment. Next to strict enforcement, a decisive shift towards a business culture of prompt payment (4), more transparency in payment behaviour and better education of businesses on their rights are needed.
To this purpose, the Commission is currently examining measures and practices with the view to build a prompt payment business culture in Europe.
In the framework of the Mid-Term Review of the Capital Markets Union Action Plan, the Commission has launched a study to gain a better understanding of the financial processes and solutions available in the market (5).
The study will collect data and identify best practices and hurdles for the development of faster payment solutions for small and medium-sized enterprises.
⋅1∙ https://publications.europa.eu/en/publication-detail/-/publication/c8b7391b-9b80-11e8-a408-01aa75ed71a1
⋅2∙ Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions.
⋅3∙ COM(2016) 534 final.
⋅4∙ Recital 12, Directive 2011/7/EU.
⋅5∙ Supply Chain Finance.