Supreme Court ruling on invoice payments on due date

The Supreme Court has overturned a ruling of the Market Court regarding payment of late payment interest.

At the start of October, the Supreme Court ruled on a case concerning invoicing between two companies. The ruling overturned an earlier ruling by the Market Court.

The companies had followed a practice whereby the seller was not entitled to late payment interest if the client paid on the due date and the money was only in the seller’s bank account after the due date. According to the seller, such payments were late, giving its company the right to charge late payment interest. For this reason, the seller demanded that the court prohibit this kind of contractual practice.

The Market Court had previously ruled on the case and not considered the contractual practice between the parties unreasonable. Among other things, the Market Court referred to the established nature of the practice in Finland.

In its recent ruling, the Supreme Court reached another conclusion. It considered that the seller was entitled to late payment interest in cases where the payment had not reached it on the due date.

We’ve earlier reported on the “standard fee” which a creditor is entitled to charge under the Finnish Debt Collection Act. The fee is €40 at most. To charge the statutory standard fee, the contractual payment between the companies must be delayed so long that the seller is legally entitled to charge late payment interest for the delay. Read more about the standard fee here and here.

Differing practices of establishing late payment interest

Tiina Toivonen, Legal Affairs Manager at Suomen Yrittäjät, the Finnish SME association, reminds businesses that they must be precise in the future.

“In trade between companies, a payment can be considered late if it is not in the other party’s account on the due date. That means that paying on the due date might not be good enough.”

Under the Debt Collection Act, late payment interest must be paid from the due date if the due date of the debt has been set in advance with binding effect on the buyer.

On the basis of the Supreme Court’s ruling, the seller is entitled to late payment interest if the payment is late.

Toivonen says that late payment interest is defined in different ways depending on whether the parties agreed on the due date. The Supreme Court did not issue an opinion on this in its ruling. Under the Debt Collection Act, late payment interest must be paid from the due date if the due date of the debt has been set in advance with binding effect on the buyer.

If the due date has not been set in advance with a binding effect on the buyer, late payment interest must be paid once 30 days have passed since the seller sent the buyer its invoice.

“The buyer is not obliged to pay late payment interest for the period before it receives an invoice or a payment demand,” Toivonen says.

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