Introduction
In a decision dated 3 August 2026, the Arbitration Court of the Republic of Tatarstan (Russia) in case number А65-27362/2025 rendered a judgment on recovery of an “unworked” advance payment, contractual penalties, and interest under a cross-border equipment and engineering contract.
The court held that the Russian buyer validly terminated the contract for delay/non-performance and that the Austrian counterparty must repay the advance as unjust enrichment, plus a contractual penalty capped at 3% of the contract price and interest for wrongful retention of funds calculated using Russian approaches for foreign-currency debts.
Facts
The claimant, OOO “Vertex” (Kazan, Russia), sued Bowas‑Induplan Chemie Ges.m.b.H. (Austria) to recover: (i) €4,350,000 as an “unworked” advance, (ii) €261,000 as a contractual penalty (penny/late-fee), and (iii) interest for use of another’s money (later increased to €697,451.74 as of 21 July 2026), with ongoing post-judgment accrual.
On 4 August 2021, the parties entered into Contract No. 251. Under the contract, the Austrian company (described as seller/contractor) undertook to perform technical design, supply equipment, and provide technical support for modernization of a pressure stabilization stage at an existing nitrocellulose plant in Aleksin (Russia). The contract price was €8,700,000 to be paid in stages.
The contract provided for an advance of €4,350,000, payable within 10 banking days after the buyer received documents for payment. Vertex paid the advance (payment order No. 1 dated 4 October 2021). The work schedule (Appendix No. 2) contemplated that the first stage of core technical documentation would be completed two months after payment—i.e., by 1 December 2021—and overall performance was to be completed by 31 December 2023.
Vertex alleged that despite receiving the advance, the Austrian supplier did not perform and did not deliver the documentation. In July 2022, the supplier sent a proposed amendment that would have treated the value of the “basic engineering documentation” as equal to the paid advance; Vertex did not agree and did not sign.
In October 2022, the supplier informed Vertex that delivery was impossible due to EU sanctions—citing Council Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/1269—which, according to the supplier, prohibited selling/supplying or supporting the contract goods for Russia.
On 7 March 2024, Vertex sent a notice stating termination and demanding repayment of the advance and payment of the penalty. The notice was sent by email on the same date and, according to the court, was delivered by PostNL on 12 March 2024. The advance was not repaid. Vertex then filed suit in the Tatarstan commercial (“arbitrazh”) court—Russia’s state courts that hear most business disputes.
The Federal State Enterprise “Aleksinsky Chemical Plant” and the Prosecutor of the Republic of Tatarstan participated as third parties without independent claims. The defendant and third parties did not appear at the hearing, though they were notified.
The defendant submitted a procedural motion via the Russian e-filing system (“My Arbitr”) seeking to leave the claim without consideration based on an alleged ICC arbitration clause. The court rejected that motion by ruling of 22 May 2026, which was not appealed and entered into force.
Legal considerations
Arbitration Clause and Russian Court Jurisdiction
The Federal State Enterprise Aleksinsky Chemical Combine and the Prosecutor of the Republic of Tatarstan participated as third parties without independent claims. The Austrian supplier asked the court to leave the claim without consideration because the parties had concluded an arbitration agreement. Vertex opposed the application, and the prosecutor supported determination of the case by the Tatarstan court.
Clause 17.3 provided that any dispute arising out of or in connection with the contract was to be resolved under the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Moscow was designated as the place of arbitration and Russian as the language of the proceedings.
“Any disputes arising out of or in connection with the Contract [are to be considered] under the Rules of Conciliation and Arbitration of the International Chamber of Commerce; the place of arbitration shall be Moscow and the language of the arbitration shall be Russian.”
English translation of the arbitration mechanism as described in the court’s order.
Clause 17.4 required a sole arbitrator who was neither a native nor a citizen of Russia or Austria, nor of any other country unacceptable to either party. The arbitrator was to be selected from the list of arbitrators accredited by the ICC.
“The arbitral commission shall consist of a sole arbitrator who is not a native or citizen of Russia, Austria or any other country unacceptable to either party. The sole arbitrator shall be selected from the list of arbitrators accredited by the International Chamber of Commerce.”
English translation of clause 17.4 as described in the court’s order.
Article 148(1)(5) of the Commercial Procedure Code and Article 8 of the Russian Law on International Commercial Arbitration ordinarily require a state court to leave a claim without consideration when a party invokes a valid and enforceable arbitration agreement in time. Both provisions preserve state-court proceedings, however, where the agreement is invalid, has ceased to have effect or cannot be performed.
The court referred to the right to judicial protection under Article 46 of the Russian Constitution and to Articles 1, 27 and 247 of the Commercial Procedure Code on economic disputes involving a foreign element. It also cited Supreme Court Plenum Resolution No. 23 of 27 June 2017, under which a court considering a jurisdictional objection must examine whether the dispute falls within the exclusive jurisdiction of Russian arbitrazh courts.
The order then relied on Articles 248.1 and 248.2 of the Commercial Procedure Code, introduced in 2020 to address foreign restrictive measures. The court described those provisions as safeguarding access to justice when the protection of a Russian person’s rights in a foreign court, international organisation or arbitral tribunal is impossible or significantly impeded.
In applying that framework, the court identified four circumstances. First, Vertex was based in Kazan, while the supplier was resident in Austria, an EU Member State included in the Russian Government’s list of states taking “unfriendly actions.” Second, the requirement for a sole arbitrator who was neither Russian nor Austrian, together with Russian as the procedural language, was said to make appointment impossible or to narrow the pool substantially, including the pool of Russian-speaking candidates from states considered unfriendly by Russia. Third, the court stated that the ICC Rules effective from 1 January 2021 were governed by French law and that disputes concerning them were determined by the Tribunal judiciaire de Paris; in the court’s view, this restricted implementation of the clause with respect to the law applicable to the dispute. Fourth, the court treated it as a matter of common knowledge that the third party, the Federal State Enterprise Aleksinsky Chemical Combine, was subject to restrictive measures imposed by the European Union, the United States and Ukraine.
The court also relied on Russian Supreme Court ruling No. 305-ES24-13398 of 28 November 2024 for the proposition that an obstacle to access to justice can exist not only where arbitration is absolutely impossible, but also where the conditions necessary for resolving the dispute have changed substantially and unpredictably. It found that Vertex could not have anticipated those circumstances when agreeing to arbitration in 2021.
On that basis, the court held that the arbitration agreement could not justify leaving the claim without consideration and that the dispute belonged to the exclusive jurisdiction of Russian arbitrazh courts. It therefore rejected the supplier’s application. The order’s first page bears the date 22 May 2026 while also stating that its operative part was announced on 13 May and its full text was prepared on 14 May 2026. The 3 August judgment records the order as dated 22 May. By the July merits hearing, it had not been appealed and had entered into force.
Separately, for the law governing the merits, the court relied on clause 18.13. That provision was a governing-law clause rather than a state-court jurisdiction clause. The judgment reproduced it in Russian as follows:
“контракт рассматривается, составляется подчиняется и подлежит интерпретации в соответствии с законодательством Российской Федерации.”
English translation: “The Contract shall be considered, drawn up, governed by and interpreted in accordance with the legislation of the Russian Federation.”
The court accordingly applied Russian law to the contractual merits. Its competence to hear the dispute, however, rested on the separate exclusive-jurisdiction analysis in the May order, not merely on the parties’ choice of Russian substantive law.
Proof, default, and unchallenged facts
The court cited Russian procedural rules placing the burden of proof on each party (Article 65 of the Arbitration Procedure Code) and the consequences where a defendant fails to file a substantiated response (Article 131). It also cited Article 70(3.1) on facts being deemed admitted if not expressly disputed. The defendant did not file a merits defence contesting non-performance or the claimant’s calculations.
Termination for delay/non-performance and timing of the sanctions notice
The court held Vertex was entitled to refuse performance unilaterally under Russian law where the contractor fails to start on time or performs so slowly that timely completion is clearly impossible, citing Article 715(2) Civil Code. It also relied on Articles 310, 450, and 450.1 Civil Code on unilateral refusal/termination by notice, with termination effective upon receipt unless otherwise provided.
The contract contained a force majeure notice provision (clause 13.2), requiring the non-performing party to notify promptly via telegram/email/fax and by registered airmail within 30 days of the force majeure event, for verification and confirmation.
The court emphasised the timeline: the first stage deadline was 1 December 2021, yet the supplier only notified alleged sanctions impossibility in October 2022. The court concluded Vertex validly terminated by its 7 March 2024 notice; for purposes of Russian law termination was treated as effective from 7 March 2024 (the date the notice was sent by email, as recorded by the court). Accordingly, the contract was considered terminated from that date under Article 450.1 and Article 715.
Repayment of the advance as unjust enrichment
Once the contract was terminated, the court held the supplier lacked legal grounds to retain the “unworked” advance. It characterised the retained advance as unjust enrichment under Articles 1102 and 1103 Civil Code, because the defendant had not shown performance corresponding to the advance and had not repaid it after termination. The court therefore awarded €4,350,000.
Contractual penalty (late fee) and contractual cap
Vertex sought a contractual penalty under clause 11.4 for delay from 1 January 2024 to 7 March 2024, but limited to the contractual cap of €261,000.
The court quoted the contractual mechanics and applied them as written: clause 11.4 set a daily penalty of 0.1% of the total contract price for each day of delay, while clause 11.1 capped the seller’s liability at 3% of the contract price. The uncapped calculation for the claimed period would have produced €574,200, exceeding the cap; the court therefore awarded the capped amount €261,000.
The court stated it saw no grounds to reduce the penalty under Article 333 Civil Code (judicial reduction of a disproportionate penalty), and noted the defendant did not seek such reduction.
Interest for wrongful use of money in a foreign-currency debt
Vertex also sought interest for “use of another’s money” on the unjust enrichment amount, under Article 1107(2) Civil Code (interest on unjust enrichment by reference to Article 395). The court awarded €697,451.74 as of 21 July 2026, for the period 13 March 2024 to 21 July 2026, and ordered ongoing accrual from 22 July 2026 until actual payment.
Although Article 395 generally uses the Bank of Russia key rate, the court relied on guidance from the Supreme Court of the Russian Federation (Review of Judicial Practice No. 1 (2017), approved 16 February 2017) to address foreign-currency obligations: interest should be determined based on average interest rates in the currency of the debt. The court accepted Vertex’s calculation based on Bank of Russia publications of weighted average rates for euro-denominated loans to non-financial organisations. The defendant did not challenge the calculation.
Costs and disposition
The court ordered the defendant to reimburse court fees paid by the claimant (RUB 2,709,059) and also ordered recovery of an additional state duty amount to the federal budget (RUB 142,911 as described in the reasoning; the operative part separately addresses state duty recovery).
The court granted the claim in full and stated the decision could be appealed to the Eleventh Arbitrazh Appellate Court within one month.
