Late Payments in Commercial Transactions Regulations 2002

An EU wide law came into effect on 7 August 2002 to combat late payment in commercial transactions. This law was implemented in Ireland by Regulations which provide that penalty interest will become payable if payments for commercial transactions are not met within 30 days, unless otherwise specified in a contract or agreement. You should first of all read our guide to the Regulations, the regulations themselves can be accessed at below. Sections 4 to 11 of the Prompt Payment of Accounts Act 1997 were repealed by these Regulations that apply to payments for commercial transactions in both the public and private sectors.

The European Communities (Late Payment in Commercial Transactions) Regulations 2002 (SI 388 of 2002) came into operation on 7 August 2002. The Regulations, which apply equally to the public and private sectors, provide an entitlement to interest if payment for commercial transactions is late.

The new Regulations provide that unless otherwise specified in an agreed contract, the interest rate will be the European Central Bank main refinancing rate plus 7 percentage points. The ECB rates in force on 1 January and 1 July apply for the following six months in each year. Only one rate will apply to a late payment – that is the rate in force on the payment date.

From the 1^st January 2012, the late payment interest rate is 8% per annum (that is based on the ECB rate of 1% plus the margin of 7%).

That rate equates to a daily rate of 0.022%. Penalty interest due for late payments should be calculated on a daily basis.

The ECB rate can be checked on the Central Bank and Financial Services Authority of Ireland website www.centralbank.ie.

The Small Business Unit provides information in respect of late payments only. It is important to note that while staff in the Unit will endeavour to provide the fullest information, it is not their function to offer advice. Where specific interpretations of the Late Payments legislation are required, it is recommended that these be sought from competent parties with the appropriate expertise within the legal profession.

Please see our Frequently Asked Questions about the Regulations on Combating Late Payment in Commercial Transactions. If you cannot find the answer to your question here or require further information please contact the Small Business Unit.