Economic and Legal Commission (ECO)

Brief description and main aims: 

Despite the existing Directive 2011/7/EU, the construction sector is still affected by the
problem of late payments both from public and private clients. This is due to the
characteristics of its value chain and the fact that construction companies usually must bear
the costs of the construction process before they are paid.

In September 2023, the European Commission published its proposal for a Regulation on Combatting Late Payments in Commercial Transactions, repealing the current directive.

FIEC is supportive of clear rules aimed at fostering and safeguarding prompt payments from clients to construction companies and between companies while also minimising the administrative burden for all parties involved in a commercial transaction. For this reason, FIEC has opposed certain provisions, namely those related to payments to subcontractors in Public Procurement.

Why FIEC is dealing with this topic: 

Late payments have the potential to threaten the very existence of a construction company,  as a positive cash flow is essential to its day-to-day operations. 

The current EU rules on late payments have been in place since 2011 but many problems  remain unsolved. In some Member States, this is of particular concern for construction  companies working with the public sector. Even if the current framework has provisions on payment periods and/or recovery measures, companies are often reluctant to take legal  action against a public authority that has failed to pay them on time. 

Ensuring that contracting authorities pay on time is not only essential for creating a prompt  payment culture but has an impact on payments down the entire supply chain. All  construction projects need upfront funding to some degree to initiate and mobilise the  project. It is essential to the supply-chain, including the main contractor, that they are paid  on time to cover the costs they are incurring. The legally enforceable principle should be  that all clients pay on time – whether they are public or private contractual authorities. 

Brief description and main aims: 

In December 2022, the European Commission’s proposal for a “Regulation on Distortive Foreign Subsidies in the EU Single Market” aimed at tackling the distortive effects of foreign subsidies in the EU Single Market was adopted. This was the first EU instrument to control subsidies granted
by third countries. The regulation entered into force on 12 July 2023.

Under the Regulation, the Commission has the power to investigate financial contributions
granted by public authorities of a non-EU country which benefit companies engaging in an
economic activity in the EU and redress their distortive effects, as relevant. The instrument has
two notification-based tools, including one to investigate bids in public procurements involving a
financial contribution by a non-EU government, and a general market investigation tool.

Before that, in June 2022, the “EU international procurement instrument” was adopted. The instrument was aimed at securing reciprocal access to third-country markets for EU countries.

Why FIEC is dealing with this topic: 

Over the past decade, an increasing number of public infrastructure projects have been awarded to third country State-Owned Enterprises (SOEs), particularly from China, submitting extremely low prices against which private European companies cannot compete. As such, it is important to look at the possibilities for action the Regulation offers that could potentially help restore a level playing field in the EU Single Market.

On top of that, the EU has opened up its Public Procurement markets to third countries to a large degree, while many other economies have had limited appetite to liberalise market access.

FIEC treats these issues in cooperation with the European International Contractors (EIC) and the European Dredging Association (EuDA). In the summer of 2023, FIEC and its partners provided the European Commission information substantiating a reasonable suspicion of foreign subsidies in a particular market segment, justifying a market investigation. More recently, FIEC, EIC and EuDA have called for a Trade Defence Instrument (TDI) for the construction and dredging sectors, arguing that the EU’s legal toolbox is insufficient to ensure a level playing field in the internal market.

Brief description and main aims: 

In February 2022, the European Commission adopted its proposal for a Directive on Corporate Sustainability Due Diligence (CSDDD) which aims to foster sustainable and responsible corporate behaviour throughout global value chains. The Directive was finally adopted in April 2024. Under the new rules, companies will have to identify, prevent, or put an end to potential or actual negative human rights and environmental impacts resulting from their activities.

The new due diligence rules will apply to certain company's own operations and their upstream and downstream partners. Companies can be held liable for damages and can be fined for non-compliance. Although only companies that meet defined thresholds will come directly under the scope of the due diligence rules, SMEs working as sub-contractors for such companies will therefore indirectly be impacted too.

Why FIEC is dealing with this topic: 

Contractors across Europe are still sensing the repercussions of the Covid-19 pandemic and are now confronted with the impact of a war in Ukraine on their supply chains. Therefore, there is a need to ensure that the ruleset for CSDD is manageable and does not lead to additional cost burden for European businesses.

As such, while FIEC supports the introduction of a harmonised EU legal framework for the CSDD, we call upon the EU legislator to limit corporate responsibility to companies’ own operations and direct business partners. Furthermore, the corresponding obligations must provide a level playing field between EU and non-EU construction companies whilst avoiding disproportional obligations for SMEs.
Why FIEC is dealing with this topic:
Contractors across Europe are still sensing the repercussions of the Covid-19 pandemic and are now confronted with the impact of a war in Ukraine on their supply chains. Therefore, there is a need to ensure that the ruleset for CSDD is manageable and does not lead to additional cost burden for European businesses.