Belgium: Late payments in commercial transactions to be more vigorously combated as of 1 Feb 2022

The Belgian legislator took advantage of the summer of 2021 to quietly adopt legislation likely to have a noticeable impact on undertakings’ cash flow, namely the Act of 14 August 2021 (FR/NL) amending the Act of 2 August 2002 on combating late payments in commercial transactions (the “Act of 2002”). These modifications to the Act of 2002, which notably restrict parties’ freedom as regards contractual payment terms, will enter into force on 1 February 2022. It is now time for the undertakings concerned to anticipate what it may mean for them.

Context 

Directive 2011/7/EU on combating late payment in commercial transactions, replacing Directive 2000/35/EC, aims at preserving the stability and profitability of creditor undertakings and consequently preserving the proper functioning of the internal market. These directives were successively transposed into Belgian law by the Act of 2002, as modified over time. 

Directive 2011/7/EU, being a minimum harmonisation directive, allows Member States to go beyond its existing text to further protect creditors’ rights in commercial transactions, i.e. transactions which lead to the delivery of goods or the provision of services for remuneration. The Belgian legislator already did so in 2019, by introducing a maximum payment term of 60 days for commercial transactions in which the creditor is an SME. 

Having established that undertakings were still facing substantial difficulties in being paid promptly, that payment terms of, for example, 90 days were too long for many undertakings, and that the existing provisions of the Act of 2002 still allowed for a number of loopholes, the Belgian legislator has now decided, through the Act of 14 August 2021, to further tighten the protective rules of the Act of 2002, this time to the benefit of all creditor undertakings (whether SMEs or not).

Overview of key modifications 

The key modifications introduced by the Act of 14 August 2021 can be summarised as follows¹: 

• The default payment term is set at 30 days as of the receipt of an invoice, which the parties can potentially extend by contract to a strict maximum of 60 days. A Royal Decree may extend this maximum 60-day period in specific sectors;
• It is prohibited to contractually define the date of receipt of an invoice;
• The time required to conduct a procedure of acceptance or verification, by which the conformity of the goods or services with the contract is to be ascertained, is to be included in the payment term (and can thus not be used to de facto prolong the maximum payment term); and
• Interest for late payment, as well as a lump-sum compensation payment of 40 EUR for recovery costs, are automatically due in the event of late payment (and are no longer merely a right for unpaid creditors).

A harsh sanction in case of contractual payment term exceeding 60 days?

Pursuant to the Act of 14 August 2021, any contractual clause providing for a payment term of more than 60 days will be deemed unwritten (“non écrite” / “niet geschreven”). 

This means that a contractual clause providing for a payment term of for instance 90 days, being deemed unwritten, would disappear from the contract. The consequence of such disappearance is not addressed in the Act of 14 August 2021 or in its legislative history. On the one hand, such disappearance could arguably lead to the application of the default payment term of 30 days set out in the Act of 2002. On the other hand, if it is established that the parties had agreed to apply the longest payment term legally possible, it could potentially be argued that the initially agreed payment term of 90 days should only be reduced to 60 days. 

Payment terms between 31 and 60 days still potentially at risk 

Article 7² of the Act of 2002 allows the judge to revise – at the request of a creditor – a contractual clause that would deviate from the provisions of the Act of 2002 dealing with payment term, late interest and recovery costs, to the extent such clause would be manifestly unfair towards the creditor, taking into account, inter alia, the factual circumstances of the case. 

The new provision of the Act of 2002 allowing parties to agree on a payment term of a strict maximum of 60 days contains an express reference to that Article 7. 

On that basis, a creditor faced with a contractual payment term exceeding 30 days, but not exceeding the new strict maximum of 60 days, could thus still potentially request the judge to revise the duration of the payment term (to the extent the latter would be deemed manifestly unfair towards the creditor). 

Uncertainties 

The Act of 14 August 2021 creates unwelcome uncertainties for undertakings. We summarize a number of those uncertainties below. 

First, neither the Act of 14 August 2021 nor its legislative history expressly addresses the nature of the new provisions or their regime under private international law.

It is, for instance, unclear whether the new provisions of the Act of 2002 are to apply to all contracts in which parties have designated Belgian law as the governing law, irrespective of the contract’s ties with Belgium or, to the contrary, whether the new provisions would have an auto-limitative effect (i.e. they would not apply – despite the designation of Belgian law as governing law – to a contract that has no ties whatsoever with Belgium, save in case of express designation of those provisions in the contract). 

It is also, for instance, unclear whether the new provisions of the Act of 2002 are to be considered as overriding mandatory provisions (“lois de police” / “bepalingen van bijzonder dwingend recht”) in the sense of Article 9.3 of the Rome I Regulation on the law applicable to contractual obligations, as a result of which a judge in another EU member state could potentially give effect to the new provisions of the Act of 2002 if the obligations arising out of the contract (governed by a law other than Belgian law) have to be performed in Belgium.

In addition, the Belgian legislator has not provided for any particular transitory regime for the entry into force of the Act of 14 August 2021, as had been the case for previous modifications to the Act of 2002.

Under Belgian law, contracts remain in principle governed by the law in force at the time they were concluded. By exception, rules of public order but also mandatory rules (although there were previously hesitations in case law in that respect) are to immediately apply to existing contracts. As a result, save for a legislative intervention that would alter their entry into force, the provisions of the Act of 14 August 2021 (which largely qualify as mandatory provisions) will apply to all contracts concluded on or after 1 February 2022, but also to all contracts in existence on that date.

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¹ The rules summarised here are those applicable between undertakings; the Act of 2002 provides for certain nuances in the rules applicable to transactions between undertakings and public authorities, which are not developed here.

²Article 7 of the Act of 2002 was not modified by the Act of 14 August 2021.