The Department of Business, Innovation and Skills (BIS) has published new proposals which seek to expand the powers of representative bodies in the UK to better tackle late payment issues. The re-cast Late Payment Directive (2011/7/EU) allows representative bodies to challenge late payment terms and practices which are 'grossly unfair' and the BIS is now consulting on how to properly incorporate this power into UK law.
In the UK, 'representative' bodies currently have only limited powers to challenge payment terms or practices on behalf of SMEs. This is narrower than the right contained in the re-cast Directive. The new right would give certain bodies the right to challenge any terms or practices deemed to be 'grossly unfair' on behalf of their members.
The proposals are seeking views on:
who might be covered by a representative claim (for example, individual businesses or groups of businesses);
which organisations can bring a claim;
the resources available to bring a case.
Additionally, the BIS is considering whether to further refine the definition of 'grossly unfair' payment practices. This could include legislating to provide indicative criteria that would be used to assess whether a practice is unfair.
Clarity of what the term 'grossly unfair' means is seen as a positive step for small businesses as it would give them confidence in negotiating and challenging exceptionally long payment terms which are imposed on them by customers.
Previously published in the Construction Law Journal
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