This content is from: Local Insights

New terms for payments of commercial debts

Following the implementation in Italy of Directive EU/7/2011 of the European Parliament and the European Council of February 16 2011, the Italian government has recently approved a legislative decree which introduces substantial changes to Legislative Decree No. 231/2002 relating to late payments in commercial transactions.

The decree reduces to 30 days the maximum period for the payment of all creditors supplying goods and services to the public and private sector.

The 30-day period may be extended to a maximum of 60 days in two cases: for the Public Administration, when a written agreement is reached between the parties or the extension is required by the nature or the object of the contract or by specific circumstances existing at the time of the entering into of the contract; and for private undertakings, when a written agreement is reached between the parties and subject to the new term being not unfair for the creditor. Any contractual provision being unfair for the creditor will be considered void.

A 60-day term is provided, in any case, to public undertakings required to be compliant to the transparency requisites provided by Legislative Decree No. 333 of November 11 2003 as well as to local health authorities. In the event of late payments, interest in arrears will become payable automatically without the need of a formal notice and irrespective of the fact that a grace period for payment is provided in the contract. Indeed the decree fixes the specific events from which the 30-day period starts running.

Interest in arrears is computed on the single unpaid amount (for example for payments by instalments, interest is payable on the specific unpaid instalment). Any compounding is forbidden.

The decree also provides for an increase of one percentage point (from seven percent to eight percent) of the margin applied to the so-called reference rate – used to determine the interest in arrears – being the interest rate applied by the European Central Bank to its most recent main refinancing transactions.

The decree will be applicable starting from January 1 2013 and will involve a large number of entities. The definition of Public Administration has been widened compared to the previous decree, to include not only public authorities such as the State, regions and municipalities, but also private undertakings operating under public contracts law which represent an important segment of the market.

The new provisions can certainly be considered a valid instrument to help and guarantee economic stability (especially for small and medium-size enterprises). Doubts remain, however, as to the actual effectiveness of these rules for the purposes of reducing public indebtedness.

The provision of more stringent terms for the payment of commercial claims and the automatism in the application of interest in arrears, in the absence of specific measures aimed at improving internal mechanism of functioning of the Public Administration, might just increase the level of indebtedness representing an unusual interference on individual freedom to agree payment terms at arm's length.

Susanna Beltramo and Francesca Ceccobelli

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