- Russian Federation
- Arbitrazh Court of Sakhalin Region
SERVICE CONTRACT - BETWEEN A RUSSIAN STATE-OWNED COMPANY AND ANOTHER RUSSIAN COMPANY - UNIDROIT PRINCIPLES APPLIED AS MEANS FOR INTERPRETING APPLICABLE DOMESTIC LAW (RUSSIAN LAW)
FORCE MAJEURE - REFERENCE TO ARTICLE 401 OF THE CIVIL CODE OF THE RUSSIAN FEDERATION AND TO ARTICLE 7.1.7 OF THE UNIDROIT PRINCIPLES ON INTERNATIONAL COMMERCIAL CONTRACTS
Claimant, a Russian State-owned company, entered into a contract with Respondent, another Russian company, for the design work on the plumbing repair project, including the development of project documentation (the "Agreement").
Subsequently, when the design work was not completed on time, Claimant filed suit, seeking the recovery of the penalty for the delay as stipulated in the Agreement. Respondent objected that it should not had to pay the full penalty as part of the delay was caused by an impediment beyond its control (force majeure).
The Court granted Claimant's claim.
On the merits, the Court rejected Respondent's arguments that it could not timely perform its contractual obligations due to adverse climate conditions in the Sakhalin area and that moreover also in addition the subcontractor delayed its performance. The Court noted that, in accordance with Article 401(3) of the Civil Code of the Russian Federation, unless otherwise provided by the law or by the contract, a party who fails to perform or performs in an improper way its contractual obligation shall be liable, unless it proves that proper performance was impossible because of a force-majeure, i.e., because of the extraordinary circumstances, which it was impossible to avoid under the given conditions. Failure on the part of subcontractors of the debtor, or the unavailability on the market of the goods necessary for the performance, or the lack of sufficient funds at the debtor's disposal do not fall within this category.
In this respect, the Court referred to Article 7.1.7 of the UNIDROIT Principles, according to which impediment (force majeure) means an obstacle beyond the control of the party which did not fulfill its obligation. According to the Court it follows that to be an exemption or "force majeure" the impediment must be extraordinary and unavoidable under the given circumstances, such as e.g. floods, earthquakes, snow debris and other similar natural disasters, acts of war, epidemics, etc.
According to the Court, Respondent could have foreseen the adverse weather conditions in the Sakhalin region, and therefore could not invoke them as force majeure. The Court likewise found that a delay caused by debtor's subcontractor would also not fall under the force majeure exception.
Original in Russian available at the bank of decisions of the Commercial Courts of the Russian Federation: http://ras.arbitr.ru}}