Belgium: New Legislation : A New Interest Rate in Case of Late Payment in Commercial Transactions

In order to combat delays in payment in commercial transactions, the Belgian legislator has transposed the EU Directive of 29 June 2000 on combating late payment in commercial transactions in its Act of 2 August 2002 on combating late payment (hereinafter the "Act"). The Act applies to all payments as remuneration for the delivery of goods or the rendering of services. These transactions must be between enterprises or between an enterprise and a contracting public authority. The Act does not apply to transactions between or with consumers. The Act defines "enterprise" as any undertaking in the course of its economic or professional activity. Such undertaking can be exercised by one person or several persons. The definition of enterprise goes beyond the traditional concept of "merchant, trader" and also includes the liberal professions (e.g. pharmacists, doctors, bailiffs, notaries, lawyers), artisans and agricultural undertakings.

The rule of thumb is that in principle any payment as remuneration of a commercial transaction must be made within thirty days of the latest of any of the following events: (i) receipt of the invoice or equivalent request for payment, (ii) receipt of the goods or the services, or (iii) acceptance of the goods or services, or verification of the conformity of the goods or services with the agreement. In the absence of due payment, interest shall automatically become due as from the next day, without the requirement for any prior notice of default. The interest rate is based upon a reference interest rate applied by the European Central Bank plus 7%, and will be determined every six months via publication in the Belgian State Gazette. The interest rate applicable for late payments in commercial transactions during both the first and the second half of 2002 is 10.5%. This rate is considerably higher than the general legal interest rate (equal to 7%).

As the Act applies to the delivery of goods or services against a remuneration, it also concerns real estate transactions, such as the sale of buildings, lease agreements, etc.

A creditor will also be entitled to reasonable indemnification by the debtor for all relevant recovery costs incurred by the creditor as a result of the delay in payment (e.g. costs of formal notification). These recovery costs can also include the fees of the creditor’s lawyer. The recovery costs must be relevant, transparent and in proportion to the debt due. A Royal Decree shall specify the maximum amounts of the reasonable indemnification for various levels of debt. Notwithstanding the fact that the Royal Decree has not yet been published, it appears most unlikely that the "reasonable indemnification" will cover all costs actually incurred by the debtor.

Parties can expressly depart from the rules set forth in the Act in their pre-contractual documents and agreements. The Act is not to be considered mandatory law. However, in case of apparent inequity, a court can review the deviating provisions, although the court can not grant more rights to the creditor than are provided for in the Act. The court will have to examine whether objective reasons exist for deviating from the provisions of the Act.