Introduction

On April 24 2014 Parliament passed the Law on Late Payments for Contractual and Commercial Obligations (48/2014), which is partially aligned with the EU Directive on Combating Late Payment in Commercial Transactions (2011/7/EC) and will enter into force upon publication in the Official Gazette, 15 days after promulgation by the president.

Until now, late payments have been regulated by the Civil Code based on the principle of contractual freedom. The new law sets out the rules for the calculation of legal interest for late payments in commercial transactions involving the supply of goods and services between commercial undertakings and public authorities, in order to ensure the proper functioning of the internal market by encouraging competitiveness of commercial undertakings, and particularly small and medium-sized enterprises.

Article 2 of the law provides that the law shall not apply to obligations or payments that:

• are subject to bankruptcy procedures initiated against the debtor (including the procedure of debt restructuring);
• derive from transactions with consumers;
• consist of interest or other payments made for securities; or
• constitute damage relief for torts, including indemnities payable from life and non-life insurance companies.

In commercial transactions where the debtor is an undertaking or a public authority, the creditor is entitled to payment of interest from the next day of the due date, without giving notice of delay to the debtor, if:

• the creditor has fulfilled all of its obligations under the law and contract; and
• the creditor has not been paid, except where the delay is not the debtor's fault.

Payment terms

If the payment term is not set out in the contract, the creditor shall be entitled to interest from the expiry of the following terms:

• 30 calendar days following receipt of the invoice by the debtor;
• where the receipt date of the invoice is unclear, 30 calendar days after receiving the goods or services;
• where the debtor receives the invoice before the receipt of goods or services, 30 calendar days after receipt of the goods or services; or
• where an acceptance or verification procedure to ascertain that the goods or services conform with the contract is provided for by law or the contract, and the debtor receives the invoice earlier than or on the date when such acceptance or verification takes place, 30 calendar days after that date.

While the directive provides that the payment period set out in the contract may not exceed 60 calendar days, under Law 48/2014 the parties may agree on a longer payment period, provided that it is not to the detriment of the creditor.

The payment periods are also applicable to commercial transactions between undertakings and public authorities. However, the creditor shall be entitled to claim late interest after a total of 60 days, comprising 30 days' delay by the Treasury Department and 30 days' payment delay by the public authority.

Interest and compensation for recovery costs

Article 5 of the law provides for the following interest:

"The rate for late payments in Leke will be fixed in reference to the REPO (Repurchase Agreement) and reverse REPO (Reverse Repurchase Agreement) interest rates as approved by the Bank of Albania by adding eight percentage points; while, for Euro currency by referring to the interest rate of main refinancing operations approved by the Central European Bank by adding eight percentage points. For the first semester of the year concerned shall be the rate in force on 1 January of that year, while for the second semester of the year concerned shall be the rate in force on 1 July of that year."

In addition, the new law provides for the payment of expenses in case of delayed payments by the debtor. Thus, the creditor is entitled to claim not only the payment of interest, but also the expenses incurred due to such delay, including legal fees paid by the creditor to enforce the debtor's obligations. Moreover, the debtor must pay the creditor Lek5,000 as compensation for its recovery costs.

Unfair contract terms

The law prohibits the abuse of contractual freedom. Thus, where a contractual term or practice relates to the payment period, the late payment interest rate or compensation for recovery costs, and is either not justified by the terms granted to the debtor or designed to give the debtor an additional advantage, it may be regarded as abusive and unenforceable. In such cases the creditor can claim for the damage incurred.

Enforcement of monetary obligations

Under Law 48/2014, financial obligations are considered to be an "executive title" in the sense of the Civil Procedure Code and are enforced by the Bailiff's Office, provided that the creditor has delivered the goods or performed the services in accordance with the contract and the law, and the debt is undisputed.

Comment

Businesses entering into commercial contracts after Law 48/2014 has entered into force should pay particular attention to the payment periods and rates of interest set down in the contract. Although commercial parties may still negotiate payment periods of longer than 60 days, it is possible that in the event of a dispute, this may not be considered a fair remedy for late payment and will be unenforceable.

For further information please contact Ilir Limaj at Boga & Associates by telephone (+355 4225 1050), fax (+355 4225 1055) or email (ilimaj@bogalaw.com). The Boga & Associates website can be accessed at www.bogalaw.com.

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