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24 June 2014 |
Russian court satisfies the claim for recovery of loss of profit from a foreign pharmaceutical company On 24 June 2014 Moscow City Arbitrazh court satisfied a claim for the recovery of damages in the amount of RUB 408,375,000 from the foreign pharmaceutical company (case No. A40-14800/14).The foreign pharmaceutical company (the seller) entered into a framework agreement for the supply of pharmaceuticals with the Russian company (the purchaser). In accordance with the agreement the seller was obliged to supply pharmaceuticals to the purchaser on the basis of the latter’s orders. The purchaser at its end had to use its best efforts to actively participate in public procurement procedures. However, in April 2013 the seller did not respond to one of the purchaser’s orders. As a result, the purchaser was not able to participate in a significant state procurement auction. In response to the seller’s behavior the purchaser filed a complaint with the Federal antimonopoly service of Russia (FAS). FAS found out that the reason for the refusal to supply was that the Russian subsidiary of the seller participated in the same state procurement auction. FAS ruled that seller’s behavior constituted the breach of antimonopoly law in the form of abuse of the dominant position[1]. On the basis of FAS decision the purchaser applied to the court with a claim for the recovery of loss of profit. The amount of the loss of profit was calculated in the following way. In 2012 the seller and the purchaser entered into a bonus agreement for the high level of supplies under the state procurement contracts. If the level specified in the contract was achieved by the purchaser, the seller would have to pay him the bonus of 16,5%. This bonus would be calculated from the total value of pharmaceuticals supplied by the seller in 2013 that were later sold by the purchaser under the state procurement contract. The threshold for the payment of bonus was achieved by the purchaser by the moment of seller’s refusal to supply the pharmaceuticals. Accordingly, the purchaser claimed that his loss of profits equaled to 16,5% of the total value of supply agreement entered into between the seller and its subsidiary in connection with the state procurement auction mentioned above. The court agreed with the calculation of loss of profit mentioned above. The described decision of Moscow city Arbitrazh Court is of significant importance since it is still quite rare for Russian courts to recover the loss of profit for the breach of antimonopoly legislation. The fact that the loss of profit was recovered from the foreign company makes it even more important and demonstrates increasingly liberal approach of the Russian courts to the issue of damages’ recovery. We recommend to take the described practice into account when dealing with Russian partners and customers. [1] FAS decision dated 24 December 2013 (case No. 1-10-279/00-18-13). |
