The Presidium of the Supreme Court of Arbitration will consider the appeal of Swedish Stena RoRo, a cargo ship operator, wanting to recover damages from the Baltic Shipyard for a breach of contract. The case has dragged on for two years.
The Baltic Shipyard had to build 2 ocean ro-ro ferries for shipping cars with trailers with the option of building two more vessels, according to €240m-worth contract signed between the shipyard and Stena RoRo on 7 July 2005. When in mid-August 2005 IST Group sold 88.2% stake in the Baltic Shipyard to Sergey Pugachev's United Industrial Corp. (OPK), the shipyard terminated the contract, due to its "unprofitableness". OPK notified Stena RoRo of the contract termination. In accordance with the arbitration agreement, Stena RoRo brought the case before the Arbitration Instance of the Stockholm Chamber of Commerce (SCC Arbitration Instance). The court ordered the Baltic Shipyard to pay €20m penalty, €5m for each ship, for violation of contract with Stena RoRo.
The Court of Arbitration of Saint Petersburg overturned the decision of the Stockholm court. The judges concluded that the contract had not entered into force, because there were no papers proving that the board of directors of Stena RoRo approved of it, therefore, the Baltic Shipyard can not be financially responsible for its violation. In addition to that, the judges pointed to the fact that the shipyard was a "strategic enterprise", and implementation of the decision of the SCC Arbitration Instance "may lead to the bankruptcy of the enterprise and damage sovereignty and security of the state, therefore, it contradicts public order of the Russian Federation".
Stena RoRo appealed to the Supreme Court of Arbitration. The board, consisting of 3 judges, found legal basis to reconsider the case. The judges concluded that the SCC Arbitration Instance had established the fact that boards of directors of both companies had approved of the contract and that the Russian court had no power to question factual circumstances of the case. The board of judges also established that the decision of SCC Arbitration Instance did not contradict public order of Russian federation. The notion of recovery of damages is similar to the notion of paying penalties, used in Russian legal system, the court ruled. In a statement made by the Baltic Shipyard the company stated it was ready to pay Stena RoRo if the court recognized the contracts as having entered into force.
Sanesta-Metall Trade House brought an action against the Baltics Shipyard, asking the Court of Arbitration of St Petersburg to declare the shipyard bankrupt, the Russian Mafia (rumafia.com) reported late in August. The case is due to be heard on 3 October. If the Presidium of the Court of Arbitration orders the shipyard to pay €20m, the company will face the danger of bankruptcy, and Stena Roro will be involved in it.