The Arbitration Court of St. Petersburg and the Leningrad region ruled on the claim by the Joint-stock Company Zvezdochka Ship Repair Centre against the public joint stock company Power machines – ZTL, LMZ, Electrosila, Energomachexport.
In 2018, these companies signed an agreement under which Power Machines would supply some equipment to Zvezdochka Ship Repair Center as part of state defense orders. The contract price was 137.394.624 rubles (approximately 1.8 million euros).
According to the court documents, as of February 6th, 2023, products from Zvezdochka had not been received. Following this, the company demanded that Power machines pay compensation for violating delivery deadlines for the period from July 1, 2020 to March 31, 2022 and from October 2, 2022 to March 2, 2023.
However, Power Machines left the claim unsatisfied. Power Machines justified its position by stating that Zvezda approved several documents which stated that no penalties were applied for the execution of contracts in 2022 (the year of Russia’s invasion of Ukraine) due to the violation of obligations by a supplier/contractor in the contract. This was because of restrictive measures imposed on Russia by unfriendly countries.
Meanwhile, Power machines has been under US sanctions since 2018, and in 2021, additional sanctions were imposed on the final beneficiary and associated individuals, as well as a ban on supplying a wide range of products to the Russian federation. Information about Power Machines’ inclusion in the SDN List is posted on the US Treasury website.
However, the appeal for a moratorium on fines likely had no effect on the court.
According to the court’s records, in order to apply for a suspension of fines for a supplier, it is necessary to prove the existence of reasons and amendments to the contract, as well as sanctions that were introduced in 2018, i.e., before the conclusion of the agreement with the plaintiff. Moreover, Power Machines reported no difficulties in fulfilling the agreement, and no amendments were made to its terms.
As a result, the court ruled to collect a fine of seven million rubles from Power Machines on behalf of Zvezdochka.
