Failure to fulfill a foreign economic activity contract

Failure to fulfill a foreign economic activity contract is a violation of the obligations of one of the parties, whether resident or non-resident, within the framework of foreign economic activity. Such disputes are regulated by the applicable law (possibly the Civil Code of the Russian Federation (Articles 309, 310, 401, 450, 450.1), and possibly the law of another country), chosen by the parties or by virtue of the law, international treaties, often standard INCOTERMS conditions and legislation on currency regulation (Federal Law No. 173-FZ). We help in situations where:

• The terms of the contract have been violated: failure to meet delivery deadlines, performance of work or provision of services with defects, partial or complete non-payment.

• A unilateral refusal occurred: the counterparty terminates the performance of the contract without legal grounds or in violation of the established procedure.

• Sanctions orforce majeure: circumstances of force majeure, natural disasters, legislative restrictions) prevent the fulfillment of obligations.

We also take into account the specifics of foreign trade contracts, including conflict of laws regulation, choice of applicable law and compliance with currency control requirements, such as registering a contract with a bank for amounts of 3 million rubles (for a non-resident contractor) or 10 million rubles (for a non-resident customer).

The most common examples of non-fulfillment of a foreign economic activity contract

Foreign trade contracts often encounter violations related to the international nature of transactions. Here are the most common cases we work with:

• Failure to deliver goods or delay in delivery. A foreign supplier fails to deliver the goods within the time period specified in the contract, or does not deliver them at all, which leads to the disruption of production or sales plans.

• Delivery of goods of inadequate quality. The goods do not meet the declared characteristics, quality standards or specifications specified in the contract, for example, non-compliance with certificates or technical requirements.

• Non-payment or partial payment. A non-resident customer fails to pay for delivered goods, completed work or rendered services, citing financial difficulties, sanctions or alleged violations.

• Violation of licensing or certification conditions. The counterparty does not provide the necessary documents (e.g. export licenses or certificates of conformity), which prevents the execution of the contract.

• Failure to comply with currency control. Failure to register an agreement with an authorized bank or violation of the deadlines for submitting documents, which entails administrative fines under Article 15.25 of the Code of Administrative Offenses of the Russian Federation.

We help to record violations, collect evidence (reports, correspondence, expert opinions) and develop a defense strategy that takes into account the international context and sanctions restrictions.

Consequences of failure to fulfill a foreign economic activity contract

Failure to comply with a foreign economic activity contract entails legal and financial consequences, which we will help either to use in your favor or minimize:

• Recovery of damagesYou can demand compensation for actual damages and lost profits if you prove the violation, losses, their size and the counterparty’s fault.

• Collection of penaltiesIf the contract provides for fines or penalties, we will ensure their collection or achieve their reduction if they are disproportionate.

• Termination of the contractIn case of a material breach, we will help terminate the contract in court or out of court with the return of the advance payment or property.

• Execution in kindIf possible, we will achieve actual fulfillment of obligations by the counterparty.

• Administrative responsibility. Violation of currency legislation, for example, failure to register a contract, may entail fines. We will help to avoid such sanctions.

Legal mechanisms of protection

We offer a full range of tools to protect your rights in the event of non-fulfillment of a foreign economic activity contract:

• Pre-trial settlement. Preparation and submission of claims, conducting negotiations or mediation to reach a compromise. The claim procedure is mandatory if it is provided for by the contract or law.

• Trial. Filing claims in arbitration courts of the Russian Federation or foreign courts, if specified in the contract. We will ensure the recovery of damages, penalties, termination of the contract or performance in kind.

• International arbitrationIf the contract provides for an arbitration clause, we will represent your interests in international centers such as the ICAC at the RF CCI, HKIAC, SIAC or DIAC, taking into account sanctions risks and the choice of neutral jurisdictions.

• Security measures. Arrest of the debtor’s property or accounts, prohibition of registration actions to prevent damage (Article 90 of the Arbitration Procedure Code of the Russian Federation).

• Currency control support. Consultations on registering contracts, compliance with currency legislation and minimizing the risk of fines.

Support in arbitration

International arbitration is an effective way to resolve disputes under foreign trade agreements, especially when working with foreign counterparties. We provide comprehensive support at all stages of the arbitration process, taking into account sanctions restrictions and the choice of neutral jurisdictions, such as Hong Kong (HKIAC), Singapore (SIAC), Dubai (DIAC) or the Belgrade Arbitration Centre. Our services include:

• Preparation for arbitration. Analysis of the arbitration clause, assessment of the applicable law and selection of the optimal strategy. We will help to draft cascading clauses providing for several arbitration centers in order to minimize the risks of unenforceability due to sanctions.

• Formation of the panel of referees. Consultations on the selection of independent arbitrators, verification of their professional reputation and neutrality. If necessary, we will organize the challenge of arbitrators who demonstrate bias, for example, those who have signed anti-Russian declarations.

• Collection and presentation of evidence. Preparation of documents, correspondence, expert opinions and other evidence supporting your position. We also help to obtain evidence through foreign courts, for example, under the procedure 28 U.S.C. § 1782 in the United States.

• Representation in arbitration. Conducting cases in international arbitration centers, including participation in hearings, filing motions and interacting with arbitrators. We take into account the specifics of the rules of HKIAC, SIAC, DIAC and other centers.

• Payment of arbitration fees. Solving problems with cross-border payments, including finding payment platforms and interacting with banks that accept payments from Russian parties.

• Enforcement of the arbitral award. Support in the procedure of recognition and enforcement of decisions in neutral jurisdictions, as well as challenging decisions if they violate your rights or public order of the Russian Federation.

We also take into account current challenges: increasing sanctions pressure on Asian arbitrations (e.g. HKIAC), difficulties with notifying foreign counterparties and engaging foreign consultants. Our team helps to find boutique law firms in neutral jurisdictions and organize prompt notification through local channels.

Legal support

Working with foreign trade agreements requires a deep understanding of international and Russian law, as well as experience in cross-border disputes. Our services include:

• Analysis of the situation. Evaluation of the contract, applicable law, breaches and prospects of dispute.

• Preparation of documents. Preparation of claims, statements of claim, petitions and arbitration requests.

• Collection of evidence. Preparation of contracts, correspondence, reports and expert opinions confirming your position.

• Representation. Protection of interests in courts, arbitrations, currency control bodies or during negotiations.

• Risk Consulting. Recommendations on the selection of arbitration centres (e.g. Hong Kong, Singapore, Dubai), drafting cascading clauses and minimising sanctions restrictions.

We also take into account modern trends: the growing popularity of arbitrations in neutral jurisdictions (HKIAC, SIAC, DIAC), difficulties with paying arbitration fees and engaging foreign consultants. Our team helps find solutions, including finding boutique law firms in foreign jurisdictions and organizing payments through new platforms.

Why should you contact us?

Disputes over foreign trade agreements are not only legal, but also strategic challenges. We understand how important it is to maintain business relationships and avoid financial losses. Our lawyers have experience working with international contracts, sanctions restrictions and currency legislation. We offer an individual approach so that you can confidently move forward, knowing that your interests are protected.

Contact us to discuss your situation and find the best solution for your business.