Attention Entrepreneurs! Courts Will Punish for Minimal Delays in Commercial Transactions.
So far, judges have been dismissing demands in which counterparties and creditors have been seeking compensation for delays in payment, when the matters concerned small amounts or delays of several days, or even weeks. This may change following a recent ruling by the Court of Justice of the European Union (CJEU) on July 11, 2024.
Right to Compensation for Recovery Costs Incurred by the Creditor
The EU directive of the European Parliament and of the Council 2011/7/EU of February 16, 2011, on combating late payment in commercial transactions, opposes the practice of Polish courts, which tend to dismiss litigation for the payment of minimum compensation for the recovery of debts due to a small delay or amount owed by the debtor. This was ruled by the CJEU in its judgment of July 11, 2024. The case concerned a Polish limited liability company that was late with a payment of PLN 246 for 20 days and PLN 369 for only 5 days. The district court in Katowice admitted that there is a legal trend in Poland, whereby such claims involving small amounts or minor delays were dismissed. This led to the question of whether this practice was in line with EU law.
What Do EU Regulations Say?
According to Article 6 of the aforementioned directive, EU member states must ensure that a creditor is entitled to receive a minimum fixed amount of EUR 40 from a debtor when interest for late payment in commercial transactions becomes necessary – that is, after the payment due date. This amount must be paid without the need to remind the debtor, it serves as compensation for the recovery costs incurred by the creditor. Article 7 expresses that member states must ensure that practices limiting creditor’s rights stemming from Article 6 are not applied, if they are blatantly unfair to the creditor.
Polish Law
The provisions of the directive have been incorporated into the Polish legal order in 2013. According to Article 10.1 of the Act on Preventing Excessive Delays in Commercial Transactions, from the day interest is acquired, the creditor is entitled to an unrequested recovery cost compensation from the debtor, amounting to EUR 40, when the monetary obligation does not exceed PLN 5000. For obligations of higher value (above PLN 5000 up to PLN 49,999.99) the compensation is EUR 70, and for obligations equal to or above PLN 50,000 – EUR 100.
What Does It Looks Like in Practice?
The Katowice court, referring to the established practice of the Polish courts, noted that if the delay does not exceed EUR 100 to 300, or a period of two to six weeks, then the aforementioned compensation is deemed to be inconsistent with the principles of social coexistence, based on Article 5 of the Civil Code, and claims for these payments are rejected. A prime example is this very case, where the mentioned company had been late with its payments at least 39 times, and not once had a payment order been imposed.
Blatantly Unfair to Creditors
The District Court Katowice-West in Katowice, considering the case of a company whose outstanding amounts did not exceed PLN 200 and PLN 300 net, and the delay was 20 days and 5 days, questioned whether the described practice, used by Polish courts, was contrary to Article 6 of the Directive 2011/7. In addition to this regulation, he also pointed to paragraph 12 of the directive, which clearly states that delays violate an agreement between the parties, benefiting debtors due to the charging of low or even zero interest for delay or due to applicable debt collection procedures. Thus, a determined shift towards improving payment culture is needed, by reversing this trend and discouraging late payments, by recognizing all practices that prevent the charging of interest or compensation as blatantly unfair to creditors. The CJEU on July 11, 2024, confirmed the doubts of the Katowice court. In its judgment, it ruled that such practices are inconsistent with Article 6.1 of Directive 2011/7 (Case C-279/23).
Attention Entrepreneurs! Courts Will Punish for Minimal Delays
What could this ruling of the EU tribunal mean for Polish entrepreneurs and foreign companies operating in Poland? In case of even a one-day delay in payment of a bill or invoice, they might face, in addition to the need to pay interest, the requirement to settle additional compensation for the “recovery costs incurred by the creditor”. Bearing in mind the above decision, courts will punish minor delays in payment, including minimal amounts, even 1 PLN.
Author: Robert Nogacki, Legal Counsel, Managing Partner, Skarbiec Law Firm, specializing in legal, tax and strategic advice for entrepreneurs.
Source: https://managerplus.pl/nowy-wyrok-tsue-polskie-sady-beda-karac-za-nawet-najmniejsze-opoznienia-w-platnosciach-57479
