Data

Date:
03-05-2012
Country:
Russian Federation
Number:
N BAC-3352/12
Court:
Supreme Commercial Court of Russian Federation
Parties:
KIT Finance Investment Bank v. Formula Pereezda LLC

Keywords

SERVICE CONTRACT BETWEEN TWO RUSSIAN COMPANIES - REFERENCE TO UNIDROIT PRINCIPLES TO INTERPRET AND SUPPLEMENT APPLICABLE DOMESTIC LAW (RUSSIAN LAW)

LOSS OF PROPERTY IN CUSTODY DUE TO A FIRE - EVENT AMOUNTING TO FORCE MAJEURE ONLY IF IT IS BEYOND THE CONTROL OF THE PARTY EITHER BECAUSE THAT PARTY COULD NOT FORESEE IT OR BECAUSE IT COULD NOT AVOID OR OVERCOME ITS CONSEQUENCES - REFERENCE TO ART. 401 RUSSIAN CIVIL CODE AND TO ART. 7.1.7(1) UNIDROIT PRINCIPLES

Abstract

Two Russian companies concluded a storage agreement. When a fire occurred in the warehouse, due to a short circuit and causing the loss of the property in custody, the custodian invoked a force majeure circumstance and argued that it undertook all possible measures to stop the fire, including engagement of professional firefighters.

The First Instance Court concluded that the custodian was excused form liability due to a force majeure impediment.

The Court of Appeal reformed the first instance decision. By referring to para. 3 of Art. 401 of the Russian Civil Code, which excuses the custodian for loss of the property in custody only in case of force majeure, and to Art. 7.1.7 of the UNIDROIT Principles, defined as "best international practices for defining the notion of force majeure", the Court affirmed that an impediment amounts to force majeure only if it is beyond the control of the party either because that party could not foresee it or because it could not avoid or overcome its consequences.

In the opinion of the Court, the mere fact that a particular number of firefighters failed to stop the fire does not amount to a force majeure impediment, which must result from an external factor and be objectively unavoidable, regardless of the "human factor". Therefore, the custodian was not excused from liability for the loss of the property in custody.

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