Change to Law on Late Payments by Public Authorities

Change to Law on Late Payments by Public Authorities

The making of late payment in commercial transactions is governed by the European Communities (Late Payment in Commercial Transactions) Regulations 2012 – S.I. 580 of 2012.

Under those Regulations,  it is an implied term of every commercial transaction that where a purchaser does not pay for goods or services by the relevant payment date, the supplier shall be entitled to interest (“late payment interest”) on the amount outstanding. Interest shall apply until such time as payment is made by the purchaser.

The Regulations apply to commercial transactions in both the public and private sector. Some of the main provisions of those regulations are:

  • in the absence of any agreed payment date between the parties (i.e. specified in the contract), late payment interest falls due after 30 days has elapsed, provided the invoice is not subject to query; and
  • the Statutory interest rate for late payment is 8 percentage points above the European Central Bank’s reference rate.

These regulations were recently amended on 25th May 2016 by the EU (Late Payments In Commercial Transactions) (Amendment) Regulations 2016. The 2012 Regulations did not specify a time limit for public authorities regarding terms of payment for goods and services but allowed undertakings to challenge the payment terms if they were grossly unfair.

Following the recent amendment, public authorities now must not seek payment terms in excess of 30 calendar days for the supply of goods or services by undertakings.

This brings Irish law in this area more into line with the EU Directive from 2011 upon which the law in this area is based.