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Alexandrow & Partners

Legal Consulting and M&A

What To Do – Solve The Case Quickly Or Consciously Extend The Term

Dr. Ilya Alexandrov, MBA (Finance)

Managing partner

During last 3 years we supported several projects in different sectors – international economic activity, mergers and acquisitions, debt recovery, organization of financing of investment projects, joint ventures, calculation of economic efficiency of business-projects, export credits.

Our specialization is maintenance of the investment projects, so we are really surprised sometimes with the standards of work of some our colleagues, including foreign lawyers.

For example, now we represent interests of the client in Arbitration Institute of the Chamber of Commerce in Stockholm. There is a serious amount of money to collect in connection with non-execution of the supply agreement of fuel oil by the German party – the German party has not provide supplier with the vessel for loading and has not opened the letter of credit in his favor. Russian supplier (our client) wishes to recover the amount of direct damage and expectation losses from the German buyer. Fuel that has been purchased in the Russian Federation in advance was kept by our client in a rented terminal of the port. The client also pays its partners, interest and penalties for late payment under the loan agreement, which was concluded in order to finance the deal with the Germans.

The defendant’s lawyer was a large foreign law firm with an office in Frankfurt-on-Main, which tried to delay the process, despite the obvious losing position of the German buyer. First of all, they were trying to call down the competence of the Arbitration Institute of the Chamber of Commerce in Stockholm (in fact there were some defects in the arbitration clause – sorry that we have not drafted the text). Then the German lawyers began to find fault with every document, which we referred to an arbitrator. Once we nailed down our colleagues with documentary evidence and arguments on the basis of e-mail correspondence, the Germans had had no arguments. However this “from empty to vacant” continued. The lawyers of the defendant really wanted to organize and hold another oral hearing on the case…

The arbitrator investigated the declared claims, had all the necessary materials and was quiet familiar with the position of both parties. He read the chronology of the events in relations between the Russian supplier and a German buyer in the format of the table. He appointed oral hearing of the case in the city of Paris. The duration of the case was nearly 12 months – which is rather long term for international commercial arbitration courts, not to mention the state arbitration. And this happened just in connection with the supply agreement of heavy fuel oil from Russia to Germany.

We, as representatives of the plaintiff, constantly referred to abuse of procedural right by the defendant. We stressed that this case, in fact, was simple, the buyer had not provided the seller with the transport as well as had not opened the letter of credit – inaction, and a violation of the terms of the contract caused additional costs on the side of the supplier, which should now be compensated.

Nevertheless, we had to explain the most banal things in the style of “white is white, and black is black, and not vice versa”. For example, a letter, in which the defendant acknowledges the fact of inability to perform obligations under the contract and proposes to settle the issue of the harm by compensation, the German lawyers still considered as a “ defendants’ notification on the unilateral termination of the contract in connection with the low quality of fuel”. And they build on that the whole defense.

The defendant seems to be waiting: what’s going to happen? –He did not take part in negotiations, despite the fact that the size of the amounts to be recovered increased every day with accumulated penalties, costs for the services of legal advisers and representatives in court. The defendant avoided negotiations in March 2011, did not signed a compromise agreement on contract termination and the compensation for harm, from which the claimant suffered. The defendant had the opportunity to solve the dispute just by payment of the compensation amount to our client, which was equal to 50 % of the current cost of the claim.

On the one hand, we want to resolve the dispute peacefully – even taking into account the arbitral proceedings, lasting about a year. On the other hand we have investment projects with contractors, who know value of the time. People don’t waste much time on empty arguments, and litigation lasting for months.

If we were German lawyers we would have advised the client at the stage of appeal resolved the dispute with the Russian supplier quickly and continued to trade oil. Moreover our client is interested in it, it is always better to earn money than to waste the time in the courts. But the Germans were afraid of responsibility and were greedy at the same time.

Unfortunately, there is strong desire of client’s money everywhere, including Germany. And the Germans still believe that their home German lawyers will protect them from “evil Russians” …