In 2026, the statutory framework governing late payment interest across the European Union continues to be set by Directive 2011/7/EU, which establishes a default interest rate equal to the European Central Bank's reference rate plus 8 percentage points and entitles creditors to a flat EUR 40 compensation per unpaid invoice. The proposed EU Late Payment Regulation, which would have replaced the Directive with a directly applicable instrument, was effectively abandoned following a blocking minority of member states and a signal from the European Commission that it intended to withdraw the proposal. International companies with cross-border receivables in the EU must therefore apply the existing Directive framework – and, where relevant, its national transpositions – when calculating and enforcing late payment claims.
What Remains in Force: Directive 2011/7/EU
Despite years of reform discussion, the legal baseline for late payment interest across EU member states remains Directive 2011/7/EU. Under this instrument, where a commercial debtor fails to pay on time, statutory interest accrues automatically at the ECB reference rate plus 8 percentage points. This rate applies unless the parties have contractually agreed a different rate, and even then any agreed rate must not be grossly unfair to the creditor.
Alongside interest, creditors are entitled to a flat-rate EUR 40 recovery compensation per invoice, payable without any requirement to prove actual costs. This amount is intended to cover internal recovery costs and is separate from any reasonable debt collection expenses incurred by the creditor where those exceed EUR 40.
For business-to-business (B2B) transactions, the Directive allows contractual payment terms of up to 60 days, unless a longer period is expressly agreed and is not grossly unfair in light of the nature of the goods or services, commercial practice, and the position of the parties. Where no payment deadline is agreed, a default 30-day period applies before interest begins to run.
The Abandoned Regulation: What Did Not Change
In September 2023, the European Commission tabled a proposal to replace Directive 2011/7/EU with a directly applicable EU Late Payment Regulation. The proposal aimed to impose stricter maximum payment terms and to strengthen enforcement at the national level. The European Parliament adopted its first-reading position in April 2024, but the proposal encountered a blocking minority of member states in the Council, who objected to several of its core provisions. The Commission subsequently signalled its intention to withdraw the proposal.
The practical consequence is significant: the Regulation was never adopted and has no legal effect. Businesses and advisers who anticipated a stricter uniform regime – including mandatory 30-day maxima and new enforcement bodies – should treat those provisions as not in force. The analysis of why this reform failed, and what structural pressures remain unaddressed in the EU payment culture, is discussed in detail in our earlier article: Why EU Late Payment Regulation Failed and What Remains.
As a result, the legal landscape in 2026 remains fragmented. Each member state's national transposition of Directive 2011/7/EU governs the specific procedural rules, enforcement mechanisms, and any extensions or modifications permitted under national law. Where national implementation details are not publicly harmonised, they remain subject to local rules and should be verified in the relevant jurisdiction.
If your business is managing unpaid invoices across multiple EU jurisdictions, our team can assist in mapping the applicable interest rates, compensation entitlements, and procedural steps under each relevant national framework. Contact us at info@ferrazwhitmore.com or visit our contacts page to discuss your situation.
How the ECB Reference Rate Works in Practice
The ECB reference rate used to calculate statutory late payment interest is the rate applicable to the main refinancing operations of the European Central Bank. It is revised periodically and published in the Official Journal of the European Union (accessible via EUR-Lex). The rate in force on 1 January for the first half of any calendar year, and on 1 July for the second half, is typically used as the base for the statutory interest calculation in that respective period.
Creditors should therefore verify the applicable ECB reference rate for the specific payment period in question before issuing a formal demand. Because the rate may shift between the date of invoice and the date of enforcement, the accrued interest should be recalculated if significant time has elapsed between when interest began to run and when proceedings are commenced.
In enforcement proceedings – whether via a European Payment Order, a national payment order, or enforcement of judgment through domestic courts – the quantification of statutory interest is typically presented as a running calculation from the due date to the date of actual payment. Courts and enforcement authorities in member states will generally require this to be set out with reference to the ECB rates applicable across each relevant period.
Who Is Affected
The Directive applies to commercial transactions between undertakings, and between undertakings and public authorities, where goods are delivered or services performed in exchange for payment. The following categories of parties should pay particular attention to their rights and obligations under the current framework:
- Exporters and suppliers selling into EU markets on credit terms, particularly where buyers habitually delay payment beyond agreed deadlines.
- International investors and fund structures with portfolio companies or contractual counterparties in EU member states where payment discipline varies.
- Construction and infrastructure contractors, where payment chains across subcontractors can involve multiple layers of potentially delayed obligations.
- Professional service providers – including law firms, consultancies, and technology vendors – supplying B2B services to EU-based clients.
- Public procurement suppliers, who benefit from stricter 30-day default terms applicable to public authority debtors under the Directive.
Companies engaged in debt collection activities or instructing external recovery specialists should ensure that their standard engagement terms explicitly reference the statutory interest entitlement and EUR 40 compensation, as omitting these from a formal demand can weaken the enforceability of the claim.
Asset Freezing and Cross-Border Enforcement Options
Where a debtor is located in another EU member state, creditors have access to several cross-border procedural instruments beyond straightforward domestic litigation. The European Account Preservation Order (EAPO) provides a mechanism for asset freezing of bank accounts across member states before or during proceedings, without prior notification to the debtor. This tool is particularly relevant for creditors who suspect a debtor may dissipate assets to frustrate recovery.
The European Payment Order procedure remains available for uncontested monetary claims with a cross-border dimension. Where a claim is contested, creditors should evaluate whether to proceed under the European Small Claims Procedure (for lower-value claims), or through standard national litigation followed by enforcement of the resulting judgment in the debtor's member state using the Brussels I Recast Regulation.
Regulatory oversight of systemic payment conduct in financial sectors involves both ESMA and EBA in respect of their regulated entities, though their mandates do not directly govern commercial late payment disputes outside regulated financial services contexts. For creditors pursuing claims against counterparties that are themselves regulated entities, the regulatory relationship between the debtor and its supervisory authority may in some circumstances be a relevant background factor in negotiations.
For businesses operating in or exporting to markets outside the EU, enforcement dynamics differ substantially. Our debt recovery services for India outline the procedural framework applicable to cross-border claims in that jurisdiction, which may be relevant for groups with receivables on multiple continents.
Immediate Action Items for International Companies
Given the current regulatory environment – a Directive that remains in force but has uneven national implementation, and a failed reform that briefly raised expectations of a stricter uniform regime – international companies should take the following steps now:
- Audit open receivables to identify invoices that are overdue in EU member states and calculate the statutory interest and EUR 40 compensation already accrued under Directive 2011/7/EU.
- Review standard contract terms to ensure payment deadlines are clearly specified, any terms exceeding 60 days are commercially justifiable, and interest and compensation clauses are expressly included rather than relying solely on the statutory default.
- Verify the current ECB reference rate for the relevant periods via EUR-Lex or the ECB's official publications before quantifying claims in formal demands or court submissions.
- Assess cross-border enforcement options – including the EAPO, the European Payment Order, and Brussels I Recast enforcement – for debtors in other member states, taking into account any asset freezing considerations where the debtor's solvency is in question.
- Where insolvency is a risk, consider whether early engagement with bankruptcy and restructuring counsel is appropriate, particularly where a debtor is systematically delaying payments to multiple creditors – a pattern that may indicate broader financial distress.
Looking Ahead: Regulatory Uncertainty Continues
The European Commission has not announced a replacement initiative for the abandoned Regulation at the time of this alert. The European Commission's 2023 proposal reflected genuine political concern about late payment culture in EU supply chains, particularly the asymmetry of bargaining power between large buyers and smaller suppliers. That concern has not disappeared with the proposal's withdrawal; further legislative initiatives remain plausible, though their timing and content are uncertain.
Companies should monitor developments in EU commercial law and payment policy, particularly any new Commission initiatives that may emerge in the context of the Capital Markets Union or SME strategy discussions. Changes to the ECB reference rate – which is set by monetary policy considerations, not payment policy – will continue to affect the quantum of statutory interest automatically, independent of any legislative change.
The CJEU continues to interpret provisions of Directive 2011/7/EU in references from national courts. Case law clarifying the scope of "grossly unfair" terms, the interaction between the Directive and sector-specific payment regimes, and procedural aspects of cross-border enforcement remains a live area. Monitoring EUR-Lex and official CJEU publications for relevant judgments is advisable for legal teams managing high-volume receivables portfolios.
If you have questions about how the current EU late payment framework applies to your receivables, your standard contract terms, or cross-border enforcement options, the Ferraz & Whitmore team is available to assist. Reach us 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.