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Russian Supreme Court Rules on “Take-Or-Pay” Provision in Russian Law Contracts
6 September 2021
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The Supreme Court of the Russian Federation (the “
”) examined in detail the “
” arrangement in Russian-law-governed contracts which is significant primarily for the commodities delivery and off-take market.
The SC noted that despite the “
” arrangement not being expressly addressed in Russian law, the freedom of contract principle enables the parties to negotiate such provisions in their contract.
” provision consists of two obligations: (i) to “
the right to receive a certain volume of products or services from the other party (provider/supplier) exercised at the sole discretion of the customer/purchaser; and (ii) to “
the right of the provider/supplier to require payment from the customer/purchaser even if the customer did not exercise its right to receive the agreed volume of products or services from the provider/supplier.
The customer may unilaterally terminate the services agreement, this right is contemplated by law and such right to terminate is an imperative rule that cannot be restricted/excluded by contract, however, it will not release the customer from its obligation to “pay”. Such obligation can be treated as payment for the repudiation of contract.
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