Challenging the Recovery of Compensation Under an Agency Agreement

Case Profile

The Background

A foreign company (the Plaintiff) filed a lawsuit against our Client to recover 1,506,392 RUB in compensation under Agency Agreement No. CS-1 dated August 30, 2011, for lost shipments. The claims were based on Clause 5.2 of the agreement: if a shipment is not delivered or returned within 60 days, it is deemed lost, and compensation must be paid within 10 days of a written request.

Under the agreement, our Client (the Agent) was obliged to organize the delivery and distribution of shipments, and accept and return undelivered items, while the Plaintiff was to transfer them under international waybills and shipment registries. However, the Plaintiff failed to present any evidence to the court confirming the physical transfer of the shipments to the Agent.

By decision of the Arbitration Court of Moscow, the lawsuit was dismissed in its entirety. The court recognized the documents presented by the Plaintiff as inadmissible: the so-called "tracking waybills" and "registration cards" did not prove direct transfer of goods to our Client. Furthermore, electronic correspondence was sent to email addresses not specified in the agreement, and the translations of foreign documents were not notarized.

The Ninth Arbitration Appellate Court upheld this decision, charging the state duty expenses for the appeal to the Plaintiff.

The defense's position was further supported by a detailed "Response to Explanations", where our lawyers cited the strict requirements of Article 75 of the APC RF and Article 81 of the Fundamentals of Legislation on Notaries regarding the formatting of translations, and noted the complete lack of contractually agreed email addresses for official document exchange.

Client Risks

1. The threat of being forced to pay 1,506,392 RUB in compensation for lost shipments under agency agreement CS-1, which would lead to direct financial losses and potential cascade claims from other counterparties on similar grounds;
2. The risk of the court accepting the Plaintiff's indirect materials (internal registration cards, tracking printouts, and email threads) as sufficient evidence;
3. An overly broad interpretation by the court of Clause 5.2 as an independent and sufficient ground for compensation, even in the absence of primary transfer documents;
4. Escalating litigation costs if the legal proceedings were to drag on indefinitely.

Our Strategy & Legal Support

KDpartners lawyers conducted a comprehensive audit of the submitted materials and Agreement No. CS-1 itself. The defense strategy focused on the failure to prove the fundamental legal fact — the physical transfer of shipments to our Client under the disputed agreement, without which the 60-day loss rule (Clause 5.2) is entirely inapplicable.

Our lawyers drafted and filed formal procedural objections, pointing out that:

• "tracking waybills" and "registration cards" do not confirm the physical transfer of shipments to the Agent and do not log their movement under the scope of the agreement;
• the electronic correspondence was carried out via email addresses that were never agreed upon by the parties in the text of the contract.

Additionally, we raised valid objections regarding the admissibility of evidence: the foreign documents provided by the Plaintiff lacked notarized translations, directly violating procedural law requirements.

At the appellate stage, KDpartners lawyers defended the favorable ruling by organizing the position into key pillars: the absence of a transfer equals no grounds for compensation; the inadmissibility of the presented documents as evidence; and the failure to comply with the contractually agreed-upon official document workflow.

The Arbitration Court of Moscow dismissed the claim against our Client for 1,506,392 RUB. The Ninth Arbitration Appellate Court upheld the first-instance court's decision, leaving the Plaintiff's appeal unsatisfied. The state duty costs for the appeal were fully charged to the Plaintiff.