Ost Legal wins a case seeking the recovery from an EPC-contractor of a penalty in a total amount of over RUB 1.3 bln

Ost Legal successfully represented the interests of the client, Nizhnevartovsk SDPP CJSC (an Inter RAO UES Group company), at the Court of Arbitration for the Resolution of Economic Disputes at the RF Chamber of Commerce and Industry in its claim against Technopromexport OJSC, the general contractor, seeking the recovery of a RUB 1.3 bln penalty for the delayed commissioning of generating unit No. 3 at the Nizhnevartovsk SDPP.

The position of Ost Legal’s client, the project customer, was complicated by the fact that the primary equipment supplied by the customer on its own had turned out to be defective. The contractor had seized on that opportunity and was pointing to it as the basis for being exempted from liability for a delay that had ostensibly been caused by the customer’s own fault. In this connection, it should be noted that under the consideration of such disputes, the arbitration courts frequently take precisely that kind of “simplified” approach, treating any delay on the customer’s part according to the “day for a day” principle without analyzing the actual impact of such delays on the project schedule.

That said, in this case, the provisions of the construction contract that had been concluded (the draft of which, at the time, had been prepared by Ost Legal) only entitled the contractor to an extension and exemption from liability in the event and to the extent that the customer’s delay had a direct impact on the contractor’s ability to complete its work according to the contractual schedule. Ost Legal attorneys Vladimir Lipavsky and Anna Kozhushko were successful in demonstrating that the work done to eliminate the defect in the equipment had not affected the critical path of the project schedule, and that the respondent’s references to these circumstances were merely an attempt to “cover up” its own material and significant lags behind schedule in terms of work completion.

Ost Legal also managed to refute all of the contractor’s arguments for reducing the amount of the penalty (which the respondent had proposed slashing by a factor of more than 100).