On March 15, 2011, a new EU Directive aimed at combating late payment in commercial transactions (2011/7/EU, the "Recast Directive") - repealing and modernising the Directive 2000/35/EC on the same matter - entered into force.

The Recast Directive was issued because late payments in commercial transactions are still seen as a significant problem in the EU; late payments hinder the free movement of goods and services between Member States, distort competition and are detrimental to smaller businesses. The Recast Directive aims to confront debtors with measures that discourage them from paying late, to provide creditors with measures enabling them to effectively exercise their rights when paid late and to create a level playing field across Member States.

Italy has transposed the Recast Directive by means of Legislative Decree November 9, 2012 No. 192("New Provisions") which has amended Legislative Decree October 9, 2002 No. 231 (which had implemented Directive 2000/35/EC). The New Provisions entered into force on November 30, 2012 and are applicable to commercial transactions starting from January 1, 2013.

Scope of application

The New Provisions apply to "late payment in commercial transactions".

"Commercial transactions" are defined as contracts between undertakings or between undertakings and public authorities which "lead, in an exclusive or prevalent way, to the delivery of goods or the provision of services for remuneration". It is important to highlight that such definition appears different from the one provided for by the Recast Directive, where "commercial transactions" are defined as: "transactions between undertakings or between undertakings and public authorities which lead to the delivery of goods or the provision of services for remuneration". As we will see below this appears to impact on the scope of application of the New Provisions.

The New Provisions do not apply to: contracts entered with consumers; payments made as compensation for damages, including payments from insurance companies; and debts that are subject to insolvency proceedings, including proceedings aimed at debt restructuring.

According to the New Provisions, undertaking means any organization acting in the course of its independent economic or professional activity, even where activity is carried out by a single individual; public authority is defined de relato making reference to the awarding authority provided for by the Legislative Decree No. 163/2006 (Public Procurement Code).

In this respect, it is worth noticing that according to the Recast Directive, the provisions on late payments should be applied also to "design and execution of public works and building and civil engineering works".

Notwithstanding this mentioned European provision and the new definition of public authority set out by the New Provisions, it is currently debated if the New Provisions apply to public works. In fact, taking into consideration the new definition of "commercial transactions" provided for by the New Provision (i.e., contracts which "lead, in an exclusive or prevalent way, to the delivery of goods or the provision of services for remuneration") - which, as above mentioned is different from the Recast Directive's definition of "commercial transactions" - it is possible to say that it is not clear if public works are included or excluded from such definition and, as a consequence, from the application of the New Provisions. At the moment contractors associations are asking the Italian Government to make the necessary amendments in order to clarify this important aspect.

Transactions between undertakings

The New Provisions now set forth that the creditor is entitled to interest for late payment without the necessity of any dunning letter or reminder sent to the debtor.

As a general rule, contractual payment terms must be limited to 60 calendar days, but the parties may expressly agree (in writing) on payment terms longer that 60 calendar days, provided, however, that such extension is not grossly unfair to the creditor.

If a payment term is not set out in the contract, the debtor must make the payment upon the expiry of any of the following time limits:

  1. 30 calendar days following the date of receipt by the debtor of the invoice or an equivalent request for payment;
  2. where the date of the receipt of the invoice or the equivalent request for payment is uncertain, 30 calendar days after the date of receipt of the goods or services;
  3. where the debtor receives the invoice or the equivalent request for payment earlier than the goods or the services, 30 calendar days after the date of the receipt of the goods or services;
  4. 30 calendar days after the completion of the procedure of acceptance or verification of the conformity of the goods or services provided for by statute or in the contract and if the debtor receives the invoice or the equivalent request for payment earlier or on the date on which such acceptance or verification takes place. Such procedures shall not last more than 30 calendar days but this period can be varied by express agreement provided it is not grossly unfair.

Transactions between undertakings and public authorities

As above mentioned, the New Provisions also apply to commercial transactions taking place between undertakings and public authorities (as the debtor). The relevant provisions are similar to those applying to commercial transactions taking place between undertakings but there are some differences.

If a payment term is not stated in the contract the debtor public authority must make payment within 30 calendar days.

According the New Provisions, the time limit of 30 calendar days is extended to 60 calendar days for: (a) any public authority which carries out economic activities and that is subject to transparency requirements provided for the Legislative Decree No. 333/2003; (b) public entities providing healthcare and that are duly recognized for that purpose.

The parties are allowed to expressly agree (in writing) a payment term longer than 30 calendar days (in any event it does not exceed 60 calendar days) provided that this later deadline is objectively justified by the nature or features of the contract.


The statutory interest applying to commercial debt under the New law Provisions will be simple interest at a rate equal to the sum of the "reference rate" plus 8%. The "reference rate" will be the European Central Bank's interest rate, currently 0.75%. The relevant interest rate applicable will be that of January 1 for the first semester of the year in question or July 1 for the second semester of that year, as appropriate.

Compensation for recovery costs

Where interest for late payment becomes payable in commercial transactions between undertakings or between undertakings and public authorities the creditor is entitled to be paid a minimum fixed sum of €40 by the debtor. This sum, aimed as compensation for the creditor's own recovery costs, is due without the need for any reminder. In addition to this fixed sum, the creditor can also obtain reasonable compensation for any recovery costs exceeding that sum and incurred due to the late payment (these costs might include employees' time for chasing up the debt, legal fees or debt collection agency fees).

Unfair contractual terms and practices

Any contractual term or practice relating to (i) the date or period for payment, (ii) the rate of interest for late payment, or (iii) the compensation for the recovery of costs, that is grossly unfair to the creditor is null and void (pursuant to Section 1419 of the Italian Civil Code). In determining whether a contractual term or a practice is null and void because it is grossly unfair to the creditor, the Judge should consider:

  1. any gross deviation from good commercial practice, contrary to good faith and fair dealing;
  2. the nature of the product or service; and
  3. whether the debtor had any objective reason to deviate from the statutory rate of interest for late payment or the fixed sum referred to recovery costs.

The New Provisions set forth that any contractual term that excludes: (i) interest for late payment or (ii) compensation for recovery costs has to be considered to be grossly unfair and, as a consequence, null and void.


Late payments represent a significant cost to creditor businesses as they strain cash flow, add financial costs, reduce potential for investment opportunities and create uncertainty in particular for small business. Late payments by public authorities also discourage businesses to participate in public procurement opportunities (according to the latest data available to the European Commission, in 2011 the Italian public authorities had an average payment period of 180 days for services and goods procured, and an average delay of 90 days) with negative consequences on the competitiveness of such businesses.

Given such scenario, the European Institutions and Member States are strongly committed to combating late payment in order to improve the cash flow of businesses that is of particular importance in time of economic downturn. The Recast Directive and the New Provisions— which in our opinion will require a further clarification with reference to the scope of application to become a proper transposition of the Recast Directive — are aimed at creating an environment where paying on time is the norm and late payments are seen to be unacceptable across the European business community.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.