Kirill Katkov explained to DP how the case of the cancellation of the agreement between St Petersburg Administration and the company of the billionaire Traktovenko’s son can be useful for SEZ residents who find themselves in a similar situation

Baltengineering LLC, according to SPARK data, 24% owned by Vyacheslav Traktovenko, son of billionaire David Traktovenko, planned to invest about RUB 25 mn in the development and production of automated systems for active substances and pharmaceutical substances in the St Petersburg Special Economic Zone (SEZ). However, the project implementation was hindered by sanctions, in particular, the introduction of a direct ban on the use of high-tech imported equipment and rare chemical reagents. At the same time, the failure to fulfil the obligations of the SEZ resident allowed the St Petersburg administration to apply to a court for cancellation of the agreement and recovery of RUB 1.24 mn in penalties. The Commercial Court of St Petersburg and the Leningrad Region granted the officials’ claim, but reduced the penalty to RUB 200,000, recognising the circumstances that prevented the implementation of the project as not only substantial, but also beyond the control of Baltengineering

Kirill Katkov, Associate at Maxima Legal, told Delovoy Peterburg newspaper that based on practice, sanctions restrictions are rarely the reason for the cancellation of agreements on technical and innovation activities in special economic zones. According to the expert, the most common reasons are other reasons are lagging behind the planned volumes and terms of capital investments, failure to carry out technical and innovation activities, failure to provide project documentation and engineering survey results, late payment of land lease fees, etc.

In Kirill Katkov opinion, this case demonstrates to businesses that any participant in an agreement for the implementation of technology innovation activities in SEZs, who was unable to fulfil its terms due to sanctions, has the right to ask the court to reduce the amount of the penalty. At the same time, as Maxima Legal’s lawyer pointed out, this approach is not common in court practice. ‘Usually the courts refuse to reduce the penalty, referring, among other things, to the fact that the size of the fine is established by regulation, its maximum limit is limited, and therefore not subject to change,’ Kirill Katkov said.

To read the full article (in Russian), please, see Delovoy Peterburg newspaper`s website >>>>