According to a new proposed directive from the European Commission (Late Payment Directive), governments are soon to decide the content of contracts between businesses when it comes to agreements concerning payments. The intention of this directive was originally to ensure that government institutions made payments to private companies on time, a principle of which one can only approve. However, government regulation tends to grow in the making and this directive is not an exception.
The latest discussions from the European Parliament reveal that some groups intend to make the directive include business-to-business contracts as well. This will mean that businesses can't decide the conditions of payments in future contracts, making it completely impossible to compete on these parameters. If loss of competitive advantages wasn't enough this system also looks to expand the bureaucratic burdens on the economy in order to monitor it. All in all a loss – loss situation!
It sounds from the discussions in Brussels that they have lost track of what they intended to do in the first place. Instead of intervening in the content of contracts between businesses, the EP should instead increase the possibilities for actors to sanction late payments if they wish to do so. Politicians ought to accept private contracts as legally binding documents made by enlightened adults!
If the Commission intends to hold back European enterprise, and make the Saharan desert look like a better place to do business, the approach this directive indicates is surely the way to go. However, if the Commission wants to fulfil its own vision of making Europe the most competitive knowledge-based economy in the world, I would suggest that the Commission view this directive as a sunk cost and moves on!