The decision results from a lawsuit filed by the European Commission which accused the Portuguese State of failing to ensure that several public entities, including local and regional administrations and health entities, paid their commercial debts within the stipulated deadlines.

The European Commission, when bringing the action, argued that late payments are a continuous and systematic violation of this European directive, negatively affecting the competitiveness and viability of companies.

According to the ruling, “by failing to ensure that its public entities effectively comply with the payment deadlines set out in article 4, paragraph 3, and paragraph 4, subparagraph b), of Directive 2011/7/EU, the Portuguese Republic has not fulfilled its obligations under these provisions.”

The European Directive that served as the basis for the European Commission's accusation establishes that Member States must guarantee that public entities pay their commercial debts within 30 days, with this period being able to be extended up to 60 days for public entities providing health care, as long as they are duly justified.

However, between 2013 and 2022, several Portuguese public entities, including local administration, health entities, and the Autonomous Regions of Madeira and the Azores, did not consistently comply with established payment deadlines.

The pre-litigation procedure began in 2017 when the European Commission notified Portugal about the violation of the obligations of Directive 2011/7/EU. The State responded by indicating the set of measures adopted, but the European Commission considered them insufficient and issued a reasoned opinion in October 2017.

At Portugal's request, the procedure was suspended between 2018 and 2020 to allow the implementation of new measures. During this period, Portugal sent several reports to the Commission, but delays persisted.

The Court of Justice concluded that, despite improvements in payment deadlines over the years, Portugal was unable to ensure effective compliance with payment deadlines. “The fact that the situation of late payments by public entities in commercial transactions covered by Directive 2011/7 is improving cannot prevent the Court of Justice from declaring that a Member State has not fulfilled its obligations under the law of the Union”, reads the ruling.

Portugal was ordered to pay the costs of the process, as requested by the European Commission. This decision highlights the importance of strictly complying with payment deadlines in commercial transactions, especially by public entities.

The conviction could lead to a review of the payment practices of public entities in Portugal, promoting greater transparency and efficiency in financial processes.