Sergei Bakeshin has commented to Delovoy Peterburg following a court’s decision to reduce the penalty for the defence contract by 6.5 times

Sergei Bakeshin - Counsel

The Moscow Commercial Court decided to recover from the Pella shipyard in St Petersburg 446.8 million roubles for late delivery of the Karakurt rocket-artillery ship to the Ministry of Defence. The initial requirements of the military department amounted to 2.93 billion roubles, the court recognised that the calculation as correct, but considered the amount disproportionate to the consequences of the contractual breach, and also drew attention to the fact that the deadline was caused by the customer’s requirement that only diesel engines be used in the project.

As Sergei Bakeshin explained to Delovoy Peterburg, sometimes when determining the fair amount of the penalty for breaching a non-monetary obligation, the courts are guided by the lower limit of reduction of the penalty and interest for the delay in performing a monetary obligation, which is equal to two, or in exceptional cases, one percent of the interest rate used by the Bank of Russia.

According to Sergei, the appeal court is reluctant to review the decisions of the trial courts on the amount of the penalty and its reduction. “But in this case, Pella OJSC can increase its chances, because the Moscow Commercial Court did not take into account some circumstances. The delay in the performing the obligations by the St Petersburg company came for reasons that depended on the Ministry of Defence. On this basis, the defendant could be completely exempted from payment of the penalty due to the potential absence of fault (Article 401 of the Civil Code) or due to the presence of fault on behalf of the Ministry of Defence (Article 404 of the Civil Code)”, emphasised Sergei Bakeshin.

To read the article (in Russian), please see the Delovoy Peterburg  >>>