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The European Commission has published its new directive (2011/7/EU) which seeks to tackle late payment in commercial transactions. This alert is relevant to anybody buying or selling goods or services. For sellers the directive might strengthen rights to secure payment and interest on late payment. For buyers it may increase risks of long payment terms or paying late. The European Commission considers that the previous legislation had failed in improving payment terms. The new directive is intended to tackle this. The key change on existing English law is that payment terms longer than 60 days (and in the public sector 30 days) are likely to be unenforceable. The default rate of interest at 8% above base and the right to be compensated for recovery costs are not new and reflect the current law. The existing legislation (10 years old) has had little impact on changing payment periods. We doubt that this new directive will have any more impact then the previous legislation. After all, no supplier is likely to seek interest on a late payment from a regular customer. The new directive does not come into law straight away. Each member state of the European Union will need to introduce the directive international law. Each member state has until March 2013 to do this. We will issue briefing notes regarding the implementation of the directive.

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