Siemens receives court fine for breaching contract with Russian Railways

Moscow, May 22 – The Moscow Arbitration Court, at the request of Russian Railways (RZD), recovered from Siemens Mobility a judicial penalty in the amount of more than 6 million rubles for each day of non-implementation of a court decision, which declared illegal the refusal of a subsidiary of German Siemens to fulfill With a contract to supply 13 high-speed electric trains “Sapsan”, which the defendant was bound to implement this agreement on June 7, 2019.

According to a the News Agency correspondent from the courtroom, the court partially satisfied the plaintiff’s request – Russian Railways was required to recover the astringent in the amount of about 30 million rubles per day.

In April, after the 9th Arbitration Court of Appeal dismissed Siemens Mobility’s complaint, the February decision of the Moscow Arbitration Court entered into force. As the representative of the plaintiff explained on Monday, an application for granting the Astrent was made to compel the defendant to carry out a judicial proceeding regarding the continued performance of the contract.

The defendant stated that Astrent is an enterprise of Russian law, and the contract is governed by German law, so the plaintiff should be dismissed. In addition, according to the defendant, an astrent is granted when the decision is, in principle, enforceable, and in this case, Siemens employees cannot enforce it under penalty of criminal liability. Finally, the representative of the German company drew the court’s attention to the fact that losses had already been claimed under the guise of a fine, as well as an excessive amount. As noted by the Defendant, if awarded, the Claimant would receive an amount equal to the profit for the year 2021.

Russian Railways signed an agreement for the purchase and maintenance of new Sapsan vehicles in June 2019. Siemens Mobility and Sinara Group JSC have committed to supply 13 10-car trains from September 2022 to July 2023. The total value of the supply contract is €513.5 million. During its full service life (30 years). The cost of the additional maintenance agreement was another €583.1 million.

But in October, Siemens Mobility sent Russian Railways a notice to terminate the contract “due to sanctions imposed on Russian legal entities,” according to the court decision.

The court, answering the claim of Russian Railways, noted that “the sanctions legislation of the United States and the European Union contradicts public policy, and as a result should not be applied on the territory of the Russian Federation,” so the defendant did not have the right to unilaterally terminate the contract. In addition, the Court noted that the restrictive measures, according to the interpretations of the European Union itself, “are not subject to application to agreements already executed and which are being implemented.”