The Spanish Supreme Court confirms the criterion for calculating the period for calculating interest for late payment in public contracts, contrary to that of the CJEU

Delays in the payment of invoices to suppliers by the Administration are all too common in Spanish public procurement. This can be seen in the quarterly reports published by the Ministry of Finance, which analyse the General State Administration's (in)compliance with the legal payment deadlines. In the latest report published for the third quarter of 2024, 1,944 operations were pending payment for an amount of 151.03 million euros, 290 of these operations exceeded the legal period for payment. The above, bearing in mind that it only includes the General State Administration and not the autonomous communities or local entities, gives an idea of the real magnitude of the problem.

Several measures have been taken to put an end to this malpractice by the Administration, including the progressive reduction of the legal deadline for payment and the obligation to pay, in those cases in which payment is not made within the legally established period, late payment interest and collection costs for each of the amounts not paid on time, as expressly recognised in the Public Sector Contracts Law.

On many occasions, suppliers, faced with the Administration's failure to satisfy the amounts owed or their late payment, opt to go to court, thus leading to the judicialization of this type of controversy.

Main regulation concerning the payment of the price by the Administration

Article 198 of the Public Sector Contracts Law regulates the calculation of payment periods and the rules for the start of the accrual of interest for late payment, and is an old acquaintance of the judicial bodies and, specifically, of the Supreme Court, which has already expressed its opinion on many occasions on questions related to the interpretation of this article.

According to our Supreme Court, the start of the calculation period (known as the dies a quo) would occur 60 calendar days after the invoice is submitted to the Administration. It would be made up of two successive periods of 30 calendar days, a first period granted to the Administration for the "verification or checking procedure", which may or may not be exhausted, and another consecutive period of another 30 calendar days to proceed with payment. Once these 60 days have elapsed, the debt would start to accrue interest on late payment.

The following is what STS 5938/2024 adds to the interpretation of the article 198 of the Public Sector Contracts Law.

Supreme Court Ruling No. 5938/2024

On 26 November 2024 the Supreme Court issued its ruling number 5938/2024 confirming its interpretative criterion of article 198 of the Public Sector Contracts Law.

The subject matter of the dispute was a series of invoices paid late by the Lugo City Council in relation to a works contract. The Administrative Court No. 1 of Lugo ruled at first instance that, although it is true that the legislation as well as the contract contemplated a possible verification phase, from the moment that the debtor Administration did not object to the conformity of the services provided, it would not be making use of the 30 calendar day period of the verification procedure and, therefore, in order to start the calculation of interest for late payment, only the 30 day period would have to be taken into account.

In short, the Lugo Court interpreted that if no objections are raised by the Administration during the 30-day verification phase, the deadline for payment is reduced from the potential 60 days to 30 calendar days from the submission of the invoices.

This criterion was ratified by the Administrative Chamber of the High Court of Justice of Galicia, which dismissed the appeal lodged by Lugo City Council.

Controversy and Supreme Court ruling

In the present case, the question was to confirm, qualify, complement or, as the case may be, review the doctrine of the Third Chamber of the Supreme Court regarding the dies a quo for the accrual of interest on late payment and, more specifically, whether the first 30-day period, which the Law attributes to the Administration to check and verify the invoice, cannot be waived. Non-waivability would mean that it is necessary for the first 30-day period to elapse, regardless of whether or not the corresponding procedures for verification or approval of the expenditure have been carried out, in order to be able to calculate the second 30-day period, the expiry of which inevitably determines whether or not interest is incurred in arrears.

The conclusion reached by the Supreme Court is included in the ruling in the following terms (the underlining is ours): "We reiterate the jurisprudential doctrine formulated by this Contentious-Administrative Chamber of the Supreme Court in the judgements referring to the interpretation of article 216.4 TRLCSP (current article 198.4 of the LCSP), in the sense that, with the presentation of the invoice to the contracting Administration, the thirty-day period of verification and approval begins, and if once approved, thirty days elapse without payment, it is in arrears and interest begins to accrue, regardless of whether the Administration has not raised any objection in the verification phase".

With this doctrine, the Supreme Court has ruled in favour of the Lugo City Council, forcing it to recalculate the amount of interest for late payment.

Osborne Clarke Comment

In application of the ruling, the deadline for payment of invoices submitted to the Administration is: (i) 60 calendar days from the date of submission of the invoice, with interest accruing for late payment from the 61st day if the Administration does not raise any objection within this period; or (ii) 30 days from acceptance or approval by the Administration of the invoice, if this occurs without the 30-day verification period having expired.

The ruling goes against the criterion expressed by the Court of Justice of the European Union in its ruling of 20 October 2022, which we analyse in this post, in which it established that the existence in Spain of a period of 60 calendar days as a generic payment period for all commercial transactions between companies and public administrations would be contrary to the provisions of Directive 2011/7/EU, since its wording determines that a period of time longer than 30 calendar days must be understood as possible only exceptionally.