Prompt payment: an overview of the laws relating to mandatory payment terms in Europe

In the first episode of the second part of our 'Better Contracts' podcast series, Sophie Lessar catches up with Mathias Kuhn and Gerald Baumgartner to discuss the critical issue of prompt payment in business-to-business contracts. The discussion explores the legal landscape in their respective jurisdictions (the UK, France and Germany) before moving on to assess the proposed new EU-wide payments legislation and how businesses can navigate the upcoming changes.

The current legal landscape

The panel kicks off with a discussion of the differences between the UK and the EU jurisdictions, noting in particular that:

• payment periods are generally agreed between parties in the UK, whereas maximum payment terms are set by law in France and Germany
• the jurisdictions are similar in respect of late payments, with each providing a statutory interest rate above a central bank rate. In addition, the creditor can claim reasonable debt recovery costs in the UK, whereas in both France and Germany the creditor is entitled to be paid a fixed sum as compensation (as determined by the EU Late Payment Directive¹)
• most large companies in the UK must publicly report on their payment practices, and non-compliance can lead to prosecution. There are no such mandatory reporting obligations in France and Germany. In France, however, non-compliance with payments legislation is actively investigated by the DGCCRF (the French Directorate General for Competition Policy, Consumer Affairs and Fraud Control), which levies significant fines for non-compliance and publishes details of those fines.

Upcoming Legislative Changes

A proposed new EU Late Payment Regulation² is expected to replace the current Late Payment Directive, likely in 2026. It will impose an EU-wide set of rules that include a new standard maximum payment period and a mandatory interest rate, as well as mandating that Member States have national 'enforcement authorities' to conduct audits and impose fines.

The discussion assesses the wide scope and impact of this new legislation, including the likely approach to enforcement in Germany which, unlike France, does not have an existing enforcement regime in place. This leads to a discussion of practical steps that businesses can take now, such as:

• strategic planning (including identifying in-scope contracts and mapping out jurisdictional requirements)
• already taking account of the new rules in new contracts and standard terms and conditions
• educating operational teams and involving them in any compliance activity undertaken by the legal function

In addition to discussing the new EU legislation, Sophie touches on developments that businesses should be aware of in the UK, including the extended reporting requirements on payment performance³, the mandatory payment terms that the Public Procurement Act applies to supply chains from February 2025, and the new Fair Payment Code.

You can listen to the podcast and find out more about the other podcasts in the series here.

For further guidance on payment terms across 20 jurisdictions, please see DLA Piper's Guide to Going Global - Payment Terms.

Further reading

• Die Zahlungsverzugsverordnung kommt – Anwendungsbereich und Möglichkeiten der Abbedingung durch Rechtswahl, ZVertriebsR 2024, 216 ff.
• The New EU Late Payment Regulation – Avoiding its Applicability to a Commercial Contract by Choosing U.S. State Choice of Law, Transatlantic Law Journal 2025, Issue 2.
• New UK payments reporting obligations starting on 1 January 2025 - The Reporting on Payment Practices and Performance (Amendment) Regulations 2024