Ilyashev & Partners recovers EUR 2 million in favor of Ukrainian State Enterprise

Ilyashev & Partners Law Firm has successfully represented a state-owned enterprise subordinated to the Ministry of Defense of Ukraine in arbitration against a military equipment seller from the Slovak Republic.

The Ukrainian state enterprise entered into a supply agreement with the Slovak seller to meet the needs of Ukrainian defenders to repel the armed aggression of the Russian Federation. The Ukrainian state enterprise fulfilled its contract obligations in a timely manner by transferring an advance payment in full. However, the foreign counterparty delivered only half of the contractually agreed quantity of goods, which turned out to be defective at the time of their acceptance by the end-user. Unfortunately, the seller refused to rectify the defects.

For the protection of the Ukrainian state enterprise, Ilyashev & Partners filed a claim with the Vienna International Arbitration Centre (VIAC). In the course of the arbitration proceeding, the international arbitration team proved that the foreign seller had fundamentally breached the contract by failing to deliver the military equipment that would conform to the contractual quality terms. That entitled the Ukrainian state enterprise to validly terminate the contract under the 1980 United Nations Convention on Contracts for the International Sale of Goods.

A VIAC sole arbitrator has found arguments advanced by the team justifiable and made an award in favor of the Ukrainian state enterprise. The VIAC sole arbitrator has ordered the Slovak company to pay to the Ukrainian state enterprise over EUR 2 million, including:

• the full purchase price paid by the Ukrainian state enterprise in advance;
• late payment interest on the principal under Slovak law for the entire period of delay until the full payment of the principal debt;
• damages suffered by the Ukrainian state enterprise in the form of the collected penalties awarded by a Ukrainian court against the Ukrainian state enterprise for failure to fulfil a state contract;
• costs incurred by the Ukrainian state enterprise for storing the defective goods;
• restitution interest for the use of the advance payment;
• a contractual penalty for violating to deliver the goods on time; and
• costs of arbitration incurred by the Ukrainian state enterprise to pursue its claims in VIAC.

Roman Protsyshyn, counsel, led the case under the supervision of Roman Marchenko, senior partner, with the assistance of lawyers Kateryna Solodovnyk and Mykhailo Churakov.

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