EU Late Payment Directive 2011/7/EU explained

What the Directive does

The Late Payment Directive (2011/7/EU) replaced an earlier 2000 directive and had to be written into national law by 16 March 2013. It applies to commercial transactions: deals between undertakings, or between undertakings and public authorities, that lead to the delivery of goods or services for payment. An “undertaking” includes anyone acting in an independent economic or professional activity, so freelancers and sole traders qualify.

Because it is a directive, you never claim “under the Directive” directly. You claim under the national law that implements it, such as the German Civil Code or the French Commercial Code. Those laws must give you at least the Directive's minimum rights.

Interest is due when you have fulfilled your side of the contract and haven't been paid on time, unless the debtor isn't responsible for the delay. It runs from the day after the agreed payment date.

Payment terms and default deadlines

• Agreed terms between businesses should not exceed 60 calendar days, unless expressly agreed otherwise and not grossly unfair to the creditor.
• No agreed date: interest is due automatically 30 calendar days after the debtor receives the invoice (or the goods or services, if that date is later or the invoice date is uncertain).
• Public authorities must generally pay within 30 days, extendable to a maximum of 60 days in limited cases such as public healthcare.

The interest rate: ECB rate + 8 points

For euro-area countries, the reference rate is the interest rate the European Central Bank applies to its most recent main refinancing operations (the “MRO rate”). Statutory interest is that rate plus at least 8 percentage points. Countries outside the euro area use the equivalent rate of their own central bank.

The Directive fixes the reference rate in half-year blocks: the rate in force on 1 January applies from January to June, and the rate in force on 1 July applies from July to December. Unlike the UK rule, the rate is not frozen for the life of the debt. A debt that stays unpaid across several half-years is calculated period by period, each at its own rate.

Worked example across two half-years

€40 fixed compensation

When interest becomes payable, you are entitled to a minimum of €40 as compensation for your recovery costs. It is due automatically, without a reminder, and applies per late invoice. If your reasonable recovery costs exceed €40, for example a collection agency or lawyer's fees, you can claim reasonable compensation for those too.

The €40 is a euro amount. If you invoiced in another currency, you're still entitled to the equivalent, but you'll need to convert it at a fair rate.

Terms that try to take these rights away

A contract term or practice that excludes interest for late payment is considered grossly unfair. A term that excludes the €40 compensation is presumed grossly unfair. National courts can refuse to enforce such terms, and some countries let trade bodies challenge them on behalf of their members.

National differences: some countries go further

The Directive sets a floor, not a ceiling. A few examples of national rules at the time of writing:

• Germany: 9 percentage points above the Bundesbank base rate for transactions without a consumer, plus a €40 lump sum.
• France: unless the contract sets a rate, the ECB rate plus 10 percentage points, plus a mandatory €40 recovery indemnity that must be stated on invoices.
• Netherlands: the statutory commercial interest rate follows the Directive's ECB + 8 points.

PayNudge calculates the Directive's minimum, which is valid everywhere in the EU. If your client's country sets a higher rate, you may be able to claim more. Check the local rule or ask a local adviser.

Cross-border claims

If an EU client still won't pay, two EU-wide procedures can help with cross-border debts without hiring a lawyer in their country:

• European Order for Payment: a written procedure for uncontested cross-border money claims, recognised in every member state except Denmark.
• European Small Claims Procedure: for claims up to €5,000, mostly in writing, using standard forms.

Before that, send a clear formal notice, often called a letter before action. Our letter before action guide covers what to include. For UK clients, see the UK Late Payment Act guide instead: since Brexit the UK has its own rules.