Article 25 — Payments
In brief
This article deals with payment in R&D procurement contracts. It requires public buyers to ensure timely payment of contractors and, where applicable, subcontractors, without prejudice to the EU rules on late payment. It also allows pass-through of equivalent payment terms along the supply chain, provides for appropriate advance payments in most cases, and permits direct payment to subcontractors in defined circumstances.
Key points
- Buyers must ensure timely payment of contractors and, where applicable, subcontractors, without prejudice to obligations under the late-payment Directive (2011/7/EU).
- Buyers may require contractors to pass equivalent payment terms through the supply chain, in line with that Directive.
- Unless justified by an overriding interest of the buyer, an appropriate advance payment must be provided to the contractor.
- At a subcontractor’s request, and where the nature of the contract allows, the buyer must transfer due payments directly to the subcontractor, with arrangements (including any mechanism for the main contractor to object to undue payments) set out in the procurement documents.
What it means in practice
Public buyers will need to build timely-payment, advance-payment and, where relevant, direct-payment arrangements into their procurement documents and contract terms. Contractors, and especially subcontractors such as smaller innovative firms, gain protections aimed at improving cash flow, including advance payments and the possibility of being paid directly for work supplied to the main contractor.
Official text — Article 25 (COM(2026) 567)
Source: European Commission, proposal for a Regulation establishing the European Innovation Act, COM(2026) 567 final, 9 September 2026. Read the official proposal (PDF). Text may change during the legislative process.
Anthony Bochon’s analysis
The payment rules are short but, in my experience, disproportionately important to the SMEs and start-ups this instrument is meant to attract, because cash flow is what determines whether smaller innovators can participate at all. Anchoring the regime in the Late Payment Directive 2011/7/EU, permitting pass-through of equivalent terms down the supply chain, and — crucially — requiring an appropriate advance payment unless an overriding buyer interest justifies otherwise, together address the classic complaint that public R&D contracts starve the performer of working capital.
The provision I would highlight to contractors and their subcontractors is paragraph 4 on direct payment to subcontractors at their request where the contract allows, with a mechanism for the main contractor to object to undue payments. This is a meaningful protection for the innovation supply chain, but its practical value depends entirely on the arrangements being spelled out in the procurement documents; my advice is to settle advance-payment levels and direct-payment mechanics at drafting stage rather than leaving them to good faith during performance.