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Directive 2011/7/EU or Combating Late Payment In Commercial Transactions

Directive 2011/7/EU of the European Parliament and of the Council

of 16 February 2011

on combating late payment in commercial transactions

(recast)

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof,

Having regard to the proposal from the European Commission,

Having regard to the opinion of the European Economic and Social Committee [1],

Acting in accordance with the ordinary legislative procedure [2],

Whereas:

(1) A number of substantive changes are to be made to Directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions [3]. It is desirable, for reasons of clarity and rationalization, that the provisions in question be recast.

(2) Most goods and services are supplied within the internal market by economic operators to other economic operators and to public authorities on a deferred payment basis whereby the supplier gives its client time to pay the invoice, as agreed between parties, as set out in the supplier’s invoice or as laid down by law.

(3) Many payments in commercial transactions between economic operators or between economic operators and public authorities are made later than agreed in the contract or laid down in the general commercial conditions. Although the goods are delivered or the services performed, many corresponding invoices are paid well after the deadline. Such late payment negatively affects liquidity and complicates the financial management of undertakings. It also affects their competitiveness and profitability when the creditor needs to obtain external financing because of late payment. The risk of such negative effects strongly increases in periods of economic downturn when access to financing is more difficult.

(4) Judicial claims related to late payment are already facilitated by Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [4], Regulation (EC) No 805/2004 of the European Parliament and of the Council of 21 April 2004 creating a European Enforcement Order for uncontested claims [5], Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure [6] and Regulation (EC) No 861/2007 of the European Parliament and of the Council of 11 July 2007 establishing a European Small Claims Procedure [7]. However, in order to discourage late payment in commercial transactions, it is necessary to lay down complementary provisions.

(5) Undertakings should be able to trade throughout the internal market under conditions which ensure that trans-border operations do not entail greater risks than domestic sales. Distortions of competition would ensue if substantially different rules applied to domestic and trans-border operations.

(6) In its Communication of 25 June 2008 entitled ” “Think Small First” — A “Small Business Act” for Europe”, the Commission emphasized that small and medium-sized enterprises’ (SMEs) access to finance should be facilitated and that a legal and business environment supportive of timely payments in commercial transactions should be developed. It should be noted that public authorities have a special responsibility in this regard. The criteria for the definition of SMEs are set out in Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises [8].

(7) One of the priority actions of the Commission Communication of 26 November 2008 entitled “European Economic Recovery Plan” is the reduction of administrative burdens and the promotion of entrepreneurship by, inter alia, ensuring that, as a matter of principle, invoices, including to SMEs, for supplies and services are paid within 1 month to ease liquidity constraints.

(8) The scope of this Directive should be limited to payments made as remuneration for commercial transactions. This Directive should not regulate transactions with consumers, interest in connection with other payments, for instance payments under the laws on cheques and bills of exchange, or payments made as compensation for damages including payments from insurance companies. Furthermore, Member States should be able to exclude debts that are subject to insolvency proceedings, including proceedings aimed at debt restructuring.

(9) This Directive should regulate all commercial transactions irrespective of whether they are carried out between private or public undertakings or between undertakings and public authorities, given that public authorities handle a considerable volume of payments to undertakings. It should therefore also regulate all commercial transactions between main contractors and their suppliers and subcontractors.

(10) The fact that the liberal professions are covered by this Directive should not oblige Member States to treat them as undertakings or merchants for purposes outside the scope of this Directive.

(11) The delivery of goods and the provision of services for remuneration to which this Directive applies should also include the design and execution of public works and building and civil engineering works.

(12) Late payment constitutes a breach of contract which has been made financially attractive to debtors in most Member States by low or no interest rates charged on late payments and/or slow procedures for redress. A decisive shift to a culture of prompt payment, including one in which the exclusion of the right to charge interest should always be considered to be a grossly unfair contractual term or practice, is necessary to reverse this trend and to discourage late payment. Such a shift should also include the introduction of specific provisions on payment periods and on the compensation of creditors for the costs incurred, and, inter alia, that the exclusion of the right to compensation for recovery costs should be presumed to be grossly unfair.

(13) Accordingly, provision should be made for business-to-business contractual payment periods to be limited, as a general rule, to 60 calendar days. However, there may be circumstances in which undertakings require more extensive payment periods, for example when undertakings wish to grant trade credit to their customers. It should therefore remain possible for the parties to expressly agree on payment periods longer than 60 calendar days, provided, however, that such extension is not grossly unfair to the creditor.

(14) In the interest of consistency of Union legislation, the definition of “contracting authorities” in Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors [9] and in Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public services contracts [10] should apply for the purposes of this Directive.

(15) Statutory interest due for late payment should be calculated on a daily basis as simple interest, in accordance with Regulation (EEC, Eur-atom) No 1182/71 of the Council of 3 June 1971 determining the rules applicable to periods, dates and time limits [11].

(16) This Directive should not oblige a creditor to claim interest for late payment. In the event of late payment, this Directive should allow a creditor to resort to charging interest for late payment without giving any prior notice of non-performance or other similar notice reminding the debtor of his obligation to pay.

(17) A debtor’s payment should be regarded as late, for the purposes of entitlement to interest for late payment, where the creditor does not have the sum owed at his disposal on the due date provided that he has fulfilled his legal and contractual obligations.

(18) Invoices trigger requests for payment and are important documents in the chain of transactions for the supply of goods and services, inter alia, for determining payment deadlines. For the purposes of this Directive, Member States should promote systems that give legal certainty as regards the exact date of receipt of invoices by the debtors, including in the field of e-invoicing where the receipt of invoices could generate electronic evidence and which is partly governed by the provisions on invoicing contained in Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax [12].

(19) Fair compensation of creditors for the recovery costs incurred due to late payment is necessary to discourage late payment. Recovery costs should also include the recovery of administrative costs and compensation for internal costs incurred due to late payment for which this Directive should determine a fixed minimum sum which may be cumulated with interest for late payment. Compensation in the form of a fixed sum should aim at limiting the administrative and internal costs linked to the recovery. Compensation for the recovery costs should be determined without prejudice to national provisions according to which a national court may award compensation to the creditor for any additional damage regarding the debtor’s late payment.

(20) In addition to an entitlement to payment of a fixed sum to cover internal recovery costs, creditors should also be entitled to reimbursement of the other recovery costs they incur as a result of late payment by a debtor. Such costs should include, in particular, those incurred by creditors in instructing a lawyer or employing a debt collection agency.

(21) This Directive should be without prejudice to the right of Member States to provide for fixed sums for compensation of recovery costs which are higher and therefore more favourable to the creditor, or to increase those sums, inter alia, in order to keep pace with inflation.

(22) This Directive should not prevent payments by instalments or staggered payments. However, each instalment or payment should be paid on the agreed terms and should be subject to the rules for late payment set out in this Directive.

(23) As a general rule, public authorities benefit from more secure, predictable and continuous revenue streams than undertakings. In addition, many public authorities can obtain financing at more attractive conditions than undertakings. At the same time, public authorities depend less than undertakings on building stable commercial relationships for the achievement of their aims. Long payment periods and late payment by public authorities for goods and services lead to unjustified costs for undertakings. It is therefore appropriate to introduce specific rules as regards commercial transactions for the supply of goods or services by undertakings to public authorities, which should provide in particular for payment periods normally not exceeding 30 calendar days, unless otherwise expressly agreed in the contract and provided it is objectively justified in the light of the particular nature or features of the contract, and in any event not exceeding 60 calendar days.

(24) However, account should be taken of the specific situation of public authorities carrying out economic activities of an industrial or commercial nature by offering goods or services on the market as a public undertaking. For that purpose, Member States should be allowed, under certain conditions, to extend the statutory payment period up to a maximum of 60 calendar days.

(25) A particular cause for concern in connection with late payment is the situation of health services in a large number of Member States. Healthcare systems, as a fundamental part of Europe’s social infrastructure, are often obliged to reconcile individual needs with the available finances, as the population of Europe ages, as expectations rise, and as medicine advances. All systems have to deal with the challenge of prioritizing healthcare in a way that balances the needs of individual patients with the financial resources available. Member States should therefore be able to grant public entities providing healthcare a certain amount of flexibility in meeting their commitments. For that purpose, Member States should be allowed, under certain conditions, to extend the statutory payment period up to a maximum of 60 calendar days. Member States should, nonetheless, make every effort to ensure that payments in the healthcare sector are made within the statutory payment periods.

(26) In order not to jeopardize the achievement of the objective of this Directive, Member States should ensure that in commercial transactions the maximum duration of a procedure of acceptance or verification does not exceed, as a general rule, 30 calendar days. Nevertheless, it should be possible for a verification procedure to exceed 30 calendar days, for example in the case of particularly complex contracts, when expressly agreed in the contract and in any tender documents and if it is not grossly unfair to the creditor.

(27) The Union institutions are in a situation comparable to that of the public authorities of Member States with regard to their financing and commercial relationships. Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities [13] specifies that the validation, authorization and payment of expenditure by Union institutions must be completed within the time limits laid down in its implementing rules. Those implementing rules are currently set out in Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities [14], and specify the circumstances in which creditors which are paid late are entitled to receive default interest. In the context of the ongoing review of those Regulations, it should be ensured that the maximum time limits for payment by the Union institutions are aligned with statutory periods applicable to public authorities in accordance with this Directive.

(28) This Directive should prohibit abuse of freedom of contract to the disadvantage of the creditor. As a result, where a term in a contract or a practice relating to the date or period for payment, the rate of interest for late payment or the compensation for recovery costs is not justified on the grounds of the terms granted to the debtor, or it mainly serves the purpose of procuring the debtor additional liquidity at the expense of the creditor, it may be regarded as constituting such an abuse. For that purpose, and in accordance with the academic “Draft Common Frame of Reference”, any contractual term or practice which grossly deviates from good commercial practice and is contrary to good faith and fair dealing should be regarded as unfair to the creditor. In particular, the outright exclusion of the right to charge interest should always be considered as grossly unfair, whereas the exclusion of the right to compensation for recovery costs should be presumed to be grossly unfair. This Directive should not affect national provisions relating to the way contracts are concluded or regulating the validity of contractual terms which are unfair to the debtor.

(29) In the context of enhanced efforts to prevent the abuse of freedom of contract to the detriment of creditors, organizations officially recognized as representing undertakings and organizations with a legitimate interest in representing undertakings should be able to take action before national courts or administrative bodies in order to prevent the continued use of contract terms or practices which are grossly unfair to the creditor.

(30) In order to contribute to the achievement of the objective of this Directive, Member States should foster the spread of good practices, including by encouraging the publication of a list of prompt payers.

(31) It is desirable to ensure that creditors are in a position to exercise a retention of title clause on a non-discriminatory basis throughout the Union, if the retention of title clause is valid under the applicable national provisions designated by private international law.

(32) This Directive only defines the term “enforceable title” but should not regulate the various procedures for forced execution of such a title or the conditions under which forced execution of such a title can be stopped or suspended.

(33) The consequences of late payment can be dissuasive only if they are accompanied by procedures for redress which are rapid and effective for the creditor. In accordance with the principle of non-discrimination set out in Article 18 of the Treaty on the Functioning of the European Union, those procedures should be available to all creditors who are established in the Union.

(34) In order to facilitate compliance with the provisions of this Directive, Member States should encourage recourse to mediation or other means of alternative dispute resolution. Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters [15] already sets a framework for systems of mediation at Union level, especially for cross-border disputes, without preventing its application to internal mediation systems. Member States should also encourage interested parties to draw up voluntary codes of conduct aimed, in particular, at contributing to the implementation of this Directive.

(35) It is necessary to ensure that the recovery procedures for unchallenged claims related to late payment in commercial transactions be completed within a short period of time, including through an expedited procedure and irrespective of the amount of the debt.

(36) Since the objective of this Directive, namely combating late payment in the internal market, cannot be sufficiently achieved by the Member States and can, therefore, by reason of its scale and effect, be better achieved at the Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective.

(37) The obligation to transpose this Directive into national law should be confined to those provisions which represent a substantive change as compared with Directive 2000/35/EC. The obligation to transpose the provisions which are unchanged arises under that Directive.

(38) This Directive should be without prejudice to the obligations of the Member States relating to the time limits for transposition into national law and application of Directive 2000/35/EC.

(39) In accordance with point 34 of the Inter institutional Agreement on better law-making [16], Member States are encouraged to draw up, for themselves and in the interest of the Union, their own tables which will, as far as possible, illustrate the correlation between this Directive and their transposition measures, and to make those tables public,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Subject matter and scope

1. The aim of this Directive is to combat late payment in commercial transactions, in order to ensure the proper functioning of the internal market, thereby fostering the competitiveness of undertakings and in particular of SMEs.

2. This Directive shall apply to all payments made as remuneration for commercial transactions.

3. Member States may exclude debts that are subject to insolvency proceedings instituted against the debtor, including proceedings aimed at debt restructuring.

Article 2

Definitions

For the purposes of this Directive, the following definitions shall apply:

(1) “commercial transactions” means transactions between undertakings or between undertakings and public authorities which lead to the delivery of goods or the provision of services for remuneration;

(2) “public authority” means any contracting authority, as defined in point (a) of Article 2(1) of Directive 2004/17/EC and in Article 1(9) of Directive 2004/18/EC, regardless of the subject or value of the contract;

(3) “undertaking” means any organisation, other than a public authority, acting in the course of its independent economic or professional activity, even where that activity is carried out by a single person;

(4) “late payment” means payment not made within the contractual or statutory period of payment and where the conditions laid down in Article 3(1) or Article 4(1) are satisfied;

(5) “interest for late payment” means statutory interest for late payment or interest at a rate agreed upon between undertakings, subject to Article 7;

(6) “statutory interest for late payment” means simple interest for late payment at a rate which is equal to the sum of the reference rate and at least eight percentage points;

(7) “reference rate” means either of the following:

(a) for a Member State whose currency is the euro, either:

(i) the interest rate applied by the European Central Bank to its most recent main refinancing operations; or

(ii) the marginal interest rate resulting from variable-rate tender procedures for the most recent main refinancing operations of the European Central Bank;

(b) for a Member State whose currency is not the euro, the equivalent rate set by its national central bank;

(8) “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;

(9) “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;

(10) “enforceable title” means any decision, judgment or order for payment issued by a court or other competent authority, including those that are provisionally enforceable, whether for immediate payment or payment by instalments, which permits the creditor to have his claim against the debtor collected by means of forced execution.

Article 3

Transactions between undertakings

1. Member States shall ensure that, in commercial transactions between undertakings, the creditor is entitled to interest for late payment without the necessity of a reminder, where the following conditions are satisfied:

(a) the creditor has fulfilled its contractual and legal obligations; and

(b) the creditor has not received the amount due on time, unless the debtor is not responsible for the delay.

2. Member States shall ensure that the applicable reference rate:

(a) for the first semester of the year concerned shall be the rate in force on 1 January of that year;

(b) for the second semester of the year concerned shall be the rate in force on 1 July of that year.

3. Where the conditions set out in paragraph 1 are satisfied, Member States shall ensure the following:

(a) that the creditor is entitled to interest for late payment from the day following the date or the end of the period for payment fixed in the contract;

(b) where the date or period for payment is not fixed in the contract, that the creditor is entitled to interest for late payment upon the expiry of any of the following time limits:

(i) 30 calendar days following the date of receipt by the debtor of the invoice or an equivalent request for payment;

(ii) where the date of the receipt of the invoice or the equivalent request for payment is uncertain, 30 calendar days after the date of receipt of the goods or services;

(iii) where the debtor receives the invoice or the equivalent request for payment earlier than the goods or the services, 30 calendar days after the date of the receipt of the goods or services;

(iv) where a procedure of acceptance or verification, by which the conformity of the goods or services with the contract is to be ascertained, is provided for by statute or in the contract and if the debtor receives the invoice or the equivalent request for payment earlier or on the date on which such acceptance or verification takes place, 30 calendar days after that date.

4. Where a procedure of acceptance or verification, by which the conformity of the goods or services with the contract is to be ascertained, is provided for, Member States shall ensure that the maximum duration of that procedure does not exceed 30 calendar days from the date of receipt of the goods or services, unless otherwise expressly agreed in the contract and provided it is not grossly unfair to the creditor within the meaning of Article 7.

5. Member States shall ensure that the period for payment fixed in the contract does not exceed 60 calendar days, unless otherwise expressly agreed in the contract and provided it is not grossly unfair to the creditor within the meaning of Article 7.

Article 4

Transactions between undertakings and public authorities

1. Member States shall ensure that, in commercial transactions where the debtor is a public authority, the creditor is entitled upon expiry of the period defined in paragraphs 3, 4 or 6 to statutory interest for late payment, without the necessity of a reminder, where the following conditions are satisfied:

(a) the creditor has fulfilled its contractual and legal obligations; and

(b) the creditor has not received the amount due on time, unless the debtor is not responsible for the delay.

2. Member States shall ensure that the applicable reference rate:

(a) for the first semester of the year concerned shall be the rate in force on 1 January of that year;

(b) for the second semester of the year concerned shall be the rate in force on 1 July of that year.

3. Member States shall ensure that in commercial transactions where the debtor is a public authority:

(a) the period for payment does not exceed any of the following time limits:

(i) 30 calendar days following the date of receipt by the debtor of the invoice or an equivalent request for payment;

(ii) where the date of receipt of the invoice or the equivalent request for payment is uncertain, 30 calendar days after the date of the receipt of the goods or services;

(iii) where the debtor receives the invoice or the equivalent request for payment earlier than the goods or the services, 30 calendar days after the date of the receipt of the goods or services;

(iv) where a procedure of acceptance or verification, by which the conformity of the goods or services with the contract is to be ascertained, is provided for by statute or in the contract and if the debtor receives the invoice or the equivalent request for payment earlier or on the date on which such acceptance or verification takes place, 30 calendar days after that date;

(b) the date of receipt of the invoice is not subject to a contractual agreement between debtor and creditor.

4. Member States may extend the time limits referred to in point (a) of paragraph 3 up to a maximum of 60 calendar days for:

(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 Commission Directive 2006/111/EC of 16 November 2006 on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings [17];

(b) public entities providing healthcare which are duly recognised for that purpose.

If a Member State decides to extend the time limits in accordance with this paragraph, it shall send a report on such extension to the Commission by 16 March 2018.

On that basis, the Commission shall submit a report to the European Parliament and the Council indicating which Member States have extended the time limits in accordance with this paragraph and taking into account the impact on the functioning of the internal market, in particular on SMEs. That report shall be accompanied by any appropriate proposals.

5. Member States shall ensure that the maximum duration of a procedure of acceptance or verification referred to in point (iv) of point (a) of paragraph 3 does not exceed 30 calendar days from the date of receipt of the goods or services, unless otherwise expressly agreed in the contract and any tender documents and provided it is not grossly unfair to the creditor within the meaning of Article 7.

6. Member States shall ensure that the period for payment fixed in the contract does not exceed the time limits provided for in paragraph 3, unless otherwise expressly agreed in the contract and provided it is objectively justified in the light of the particular nature or features of the contract, and that it in any event does not exceed 60 calendar days.

Article 5

Payment schedules

This Directive shall be without prejudice to the ability of parties to agree, subject to the relevant provisions of applicable national law, on payment schedules providing for instalments. In such cases, where any of the instalments is not paid by the agreed date, interest and compensation provided for in this Directive shall be calculated solely on the basis of overdue amounts.

Article 6

Compensation for recovery costs

1. Member States shall ensure that, where interest for late payment becomes payable in commercial transactions in accordance with Article 3 or 4, the creditor is entitled to obtain from the debtor, as a minimum, a fixed sum of EUR 40.

2. Member States shall ensure that the fixed sum referred to in paragraph 1 is payable without the necessity of a reminder and as compensation for the creditor’s own recovery costs.

3. The creditor shall, in addition to the fixed sum referred to in paragraph 1, be entitled to obtain reasonable compensation from the debtor for any recovery costs exceeding that fixed sum and incurred due to the debtor’s late payment. This could include expenses incurred, inter alia, in instructing a lawyer or employing a debt collection agency.

Article 7

Unfair contractual terms and practices

1. Member States shall provide that a contractual term or a practice relating to the date or period for payment, the rate of interest for late payment or the compensation for recovery costs is either unenforceable or gives rise to a claim for damages if it is grossly unfair to the creditor.

In determining whether a contractual term or a practice is grossly unfair to the creditor, within the meaning of the first subparagraph, all circumstances of the case shall be considered, including:

(a) any gross deviation from good commercial practice, contrary to good faith and fair dealing;

(b) the nature of the product or the service; and

(c) whether the debtor has any objective reason to deviate from the statutory rate of interest for late payment, from the payment period as referred to in Article 3(5), point (a) of Article 4(3), Article 4(4) and Article 4(6) or from the fixed sum as referred to in Article 6(1).

2. For the purpose of paragraph 1, a contractual term or a practice which excludes interest for late payment shall be considered as grossly unfair.

3. For the purpose of paragraph 1, a contractual term or a practice which excludes compensation for recovery costs as referred to in Article 6 shall be presumed to be grossly unfair.

4. Member States shall ensure that, in the interests of creditors and competitors, adequate and effective means exist to prevent the continued use of contractual terms and practices which are grossly unfair within the meaning of paragraph 1.

5. The means referred to in paragraph 4 shall include provisions whereby organisations officially recognised as representing undertakings, or organisations with a legitimate interest in representing undertakings may take action according to the applicable national law before the courts or before competent administrative bodies on the grounds that contractual terms or practices are grossly unfair within the meaning of paragraph 1, so that they can apply appropriate and effective means to prevent their continued use.

Article 8

Transparency and awareness raising

1. Member States shall ensure transparency regarding the rights and obligations stemming from this Directive, including by making publicly available the applicable rate of statutory interest for late payment.

2. The Commission shall make publicly available on the Internet details of the current statutory rates of interest which apply in all the Member States in the event of late payment in commercial transactions.

3. Member States shall, where appropriate, use professional publications, promotion campaigns or any other functional means to increase awareness of the remedies for late payment among undertakings.

4. Member States 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 developing a culture of prompt payment which supports the objective of this Directive.

Article 9

Retention of title

1. Member States shall provide in conformity with the applicable national provisions designated by private international law that the seller retains title to goods until they are fully paid for if a retention of title clause has been expressly agreed between the buyer and the seller before the delivery of the goods.

2. Member States may adopt or retain provisions dealing with down payments already made by the debtor.

Article 10

Recovery procedures for unchallenged claims

1. Member States shall ensure that an enforceable title can be obtained, including through an expedited procedure and irrespective of the amount of the debt, normally within 90 calendar days of the lodging of the creditor’s action or application at the court or other competent authority, provided that the debt or aspects of the procedure are not disputed. Member States shall carry out this duty in accordance with their respective national laws, regulations and administrative provisions.

2. National laws, regulations and administrative provisions shall apply the same conditions for all creditors who are established in the Union.

3. When calculating the period referred to in paragraph 1, the following shall not be taken into account:

(a) periods for service of documents;

(b) any delays caused by the creditor, such as periods devoted to correcting applications.

4. This Article shall be without prejudice to the provisions of Regulation (EC) No 1896/2006.

Article 11

Report

By 16 March 2016, the Commission shall submit a report to the European Parliament and the Council on the implementation of this Directive. The report shall be accompanied by any appropriate proposals.

Article 12

Transposition

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with Articles 1 to 8 and 10 by 16 March 2013. They shall forthwith communicate to the Commission the text of those provisions.

When Member States adopt those measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. They shall also include a statement that references in existing laws, regulations and administrative provisions to the repealed Directive shall be construed as references to this Directive. The methods of making such reference and the formulation of such statement shall be laid down by Member States.

2. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

3. Member States may maintain or bring into force provisions which are more favourable to the creditor than the provisions necessary to comply with this Directive.

4. In transposing the Directive, Member States shall decide whether to exclude contracts concluded before 16 March 2013.

Article 13

Repeal

Directive 2000/35/EC is repealed with effect from 16 March 2013, without prejudice to the obligations of the Member States relating to the time limit for its transposition into national law and its application. However, it shall remain applicable to contracts concluded before that date to which this Directive does not apply pursuant to Article 12(4).

References to the repealed Directive shall be construed as references to this Directive and be read in accordance with the correlation table set out in the Annex.

Article 14

Entry into force

This Directive shall enter into force on the 20th day following its publication in the Official Journal of the European Union.

Article 15

Addressees

This Directive is addressed to the Member States.

 

Done at Strasbourg, 16 February 2011.

For the European Parliament

The President

J. Buzek

For the Council

The President

Martonyi J.

Statutory Interest Rates Overdue Payments – Bulgaria.

Of course and in Bulgaria on overdue payments may be charged interest rate.  How can we determine these rates? Is there a formula?

Statutory interest is due when the debtor is in default.  Bulgarian law determines when the debtor has fallen into default.  It is different for the various types of commitments.

When the day of the commitment is given, the debtor is in default after its expiration.  But if that day has passed after the death of the debtor, his heirs fall in default after 7 days of invitation.

If no day of execution the debtor is in default  after being invited by the creditor.

In the tort liability of the debtor shall be deemed in default and without invitation.

European law also establishes other deadlines in the fight on combating late payment in commercial transactions – DIRECTIVE 2011/7/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL.  There is stated:

1. Member States shall ensure that, in commercial transactions between undertakings, the creditor is entitled to interest for late payment without the necessity of a reminder, where the following conditions are satisfied:
(a) the creditor has fulfilled its contractual and legal obligations; and
(b) the creditor has not received the amount due on time, unless the debtor is not responsible for the delay.
2. Member States shall ensure that the applicable reference rate:
(a) for the first semester of the year concerned shall be the rate in force on 1 January of that year;
(b) for the second semester of the year concerned shall be the rate in force on 1 July of that year.
3. Where the conditions set out in paragraph 1 are satisfied, Member States shall ensure the following:
(a) that the creditor is entitled to interest for late payment from the day following the date or the end of the period for payment fixed in the contract;
(b) where the date or period for payment is not fixed in the contract, that the creditor is entitled to interest for late payment upon the expiry of any of the following time limits:
(i) 30 calendar days following the date of receipt by the debtor of the invoice or an equivalent request for payment;

(ii) where the date of the receipt of the invoice or the equivalent request for payment is uncertain, 30 calendar days after the date of receipt of the goods or services;
(iii) where the debtor receives the invoice or the equivalent request for payment earlier than the goods or the services, 30 calendar days after the date of the receipt of the goods or services;
(iv) where a procedure of acceptance or verification, by which the conformity of the goods or services with the contract is to be ascertained, is provided for by statute or in the contract and if the debtor receives the invoice or the equivalent request for payment earlier or on the date on which such acceptance or verification takes place, 30 calendar days after that date.

Since Bulgaria is not yet accepted in the Euro zone is applicable the following rule –   for a Member State whose currency is not the euro, the equivalent rate set by its national central bank;

The statutory interest on overdue payments in Bulgarian Lev and foreign currency in Bulgaria is determined by the Council of Ministers Decree.

Determined by the annual rate of statutory interest for overdue payments as

follows:

BGN – the base rate of the Bulgarian National Bank for the period plus 10 points;

In convertible currency – the three-month LIBOR for the respective currency plus 10 points.

The daily amount of statutory interest for overdue payments is equal to 1/360 part of the annual amount.

Check Base Interest Rate by Bulgarian National Bank

Getting Bulgarian Citizenship

Coat of arms of Republic of Bulgaria ?????????...

Coat of arms of Republic of Bulgaria

 

This matter is regulated by the Bulgarian Citizenship Act as the law defines the terms and conditions for the acquisition, loss and restoration of Bulgarian citizenship.

Bulgarian citizenship shall be governed also by the Constitution of the Republic of Bulgaria by law and by international treaties in force at the onset of the facts or events related to citizenship.

Bulgarian citizen who is a citizen of another country are considered only Bulgarian citizens in the implementation of the Bulgarian legislation, unless the law provides otherwise.

There are three possibilities for obtaining Bulgarian citizenship:

1. Acquisition of Bulgarian citizenship by origin

– Bulgarian citizen by origin each of whom at least one parent is a Bulgarian citizen.

– Bulgarian citizen by origin is and any person who is fathered by a Bulgarian citizen or originating from a Bulgarian citizen has been established by judicial decision.

2. Acquisition of Bulgarian citizenship by birth

– Bulgarian citizen by birth shell be any person born in the Republic of Bulgaria, if not entitled to citizenship of origin.

– It is considered born on the territory of Bulgaria child found on this territory, whose parents are unknown.

3. Acquisition of Bulgarian citizenship by naturalization

A person who is not a Bulgarian citizen may acquire Bulgarian citizenship if on a date of filing the application for naturalization:

– is an adult – at least 18 years old

– not later than 5 years has been given permission to reside in Bulgaria

– has not been convicted of a crime of general character of the Bulgarian court against him and not prosecuted for such offense unless rehabilitated

– has income or occupation, which enables him to withstand in Bulgaria

– speak Bulgarian, which establishes a procedure established by the Minister of Education and Science and

– is released from their citizenship or will be released from it at the time of acquisition of Bulgarian citizenship

A person who is not a Bulgarian citizen, meets the requirements of Art. 12, item 1, 3, 4, 5 and 6 and not less than 3 years from the date of application for naturalization has obtained permission for permanent residence in Bulgaria can acquire Bulgarian citizenship if they meet the one of the following:

– not less than three years has continued to be legally married to a Bulgarian citizen

– was born in Bulgaria

– permit for permanent residence is received before coming of age 18 years old

A person granted refugee status or asylum before no less than three years from the date of filing the application for naturalization may acquire Bulgarian citizenship if they meet the requirements of Art. 12, item 1, 3, 4 and 5.

A person granted humanitarian status not later than five years from the date of filing the application for naturalization may acquire Bulgarian citizenship if they meet the requirements of Art. 12, item 1, 3, 4 and 5.

Stateless person can acquire Bulgarian citizenship if they meet the requirements of Art. 12, item 1, 3, 4 and 5 and not less than three years of the date of filing the application for naturalization has a permanent residence in Bulgaria.

A person who is not a Bulgarian citizen may acquire Bulgarian citizenship through naturalization, without any conditions under Art. 12, item 2, 4, 5 and 6 if it meets one of the following requirements:

– is of Bulgarian origin

– is adopted by a Bulgarian citizen under conditions of full adoption;

– one of his parents is a Bulgarian citizen or has died as a Bulgarian citizen.

A person who is not a Bulgarian citizen may acquire Bulgarian citizenship without the conditions of Art. 12, if the Republic of Bulgaria is interested in naturalization or if the person has special merits to the Republic of Bulgaria in public and economic sphere, in science, technology, culture and sport.

Children under 14 years of age shall acquire Bulgarian citizenship if their parents or living accept Bulgarian citizenship or if only one of their parents do so if the other is a Bulgarian citizen. Under the same conditions of children 14 – to 18 years of age shall acquire Bulgarian citizenship if they so wish.

 

Our Immigration lawyers can help you in your intention. Feel free to send us your inquiry.

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Corporate Debt Collection World Wide

A credit card, the biggest beneficiary of the ...

A credit card, the biggest beneficiary of the Marquette Bank decision (Photo credit: Wikipedia)

Belcheva & Associates Law Office offers worldwide debt collection, but as close to the debtor as possible.  Per country and per region,  Belcheva & Associates Law Office is locally connected to debt collection specialists to support you in your international debt collection.
Combining the knowledge of national laws and requirements together with regional debtor knowledge, will guarantee you maximum result in international debt collection.

We attorneys at Belcheva & Associates Law Office believe international debt collection should be as transparent as possible. Upfront you will know your costs involved in collecting your debt, based upon a No Collection, No Fee structure. No upfront costs and/or hidden costs. Fully transparent, as international debt collection should be. Moreover, this financial structure guarantees you maximum results, as both parties have a mutual interest in collecting your debts.

Although our aim is to collect your open debts amicably, sometimes litigation is unavoidable to collect your debts. Please note you will take full advantage of the knowledge and financial agreements our partners have with instigating legal procedures. Of course you will be informed first about the assessment of the case and the financial implications before any legal actions are started.

Contact us to discuss on how we can solve your debts.

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Looking For a Long-Term Partner In Bulgaria?

See in addition what we can do to support your business:

Professional and cost effective local Business Representation optimising your ability to win new business and retain existing business.

To help these companies and business people seeking first-class business consultancy and representation in Bulgaria, we provide a wide array of services such as:

  • Market research and Sales development
  • Market Entry – search for Business Partners /Affiliations /Distributors /Buyers /Agents
  • Access to an established business network and contacts in FMCG and B2B industries which include traditional and modern trade (National accounts)
  • Negotiating and managing contracts
  • Product launches and Market tests on regional/national basis
  • Field Sales ? Preselling, Merchandising, Trade promotions, Sales reports
  • Marketing support: business listing, local advertising , mass mailing or/and telemarketing
  • Mystery shopper
  • Business Presence Support: Secretarial , Human Resources and accounting services as well as Customer billing, follow-up and collecting
  • Lead generation
  • Events Support: Trade Shows / Exhibitions / Business meetings / Sampling

We will prepare your Trade Show for maximum impact to increase your productivity.

We will target potential buyers and will follow-up with them to turn them into business partners. Activity plan will be tailored to your budget and business needs.

Preliminary Agreement

In the preliminary agreement the parties undertake to enter into another contract in the future. Preliminary contract may precede the conclusion of various agreements  the most often used to arrange the sale of real estate.

Typically a preliminary contract is concluded when the parties need a longer time period to be bound by the final, for security in the civil turnover and legal reality.

Because of an explicit legal prohibition or because of their specific features, the conclusion of certain contracts may be agreed by preliminary contract – these are real, grants, interim agreements and those concluded with a view of individual parties.  The preliminary contract must meet the general requirements, unless these preliminary contract must contain provisions concerning the the essential terms of final contract.

The purpose of the particular requirement is preliminary contract to include enough specific data on intention of the parties to the parameters of the forthcoming relationship which to enabling the court to declare the decision to replace the final contract.  Furthermore, stipulations regarding the essential terms of the final contract  a preliminary contract, being preparatory to the promise final agreement on the need to include provisions on its conclusion – for example, within which should be concluded, obligations of the parties in preparation (gathering the necessary documents, removal of existing barriers) and others.

The preliminary agreement is generally informal, with the exception of cases in which it agreed with the conclusion of a contract that requires a notary or a notarized form – then the written form is a requirement for the validity of the preliminary contract. So the format for the preliminary contract depends on its intended final contract form of validity.

Although the law does not place the written form as a condition for the validity of the preliminary contracts are agreed with the conclusion of a contract which does not require a notary or a notarized form, it appears necessary because of its special preparatory function. The opportunity to ask preliminary contract to be declared final by the court imposes the need for clarity on the parties agreed parameters of forthcoming contracts.  The oral form of the preliminary agreement would require the demonstration of reservations made on the essential terms of the final contract to rely on witness evidence because these arrangements will need to be reproduced in the judgment. Besides the risk of inaccurate reproduction of the preliminary contract clauses witness statements may be inadmissible and thus make it impossible to determine the content of the preliminary agreement by the court.

By its legal nature preliminary contract is an agreement whereby the parties agree on essential terms of the other final contract whose conclusion must follow a certain period, the occurrence of certain circumstances or conditions.

From the definition of the preliminary contract is that it is a bond and bilateral – each of the parties involved are required to conclude a final agreement in the future and the right to require the same from the other side.

With the preliminary contract is created a mutual obligation to take out another contract –  final.

The preliminary agreement which agreed the sale of an asset doesn’t have a proprietary effect – it does not transfer ownership or limited real rights on it but an obligation for parties to sign a final contract of sale.  Moreover – upon signing the preliminary contract of sale need not party shall transfer any right to the owner. In these cases, the preliminary agreement, it undertakes to acquire this right, then forward it to the other side. However, possession, surrendered on the basis of the preliminary contract shall enjoy enhanced legal protection.  Without a bona fide possessor acquired possession on the basis of preliminary contract shall enjoy the rights namely:

– Is entitled to the enjoyment of the property and obtain yields that it has given to bringing an action for its return;
– Can ask for the improvements made??, the amount by which the increased value of the property as a result of these improvements

– May request to be paid for the necessary expenditures made ??for the preservation of the property;
– Has the right to hold property until payment of the improvements and the costs.

 

 

Competition Law in Bulgaria

Bulgarian Competition  Law is designed to protect and foster competition and free enterprise in economic activity.  Over the years the law was repeatedly changed by the legislature to meet the requirements of economic life.

Bulgarian Competition law provides protection against agreements, decisions and concerted practices, abuse of monopolistic and dominant and all other acts and actions that can lead to the prevention, restriction or distortion of competition in the country and / or affect trade between Member – States the European Union as well as unfair competition. The Act regulates the control of concentrations between undertakings.  This law regulates relations concerning the application of Art. 81 and 82 of the Treaty establishing the European Community including cooperation with the European Commission and national competition authorities of the Member – States of the European Union under Regulation (EC)  1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Art. 81 and 82 of the Treaty establishing the European Community, hereinafter referred to as “Regulation (EC)  1/2003 ‘, and Regulation (EC)  139/2004 of 20 January 2004 on the control of concentrations between undertakings (Merger Regulation EC), hereinafter “Regulation (EC)  139/2004.”

Bulgarian Competition Act shall apply to:

– undertakings and associations of undertakings which operate in the Republic of Bulgaria or abroad, unless expressly or tacitly prevent, restrict, distort or may prevent, restrict or distort competition in the country;

– state bodies, including executive authorities and local government, if they expressly or tacitly prevent, restrict, distort or may prevent, restrict or distort competition in the country;

– undertakings to which the state or municipality is assigned to perform the services of public interest, insofar as the application of the law is not law or in fact the tasks assigned to them, and competition in the country is not affected significantly;

– individuals who commit or facilitate the commission of an offense under this Act.

The Act created the Commission for Protection of Competition. The Commission is the national body of the Republic of Bulgaria, responsible for the implementation of Community law on competition.

The Act prohibits any agreements between undertakings, decisions by associations of undertakings and concerted practices of two or more undertakings which have as their object or effect the prevention, restriction or distortion of competition in the market, such as:

–  directly or indirectly fixing prices or other trading conditions;

–  share markets or sources of supply;

–  limit or control production, marketing, technical development or investment.

– applying dissimilar conditions to identical contracts to certain partners, thereby placing them at a competitive disadvantage;

– making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations or additional contracts which by their nature or according to commercial usage have no connection with the subject of the main contract or its performance.

It is forbidden to conduct businesses with monopoly or dominant position as well two or more undertakings of dominant position, which may prevent, restrict or distort competition and affect the interests of consumers, such as:

– directly or indirectly imposing prices for the purchase or sale or other unfair trading conditions;

– limiting production, trade and technical development to the prejudice of consumers;

– applying dissimilar conditions to identical contracts to certain partners, thereby placing them at a competitive disadvantage;

–  making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations or entering into additional contracts which by their nature or according to commercial usage have no connection with the subject of the main contract or its performance;

– unreasonable failure to supply goods or provide service to real or potential client to hinder the attainment of its business.

The Act prohibited any act or omission in the course of business which is contrary to good commercial practice and harms or may harm the interests of competitors.

Shall be prohibited to damage the reputation and credibility of the competitors and their products or services by stating or disseminating untrue information, as well as by presenting the facts in a distorted form. Shall be prohibited to mislead in relation to essential characteristics of goods or services on or use of the goods or the provision of services by alleging false statements or misrepresenting facts.

It bans misleading and unlawful comparative advertising.
Advertiser and advertising agency prepared the ad, are liable for misleading and unlawful comparative advertising.

The offering of goods or services, appearance, packaging, marking, name or other characteristics which mislead or might mislead as to the origin, producer, seller, manner and place of manufacture, source and manner of acquisition or use quantity, quality, nature, consumer characteristics and other essential characteristics of the product or service is prohibited.

LIABILITY AND PENALTIES

For breaking the law are provided penalties, some of which are:

– Commission imposed a penalty of up to 10 per cent of total turnover for the previous financial year of an undertaking or association of undertakings

– Individuals contributed to the performance of violations under the Act if the act constitutes a crime shall be punished with fine from 500 to 50 000 BGN.

If you believe that your rights under this Act have been violated please contact us. We are ready to help you.

 

Issuance of Bulgarian ID for foreigners

Bulgarian ID card

Bulgarian ID card (Photo credit: Wikipedia)

The purpose of this post is to examine conditions and procedures for issuance of Bulgarian identity documents for foreign nationals and stateless persons from the Ministry of Interior, and the prerequisites for the replacement of these documents. Regulation is contained in several Bulgarian laws namely:

Bulgarian ID act.

Rules for issuance of Bulgarian ID documents act.

Tariff of fees.

Foreigners who are granted Bulgarian identity documents as laid down in this proceeding are:

– foreigners residing in Bulgaria for a period exceeding 3 months

– stateless persons

Ministry of the Interior issued the following documents for foreigners:

– ID card to continuous residing foreigner in Bulgaria – issued to foreigners admitted to reside within one year

– ID card to permanent resident foreigners in Bulgaria

– certificate for traveling abroad of a stateless person

– temporary ID card – foreigners whose national documents were seized in the cases provided by law

ID Card of a foreigner continuous residing in Bulgaria is valid for 1 year. The validity of the card permanent resident foreigner also depends on the validity of national passport, which he is entered in Bulgaria. Bulgarian identity document is issued to any alien who has been authorized stay beyond three months, which is over 14 years. Identity documents for travel abroad shall be issued to persons under 14 years of age.

Bulgarian identity documents to foreigners are issued and replaced upon submission of application form. Application forms can be found by the regional offices of the Ministry of Interior for a fee – 1 BGN=0,50 Euro.

There are other documents required  for submission with application form.

For  issuance card of long-term residing and permanent resident foreigner in the Republic of Bulgaria collected state fee is 10 BGN ~ 5 euro

For a certificate for traveling abroad to a stateless person and the provisional certificate for leaving the Republic of Bulgaria  collected state fee is 30 BGN ~ 15 euro

For issuing a temporary card for foreign nationals  collected fee is 10 lev ~ 5 euro

There are no fees for foreigners who are exempt on the basis of reciprocity and international agreements to which Bulgaria is a party.

Exempt from payment of fees are and foreigners who can not present their old Bulgarian identity document because it is forcibly taken away, damaged or destroyed beyond the holder’s reasons, such as natural disasters, accidents, accidents, robbery and rendering emergency medical care, those reasons shall be established by documents issued by competent authorities.

The issue of identity documents for minors and under partial guardianship are to be made in person, and for minors and placed prodigals – through their legal representatives.

In application, the applicant shall personally signed in the presence of an official.

In cases where a person may not appear in person to sign the application, it shall make his signature at a notary in advance and in person on the face of the application. Then the application is filed by a person authorized by the applicant.

Once the official accepts regular application filed in the registry and it completed and delivered to the applicant accordingly adopted application receipt.

Application data is checked in the the information databases associated with Bulgarian identity documents in accordance identity documents are issued within 30 days of receipt of the application are received by the applicant.

Issued identity document shall be received personally by the applicant after completing the appropriate section for receiving the application and return to the previous identification of this kind, if he was issued one.

Bulgarian identity document of a foreigner shall be valid in the Republic of Bulgaria together with his national travel document.

Nobody has the right to give and accept a pledge, use and dispose Bulgarian identity document of another person.

 

If you need more detailed information please contact us. Our Bulgarian lawyers will be happy to assist you.

 

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Forcing Social Networks To Broadly Monitor Illegal File-Sharing

National courts cannot force social networks to monitor for copyright infringement by users because it would not strike a “fair balance” between the rights of rights holders and the rights of those platforms and its users, the European Court of Justice (ECJ) has ruled.

The ECJ assessed EU laws on copyright and the enforcement of intellectual property rights as well as laws on the liability of service providers, data protection and privacy in communications. It also weighed the fundamental rights to the protection of intellectual property against the rights to privacy, free speech, the freedom to conduct business, and protection of personal data. It said that, on balance, it would be unfair if courts could force social networks to monitor for illegal file-sharing.

“[EU laws] read together and construed in the light of the requirements stemming from the protection of the applicable fundamental rights, must be interpreted as precluding a national court from issuing an injunction against a hosting service provider which requires it to install a system for filtering … with a view to preventing those works from being made available to the public in breach of copyright,” the ECJ ruling said.

The ruling was prompted by a national court case in Belgium involving music royalties collecting society Sabam and social network platform Netlog. Sabam has claimed that Netlog users were sharing copyrighted music and videos on the site without permission. Sabam said Netlog should have to pay a fee or “give an undertaking to cease and desist from making available to the public musical and audio-visual works from SABAM’s repertoire without the necessary authorisation,” the ECJ’s ruling said.

In 2009 Sabam asked the Court of First Instance in Brussels to issue an injunction to force Netlog to stop the infringement happening and said it should have to pay €1,000 as a penalty each day that Netlog delayed its compliance with the order. Netlog argued that such an injunction would have been “tantamount to imposing on Netlog a general obligation to monitor” user behaviour and said that that was contrary to Belgian national law.

The social network operators also argued that the injunction could force it to introduce a filtering system to identify and prevent illegal file-sharing. Such a system “would have to satisfy the provisions of EU law relating to the protection of personal data and the confidentiality of communications,” Netlog had argued.

Brussels asked the ECJ whether EU law and the fundamental rights to privacy and freedom of expression allowed national courts to issue injunctions to impose such a filtering system.

In a separate case also involving Sabam last year the ECJ also ruled that courts could not issue injunctions to force internet service providers to monitor for copyright infringement.

The EU’s Copyright Directive says copyright owners can obtain a court order against intermediaries whose services are used for piracy. But the E-Commerce Directive says that those intermediaries are generally not responsible for the activity of customers and that member states must not put them under any obligation to police illegal activity on its service.

Under EU data protection laws personal data must be “processed fairly and lawfully” and be collected for “specified, explicit and legitimate purposes and not further processed in a way incompatible with those purposes”. The laws also state that information can only be processed if a person has given their unambiguous consent and if that consent is explicitly given.

Separate EU laws set out in the EU’s Privacy and Electronic Communications Directive also state that storing and accessing information on users’ computers is generally only lawful “on condition that the subscriber or user concerned has given his or her consent, having been provided with clear and comprehensive information … about the purposes of the processing”.

Under the EU Charter of Fundamental Rights individuals generally have a right to privacy and protection of personal data. The Charter also confers rights on free speech, the freedom to conduct business and states that intellectual property (IP) “shall be protected”. The ECJ said, however, that there was “nothing whatsoever” in the way the Charter was worded or in ECJ case law to suggest that the fundamental right to the protection of IP is “inviolable and must for that reason be absolutely protected”.

It said that filtering system would have unfairly affected Netlog’s ability to conduct its business because it would have involved the platform “monitoring all or most of the information” it stored.

“That monitoring has no limitation in time, is directed at all future infringements and is intended to protect not only existing works, but also works that have not yet been created at the time when the system is introduced,” it said. “Accordingly, such an injunction would result in a serious infringement of the freedom of the hosting service provider to conduct its business since it would require that hosting service provider to install a complicated, costly, permanent computer system at its own expense, which would also be contrary to the conditions laid down in [the EU’s Enforcement of Intellectual Property Rights Directive], which requires that measures to ensure the respect of intellectual-property rights should not be unnecessarily complicated or costly,” the ECJ ruling said.

“In those circumstances, it must be held that the injunction to install the contested filtering system is to be regarded as not respecting the requirement that a fair balance be struck between, on the one hand, the protection of the intellectual-property right enjoyed by copyright holders, and, on the other hand, that of the freedom to conduct business enjoyed by operators such as hosting service providers,” it said.

The ECJ said that the rights of users of social networks would also affected by any monitoring for copyright infringement and that therefore those rights also had to be taken into account. It said that because the filtering system “would involve the identification, systematic analysis and processing of information connected with the profiles created on the social network by its users” the monitoring of information could infringe on those individuals’ rights to the protection of their personal data.

The filtering system may not be able to distinguish between lawful and unlawful content it could result in lawful content being blocked. Because of this the system could also impinge on individuals’ rights to freely impart or receive information, the ECJ said.

“Consequently, it must be held that, in adopting the injunction requiring the hosting service provider to install the contested filtering system, the national court concerned would not be respecting the requirement that a fair balance be struck between the right to intellectual property, on the one hand, and the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information, on the other,” the ECJ said.

Credits :

out-law.com