David Cullinane (Waterford, Sinn Fein)
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636. To ask the Minister for Jobs, Enterprise and Innovation if she has given consideration to reviewing prompt payment legislation as called for by ISME; and if she will make a statement on the matter. [29653/16]

Mary Mitchell O'Connor (Dún Laoghaire, Fine Gael)
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Prompt Payment of invoices is critical to the effective working of any economy and is an issue on which this Government places great emphasis. Late payment is particularly damaging for small and medium-sized businesses, where any disruption to cash flow can mean the difference between solvency and bankruptcy.

The issue of late payment in commercial transactions is governed by the European Communities (Late Payment in Commercial Transactions) Regulations 2012 - S.I. 580 of 2012. The purpose of these Regulations is to give legal effect to Directive 2011/7/EC of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions.

The main provisions of the Regulations include:

-Public authorities must pay for the goods and services that they procure within 30 days;

-Businesses must pay their invoices within 60 days, unless they expressly agree otherwise and provided it is not grossly unfair;

-Automatic entitlement to interest for late payment and compensation for recovery costs;

-Statutory interest of at least 8% above the European Central Bank’s reference rate.

Under these Regulations, (S.I. 580 of 2012), 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.

The Regulations allow for contractual freedom in business to business commercial transactions. Where the date of payment exceeds 60 calendar days, the payment date must be expressly agreed in the contract and not grossly be unfair to the creditor. In cases where no contract exists, businesses must pay within 30 days. The Regulations also provide for businesses to challenge grossly unfair payment terms and practices.

Most commercial transactions are made on credit terms and trade credit is a major competitive tool for small businesses in Ireland.The payment period is typically one of the negotiable elements of a contract.The Regulations do not harmonise payment terms as this would lead to a loss of flexibility and contractual freedom by removing the ability of Irish businesses to compete with their counterparts in other Member States where payment terms are negotiable.

In addition to legislating for prompt payments, since 2009, Central Government Departments have been improving their respective payment times and are now obliged to pay their suppliers within 15 days of receipt of a valid invoice. This 15 day prompt payment rule, introduced by Government on a voluntary basis, was extended to the wider Public Sector in March, 2011.

Other initiatives introduced at national and EU level to combat this issue include the launch of the Prompt Payment Code (PPC) portal in March of 2015. The PPC, which is hosted through an online portal – www.promptpayment.ie–, is a new initiative aimed encouraging and promoting best practice between businesses and their suppliers, improving cash flow between businesses and driving a change in payment culture.

These initiatives, together with the late payment legislation, demonstrate the Government’s continuing drive and commitment to encourage a responsible payment culture in Ireland.