PREVENTION OF LATE PAYMENT IN COMMERCIAL TRANSACTIONS

ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora

According to the legal acts of the Republic of Lithuania, the parties of commercional contracts have the right to discuss the conditions of the prevention of a late payment. If the parties didn’t discuss these conditions, the prevention of late payments is regulated by the Law on the Prevention of Late Payment in Commercial Transactions (hereinafter - the Law). This Law applies to all payments made as remuneration for commercial transactions concluded between economic entities or between economic entities and public authorities which lead to the delivery of goods, provision of services or performance of works for remuneration and in which payments are made.

According to the Law, a commercial transaction means a transaction between economic entities or between economic entities and public authorities which lead to the delivery of goods or the provision of services or  the performance of works for remuneration.

Interest for late payment shall become payable from the day following the date or the end of the period for payment fixed in the contract. If the date or the period for payment is not fixed in the contract, interest shall become payable automatically without the necessity of a reminder 30 days following the date of receipt by the debtor of the invoice or an equivalent request for payment. The interest rate in this cases means a monthly VILIBOR interest rate (interbank offered rate, at which banks are willing to lend funds in litas to other banks), increased by 7 percentage points. This interest rate is counted as follows: the amount of interest payable by the debtor shall be calculated applying the interest rate specified in the Law, which was in force in the half-year in question when the debtor became obliged to pay interest. During the first half-year the most recent interest rate, announced before the first calendar day of the first half-year, shall be in force, for the following six months the most recent interest rate announced before the first calendar day of the second half-year shall apply.

It should be noted that the Law has been harmonized with Directive 2000/35/EC of the European Parliament and of the Council of June 29, 2000 on Combating Late Payment in Commercial Transactions. This directive has been changed by Directive 2011/7/EU of the European Parliament and of the Council of Feb. 16, 2011, on Combating Late Payment in Commercial Transactions (hereinafter - the Directive).

The Directive came into effect on March 16, 2011. This Directive provides the new rules, which will make changes to existing rules on late payments in commercial transactions.
Under the new legislation, the period for payment fixed in the business-to-business contract does not exceed 60 calendar days, unless otherwise expressly agreed in the contract. For contracts involving public authorities, the deadline is even shorter and the general rule is that payment must be made within 30 days (and just in exceptional circumstances by up to 60 days).

The statutory interest rate for late payments under the new legislaton will be increased to 8 percent above the European Central Bank rate for a member state whose currency is the euro or the national central bank rate for a member state  whose currency is not the euro.

According to the Directive - member states  shall have until March 16, 2013 to adjust their national legislation to implement the Directive.