Az építőipari szektort értékláncának sajátosságai miatt különösen érintik a késedelmes fizetések, de azért is, mert az építőipari vállalatoknak általában a fizetés előtt viselniük kell az építési folyamat költségeit (anyag, gép, személyzet stb.). A késedelmes fizetések veszélybe sodorhatják egy építőipari vállalat létét, mivel a pozitív cash flow elengedhetetlen a mindennapi működéséhez...

FIEC position on the Commission’s proposal for a Late Payment Regulation

The construction sector is particularly affected by late payments, because of the characteristics of its value chain but also because construction companies usually have the obligation to bear the costs of the construction process (material, machinery, personnel, etc.) before getting paid. Late payments have the potential to threaten the very existence of a construction company, as a positive cash flow is essential to its day-to-day operations.

Although the current EU rules on late payments have been in place since 2011, there are still problems with timely payments in commercial transactions. A major concern in some Member States is that construction companies working mainly with the public sector are subject to late payment, which may not even be covered by the current Directive or national legislation.[1] Even if they are covered, construction companies in this situation are often reluctant to take action against the public client who has failed to pay them on time.

On 12 June 2023, the European Commission proposed to replace Directive 2011/7/EU on Late Payment with a Regulation. FIEC is generally supportive of proposals aimed at fostering and safeguarding prompt payments from clients to construction companies, therefore strengthening the financial sustainability of the sector. It is particularly important that the updated rules ensure that public administrations pay on time, as this is essential for creating a prompt payment culture.

FIEC welcomes replacing the current Directive with a Regulation. Incorrect application of the rules laid out in the Late Payment Directive has been a major issue in several EU Member States. Countries like Italy, Portugal or Slovakia have been referred to the Court of Justice of the European Union for continued non-compliance with the current rules. In some cases, this involves late payments from several layers of the public administration. Therefore, the adoption of a Regulation instead of a Directive could be a positive step to tackle this issue, as a Regulation, unlike a Directive, is directly applicable in all 27 EU Member States and would therefore improve the application of EU rules on late payments for construction companies.

Having said so, we would like to express our strong reservations against the introduction of certain provisions in the Commission’s proposal, namely those related to payments to subcontractors in public procurement, enforcement authorities, complaints and confidentiality.

 

Payments to subcontractors in public procurement

The Commission’s proposal introduces a new provision requiring the main contractor to prove to the contracting authorities or entities that direct subcontractors have been paid.[2] Proof must be submitted before or at the latest together with the request for payment.

FIEC understands that the new provision is aimed at ensuring that payments are passed down the supply chain in contracts for public works. This is a sensible approach and one that could create an incentive for the client to pay contractors promptly. However, introducing a new requirement whereby the main contractor must prove that direct subcontractors have been paid, and which the client must subsequently check, creates additional administrative, financial and time-consuming efforts for both the contractor and the client. This contradicts the main purpose of the proposal which is to improve prompt acceptance and payment.

As well as being contradictory, the content of the proposal is unclear in many respects. For example, the proposed provision does not explain whether the existence of a late payment must be proven or whether it can simply be assumed. It also doesn't explain what happens in cases where the main contractor has legitimate reasons (e.g., a subcontractor has failed to perform its duties in accordance with the terms of a contract) for not paying a direct subcontractor within the payment periods laid down in the Regulation. If late payment is to be tackled effectively, it is essential not to introduce new rules that have the potential to create confusion.

The introduction of this provision also implies that the main contractor would have to bear solely the additional burden of proving that direct subcontractors have been paid, at the latest when they submit an invoice to the client. Other businesses with which construction companies work would not have to bear the additional burden of these obligations. As a result, construction companies would be put at a disadvantage in relation to other economic operators.

Lastly, we reject the general and unproven assumption that in public construction works the main contractor does not pass on payments from the client to direct subcontractors.[3] In fact, in some countries (e.g., Germany), public works clients often pay later than in other activities.[4] In any case, this assumption does not justify that in the future the client will not pay the construction companies until it has been proven that the direct subcontractors have been paid. Payments can only be passed down the supply chain after the client has paid its main contractor.

Considering the above, FIEC calls for the deletion of Article 4 in the Commission’s proposal.
 

Enforcement authorities, complaints and confidentiality

The proposals also introduced a new provision requiring Member States to designate national authorities responsible for the enforcement of the Regulation, who are to cooperate with the Commission and with other relevant national enforcement authorities.[5] The specific powers of the enforcement authorities are also regulated.[6] Lastly, another new provision sets out the conditions under which creditors and associations of creditors can complain about late payments, as well as the obligations of the enforcement authorities in relation to complaints.[7]

FIEC warns that the Commission's proposal is well-intentioned but unworkable. First, creating new enforcing authorities raises questions about their responsibilities and those of existing authorities. There are also doubts about the role of "enforcement authorities" in relation to the process of assessing whether payments have been passed down the supply chain by main contractors,[8] in particular how long enforcement authorities have to verify information on payments. As mentioned above, late payment rules should avoid unclarity and disputes.

In addition, the Commission's proposal also fails to adequately justify the creation of a separate administrative structure that would be charged with enforcing late payment rules. In the absence of such a justification, the Commission should refrain from introducing provisions relating to the establishment of national enforcement authorities.

Finally, FIEC fears that the introduction of new enforcement authorities and new complaints procedures only risks creating more bureaucracy and even delaying payments to main contractors by public clients.

Considering the above, FIEC calls for the deletion of Articles 13 to 15 in the Commission’s proposal.
 

 

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[1] Examples?
[2] Proposal for a Late Payment Regulation COM (2023) 533, Art. 4
[3] Ibid, Recital 14
[4] Citation
[5] Proposal for a Late Payment Regulation COM (2023) 533, Art. 13
[6] Ibid, Art. 14
[7] Ibid, Art. 15
[8] Ibid, Art. 4(2)