Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

LATE PAYMENT OF COMMERCIAL DEBTS

(INTEREST) ACT 2003

Principal Act

Act. No. 2003-14 Commencement 1.10.2003

Assent 31.7.2003

Amending

enactments

Relevant current

provisions

Commencement

date

LN. 2013/050 Long title ss. 1(3) & (4), 2-15 & Sch. 16.3.2013

2014/097 ss. 3(1) & 9(2) 5.6.2014

EU Legislation/International Agreements involved:

Directive 2000/35/EC

Directive 2011/7/EU

English sources:

None cited

Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

ARRANGEMENT OF SECTIONS

Section

1. Title, commencement and interpretation.

2. Scope.

3. Obligation to pay interest.

4. Period for which interest for late payment runs.

5. Public Authority: period for which interest runs.

7. Extension of time.

8. Ability to agree extension of periods.

9. Procedure for acceptance or verification of conformity.

10. Payments due by instalments.

11. Compensation for recovery of costs.

12. Jurisdiction of Supreme Court.

13. Powers of the Supreme Court.

14. Unenforceability of terms.

15. Retention of title.

16. Transparency and publicity of rights.

17. Establishment of codes.

Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

AN ACT TO TRANSPOSE INTO THE LAW OF GIBRALTAR

EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE 2000/35 ON

COMBATING LATE PAYMENT IN COMMERCIAL TRANSACTIONS

AS RECAST BY DIRECTIVE 2011/7/EU OF THE EUROPEAN

PARLIAMENT AND OF THE COUNCIL ON COMBATING LATE

PAYMENT IN COMMERCIAL TRANSACTIONS.

Title, commencement and interpretation.

1.(1) This Act may be cited as the Late Payment of Commercial Debts

(Interest) Act 2003.

(2) This Act comes into operation on the day appointed by the Minister by

notice in the Gazette; and different days may be appointed for different

descriptions of contract or for other different purposes.

A notice under this subsection may specify a description of contract by

reference to any feature of the contract (including the parties).

(3) In this Act–

“amount due” means the principal sum which should have been paid

within the contractual or statutory period of payment, including the

applicable taxes, duties, levies, or charges specified in the invoice

or the equivalent request for payment;

“applicable interest rate” means for the first 6 months of any year the

statutory interest prevailing on 1 January of that year and for the

second 6 months of any year the statutory interest prevailing on 1

July of that year;

“commercial transactions” means transactions between undertakings or

between undertakings and public authorities which lead to the

supply of goods or the provision of services for remuneration;

“debt” means any amount due from time to time under a relevant

contract;

“Directive” means Directive 2011/7/EU of the European Parliament and

of the Council on combating late payment in commercial

transactions, as the same may be amended from time to time;

“grossly unfair term” means any contractual term or practice−

Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

(a) that is determined by the Supreme Court of Gibraltar to be

grossly unfair taking into account all the circumstances of any

case, including−

(i) any gross deviation from good commercial practice,

contrary to good faith and fair dealing,

(ii) the nature of the product or the service, and

(iii) whether the debtor has any objective reason to deviate

from the statutory interest, from the payment period as

provided for in sections 4(2), 6, 7 and 8 or from the fixed

compensation as provide for in section 11;

(b) that excludes interest for late payment;

(c) that excludes compensation for recovery of costs as provided

for in section 11,

and an agreement shall be deemed to be “grossly unfair” where it

includes such a term or practice;

“interest for late payment” means statutory interest or, subject to sections

13 and 14, interest at a rate agreed upon between undertakings;

“interest payment date” means, subject to the provisions of section 11,

which provisions shall apply in the circumstances defined in that

section, the date calculated in accordance with the provisions of

section 4 in the case of a relevant contract as between undertakings

and as determined in accordance with section 5 in the case of a

commercial transaction in which the debtor is a public authority;

“late payment” means payments that are not made within the contractual

or statutory period of payment under a relevant contract and where

the conditions laid down in section 3 are satisfied;

“Minister” means the Minister with responsibility for Commercial

Affairs;

“public authority” means any contracting authority as specified in

regulation 3 of the Procurement (Public Contracts) Regulations

2012, regardless of the subject or value of the contract;

“relevant contract” means any contract to which this Act applies;

“representative body” means an organisation falling within section 14(a)

or (b);

Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

“retention of title” means the contractual agreement according to which

the seller retains title to the goods in question until the price has

been paid in full;

“statutory interest” means simple interest for late payment at the rate of

8% above the base rate set by the Gibraltar Savings Bank for

savings on the day the debt became due; if the base rate changes

thereafter, the Reference Rate shall also change to remain 8%

above the base rate; and

“undertaking” means any organisation, other than a public authority,

acting in the course of its independent economic or professional

activity and includes where the activity is carried out by a single

person.

(4) Any term used but not defined shall have the meaning given to it in

the Directive.

Scope.

2. This Act does not apply to debts that are subject to insolvency

proceedings instituted against the debtor, including proceedings aimed at

debt restructuring.

Obligation to pay interest.

3.(1) It shall be an implied term of any contract governing any commercial

transaction that the creditor shall be paid interest for late payment, without

the necessity of a reminder, at the applicable interest rate as from the interest

payment date on any debt if such contract is−

(a) between undertakings; or

(b) subject to sections 5, 6, 7 and 8, a commercial transaction in

which the debtor is a public authority;

subject to the creditor having fulfilled its contractual and legal obligations

under the relevant contract and not having received the debt on time, in the

latter case, subject to the delay not due being due to the debtor.

(2) Time shall be of the essence for the purposes of the implied term set

out in subsection (1).

Period for which interest for late payment runs.

Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

4.(1) Interest for late payment shall be due and payable to the creditor on

the debt if the relevant contract is between undertakings−

(a) subject to subsection (2), in the event that the date of payment

of the sum due is fixed in the relevant contract, on the day next

immediately following that date; or

(b) in the event that the date of payment of the sum due is not fixed

in the relevant contract, on the expiry of any of the following

time limits−

(i) 30 calendar days immediately following the date of

receipt by the debtor of the invoice or an equivalent

request for payment;

(ii) in the event that the date of receipt of the invoice or an

equivalent request for payment is uncertain, 30 calendar

days immediately following the date of receipt of the

goods or services supplied by the creditor to the debtor;

(iii) in the event that the debtor receives the invoice or an

equivalent request for payment earlier than the goods or

the services supplied by the creditor to the debtor, 30

calendar days immediately following the date of receipt

of the goods or services supplied by the creditor to the

debtor;

(iv) subject to section 9, in the event that the relevant contract

or an applicable law provides a procedure of acceptance

or verification, by which conformity of the goods or

services with the relevant contract is to be ascertained

and if the debtor receives the invoice or an equivalent

request for payment earlier or on the date on which such

acceptance or verification takes place, 30 calendar days

immediately following that date;

(2) The period for payment fixed in any relevant contract shall not

exceed 60 calendar days, unless otherwise expressly agreed in the relevant

contract and provided that such agreement is not grossly unfair to the

creditor.

Public Authority: period for which interest runs.

5. In a relevant contract in which the debtor is a public authority−

Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

(a) the date of receipt of the invoice shall not be made subject to

any contractual agreement between the debtor and the creditor;

and

(b) the creditor shall be entitled to interest for late payment on the

debt on expiry of the period defined in sections 6, 7 and 8.

Public Authority: period for payment.

6. Subject to section 7, in a relevant contract in which the debtor is a public

authority the period for payment shall not exceed any of the time limits

provided for in section 4(b)(i) to (iv) inclusive.

Extension of time.

7.(1) The time limits provided in section 6 shall be extended to 60

calendar days in the following cases−

(a) any public authority which carries out economic activities of an

industrial or commercial nature by offering goods or services

on the market and which is subject, as a public undertaking, to

the transparency requirements laid down in the Public Finance

(Control and Audit) Act;

(b) public entities providing healthcare which are duly recognised

for that purpose inclusive of the Gibraltar Health Authority.

(2) The Minister shall ensure that by 16 March 2018, a report is sent to

the European Commission in accordance with the second paragraph of

Article 4 of the Directive.

Ability to agree extension of periods.

8. The period for payment fixed in a relevant contract shall not exceed the

time limits provided for in section 6 unless otherwise expressly agreed in the

relevant contract and provided such other period agreed is objectively

justified in the light of the particular nature or features of the relevant

contract in question, and that it in any event does not exceed 60 calendar

days.

Procedure for acceptance or verification of conformity.

9.(1) In the event that a procedure of acceptance or verification, by which

the conformity of the goods or services with the relevant contract is

provided for in the relevant contract, the maximum duration of that

procedure shall not exceed 30 calendar days from the date of receipt of the

Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

goods or services, unless otherwise expressly agreed in the relevant contract

and provided that it is not grossly unfair to the creditor.

(2) Where the debtor is a public authority any extension of the 30

calendar days referred to in subsection (1) must be expressly agreed in the

relevant contract and any tender documents.

Payments due by instalments.

10.(1) Notwithstanding any other provision of this Act and unless

otherwise restricted by any applicable law, the parties to any relevant

contract may agree a payment schedule providing for payments under any

relevant contract to be made by instalments.

(2) Any instalment which is not paid on its due date, shall attract the

interest and compensation provided for in this Act, and shall be calculated

solely on the basis of the overdue amounts.

Compensation for recovery of costs.

11.(1) Immediately that interest for late payment becomes payable in a

commercial transaction the creditor shall be entitled in addition to late

payment interest on the outstanding debt to the following fixed sums−

(a) for a debt not exceeding £999.99, the sum of £40;

(b) for a debt between £1000.00 and £9999.99, the sum of £70.00;

(c) for a debt of £10,000.00 or more, the sum of £100.00,

which sums are payable forthwith without any demand being made as

compensation for the recovery costs of the creditor.

(2) In addition to the compensation recoverable under subsection (1), the

creditor shall be entitled to recover from the debtor reasonable

compensation for any recovery costs exceeding the amounts provided for in

subsection (1), including the cost of instructing lawyers or employing a debt

collection agency, that are incurred due to late payment by the debtor.

Jurisdiction of Supreme Court.

12. The Supreme Court of Gibraltar shall have jurisdiction to determine

whether any term of or practice under a relevant contract is a grossly unfair

term on the application of any creditor under a relevant contract or of a

representative body as provided for in section 14.

Powers of the Supreme Court.

Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

13.(1) If the Supreme Court of Gibraltar determines that any term of or

practice relating to−

(a) the date or period for payment;

(b) the rate of interest for late payment; or

(c) the compensation for the recovery of costs,

under a relevant contract is a grossly unfair term as regards the creditor, the

court may make a declaration to that effect and may either grant an

injunction against the debtor restraining him from using or relying on that

offending term or practice or it may grant an award of damages and costs to

be paid by the debtor.

(2) In the case of an application by a representative body under section

14, the effect of a determination by the court shall be that the unfair term or

practice shall cease to be capable of continued use in any contract governing

any commercial transaction and shall be unenforceable if used thereafter.

Unenforceability of terms.

14. For the purposes of sections 12 and 13−

(a) organisations officially recognised as representing

undertakings, or

(b) organisations with a legitimate interest in representing

undertakings,

may, in accordance with any applicable law, apply to the Supreme Court

under section 13 on the grounds that contractual terms or practices are

grossly unfair, so as to prevent their continued use.

Retention of title.

15. The Sale of Goods Act shall continue to apply to any question regarding

the retention of title in commercial transactions for the supply of goods.

Transparency and publicity of rights.

16. The Minister shall ensure transparency of the rights and obligations

under this Act, which shall include making the applicable statutory interest

publicly available including, where appropriate in the opinion of the

Minister, using professional publications, promotion campaigns or any other

Late Payment of Commercial Debts (Interest)

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

2003-14

functional means to increase awareness of the remedies for late payment

among undertakings.

Establishment of codes.

17. The Minister may encourage the establishment of prompt payment codes

which set out clearly defined payment time limits and a proper process for

dealing with any payments that are in dispute, or any other initiatives that

tackle the crucial issue of late payment and contribute to a culture of prompt

payment in order to ensure the proper functioning of the market and

competitiveness.