Current affairs

Congress is processing a Law to reinforce the battle against late payment

Friday, 1 de September, 2017

Pere Brachfield, a lecturer at EAE BUSINESS SCHOOL

In Hans Kelsen's opinion, the rules of Law are coercive norms by which order by which human conduct is regulated in a specific way. The Law empowers the State authorities to impose a coercive act on an offender as a penalty. Kelsen adds that, without a penalty, there can be no legal obligation, defining this as a positive legal norm that regulates individuals' conduct by relating a penalty to any behaviour that violates the regulation in question. The regulation must contain a mandate and a legal consequence for breaching this mandate or, in other words, a penalty. The German jurist Karl Binding expressed the same idea as Kelsen, stating that a regulation without a penalty is like a bell without a clapper.

Binding's maxim gives us the best explanation of the failure of Law 3/2004, of 29th December, on measures to combat late payment: an absence of political interest in implementing the precepts stipulated by the Act and the lack of any coercive measures to enforce compliance.

The objective of this Act is to combat delays in the payment of outstanding and payable monetary debts, and to prevent abusive practices to the detriment of the creditor when setting payment periods for commercial transactions between companies. To this end, it stipulates that the legal period within which a debtor must make payment is thirty days, unless a different payment date or period is specified in the contract. Moreover, it states that the payment period cannot be extended by agreement of the parties to more than sixty calendar days. However, as the Act has not incorporated any coercive measures to date, there is a generalized level of non-compliance with this precept. To illustrate this claim, a report by INFORMA D&B reveals that the average payment period in Spain is 86 days, far above the sixty days permitted by the law.

As a penalty for payment default, the Late Payment Act stipulates that any delay in making full payment entitles the creditor to charge late payment interests that the defaulter is under obligation to pay. The applicable interest rate in this case is the ECB interest rate plus eight points. Moreover, the Act states that the defaulter must pay the creditor 40 euros in compensation for each outstanding invoice. In addition, the creditor is entitled to claim compensation from the debtor for any justified recovery expenses that they may have incurred in excess of 40 euros. However, there are very few companies that have dared to claim late interest payments and recovery costs from their customers. 

For many years, experts in the battle against late payment have urged the legislators and the government in power to enact coercive measures to ensure compliance with the regulations against late payment as part of the business reality in this country. Until recently, the political parties had shown little interest in the issue. However, on 20th June, all other parliamentary groups finally came to understand the need to enact coercive measures to promote compliance with the Late Payment Act. As a result, in today's plenary session, Congress discussed the Proposal for the Reformed Law against Late Payment in Commercial Transactions, put forward by the Ciudadanos party, and the processing of this project was initiated. It should be noted that, in the plenary vote on the issue, there were 335 votes for the proposal, none against and no abstentions.

However, we should not consider the battle won just yet because the legislative procedure is long and painstaking. First of all, it will be submitted to the Economic Commission for amendments, which is the key phase in the procedure. The parliamentary groups of the PP and PSOE parties have already announced that they plan to make significant amendments. So, it will be a while yet before we see the regulation published in the Official State Gazette.

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