The proposed EU Late Payment Regulation, introduced by the European Commission in September 2023, has been blocked and is not expected to become law. A blocking minority of EU member states opposed the measure, and despite the European Parliament adopting its position in April 2024, the Commission subsequently signalled its intention to withdraw the proposal. As a result, the existing Late Payment Directive 2011/7/EU remains the governing framework across the European Union for debt collection and payment terms in commercial transactions.
What Happened and When
In September 2023, the European Commission published a draft regulation intended to replace the Late Payment Directive 2011/7/EU with a directly applicable EU-wide instrument. The ambition was to tighten payment discipline, standardise enforcement, and remove the inconsistencies that had emerged from differing national implementations of the 2011 Directive.
The European Parliament advanced its legislative position in April 2024. However, the proposal encountered substantial resistance in the Council. A blocking minority of member states raised objections – centring primarily on concerns about commercial freedom, the impact on supply chain financing, and the rigidity of mandatory payment caps. With the Council unable to move forward and the Commission signalling withdrawal, the regulation must now be treated as blocked and abandoned, not as a source of legal obligation.
No replacement measure has been formally tabled as of the date of this alert. Businesses and legal teams operating across EU jurisdictions should not plan on the basis of the proposed regulation's provisions coming into effect.
The Applicable Law: Late Payment Directive 2011/7/EU
Because the proposed regulation was never adopted, the Late Payment Directive 2011/7/EU continues to set the baseline for commercial payment obligations throughout the EU. The core provisions of the Directive that remain in force are:
- Statutory late payment interest at the European Central Bank's reference rate plus 8 percentage points, accruing automatically once a payment deadline passes.
- A flat recovery compensation of EUR 40 per unpaid invoice, which a creditor is entitled to claim from the debtor without needing to demonstrate actual costs.
- B2B payment terms of up to 60 days, which can be exceeded only where the contract expressly provides for longer terms and those terms are not grossly unfair to the creditor.
- Transactions involving public authorities as debtors are subject to stricter default rules under the same Directive.
Member states have transposed these provisions into national law with varying degrees of supplementary protection. Creditors pursuing a payment order or considering enforcement of judgment in a specific country should always verify current national rules, which may provide additional remedies beyond the Directive's minimums.
Who Is Affected in the European Union
The continuation of the 2011 Directive framework, rather than a new harmonised regulation, has direct implications for several categories of market participant:
- Exporters and cross-border suppliers dealing with EU buyers will continue to face a patchwork of national transposition rules rather than a single uniform instrument. Payment terms that might have been capped under the proposed regulation remain subject to national variations.
- Foreign investors and multinational groups with accounts receivable across multiple EU jurisdictions must manage late payment interest calculations and debt collection procedures under different procedural regimes.
- SMEs, which the proposed regulation was in part designed to protect, continue to rely on the existing Directive's minimums. Where contract terms extend payment periods beyond 60 days, challenging them as grossly unfair remains possible but requires case-by-case analysis under national law.
- Financial institutions and credit managers monitoring asset quality or assessing the risk on unpaid invoice portfolios should note that the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have not issued revised guidance premised on the proposed regulation's provisions.
For companies with significant exposure in markets such as Romania, where extended payment cycles in certain sectors have been a recurring commercial concern, the absence of stronger EU-level rules is particularly relevant. Our debt recovery practice in Romania regularly advises on structuring claims under both the Directive's framework and applicable national enforcement procedures.
Immediate Action Items for International Companies
Given the current regulatory position, businesses transacting across EU borders should take the following steps without delay:
- Audit existing contracts for payment term clauses that extend beyond 60 days. Assess whether those terms would be defensible as not grossly unfair under the law of the applicable jurisdiction. Do not assume that a forthcoming regulation will cure drafting weaknesses.
- Review late payment interest clauses in standard terms. Where contracts are silent on interest, the Directive's statutory rate (ECB reference rate plus 8 percentage points) applies by default, but this should be expressly invoked in any formal demand or payment order application.
- Ensure recovery compensation is claimed. The EUR 40 flat fee per invoice is frequently overlooked in informal demand letters. Including it in every written claim reinforces the commercial signal and satisfies the Directive's minimum.
- Reassess credit terms offered to EU counterparties in light of the fact that no regulatory tightening is imminent. Companies that adjusted internal credit policies in anticipation of the proposed regulation may need to recalibrate risk appetite and contractual protections accordingly.
- Consider pre-emptive enforcement tools where receivables are ageing. Asset freezing applications, European Account Preservation Orders, and national attachment procedures remain available independently of the blocked regulation. Where a debtor shows signs of financial difficulty, early advice on insolvency and restructuring options can be critical to preserving creditor position.
Companies that wish to review their broader approach to cross-border debt collection in the current regulatory environment may find it useful to consult our analysis of debt recovery strategy for SME exporters operating in the EU in 2026, which addresses practical enforcement sequencing in the context of the existing Directive framework.
What to Monitor Going Forward
The European Commission retains the authority to propose a revised instrument in a future legislative cycle. Any new proposal would need to navigate the same political tensions that blocked the 2023 text, particularly disagreements between member states on mandatory payment caps and the treatment of supply chain finance arrangements. EUR-Lex and the Commission's legislative pipeline remain the primary reference sources for any future developments; Ferraz & Whitmore will publish updates as the position evolves.
In the meantime, businesses should not allow uncertainty about future EU rules to delay action on current receivables. The Directive's remedies are available now, national courts and enforcement bodies remain accessible, and delay in pursuing unpaid invoices invariably weakens the practical prospects of recovery, regardless of the applicable legal framework.
If you are managing outstanding receivables or reviewing contract terms in light of this regulatory development, we welcome the opportunity to discuss your position. Please contact us at info@ferrazwhitmore.com or visit our contacts page to arrange a consultation.
How Ferraz & Whitmore Can Assist
Our cross-border disputes and commercial teams advise clients on payment enforcement, debt collection strategy, and the structuring of commercial contracts across EU and non-EU jurisdictions. We work with both creditors and debtors, and our analysis draws on the procedural realities of enforcement in individual member states rather than on generalised guidance.
If you would like to discuss a specific receivables issue, a contract review, or your organisation's exposure in a particular EU market, please reach out at info@ferrazwhitmore.com or through our contacts page.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.