knowledge | 13 June 2016 |
Count the Cost: New Rules for Late Payments by Public Authorities
On 25 May 2016 Ireland brought its Late Payment Regulations1 in line with the EU Late Payment Directive2 by prohibiting public authorities seeking payment terms in excess of 30 calendar days. The changes only apply to contracts entered into from that date.
The Late Payment Regulations apply to contracts between businesses. In general, they seek to ensure that those supplying goods or services are paid within a certain time period: if not, the customer must pay interest.
Originally the Late Payment Regulations did not specify particular rules for public authorities paying for goods or services. Rather, they merely allowed payment terms in excess of 60 calendar days to be challenged as being (potentially) “grossly unfair”. The underlying EU Directive provided that public authorities should not seek payment terms in excess of a maximum of 60 calendar days.
Following the recent amendment, public authorities now must not seek payment terms in excess of 30 calendar days for the supply of goods or services by undertakings. For these purposes, a public authority includes:
- a Minister of the Government,
- a local authority,
- the Health Service Executive,
- a board or other body established by or under statute,
- a company in which all the shares are held (i) by or on behalf of a Minister of the Government or (ii) by directors appointed by a Minister of the Government.
However, bodies that act in a judicial or legislative capacity are out of scope for these purposes.
Typically, public authorities benefit from more secure, predictable and continuous revenue streams than private undertakings do and many public authorities can obtain financing on more attractive conditions than private undertakings can. Therefore it was thought appropriate to introduce specific rules to ensure that public authorities do not seek payment terms in excess of 30 calendar days.
These amendments to the Late Payment Regulations should help to ensure that public authorities pay promptly for goods or services that have been provided to them.
Contributed by Niall Marren
- European Communities (Late Payment in Commercial Transactions) Regulations 2012 (SI 580 of 2012) as most recently amended by the European Communities (Late Payment in Commercial Transactions) (Amendment) Regulations 2016 (SI 281 of 2016)
- Directive 2011/7/EU
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.