Legal assessment of currency risks associated withpayment of liquidated damages

22 June 2022

Our client enters into contracts for export of goods to customers from different countries and supplies such goods to them. The client’s contracts contain provisions concerning liquidated damages, providing for preliminary evaluation of the amount of liability for breaching contractual terms and conditions of offset of such liquidated damages against payments to be made to the client for goods.

FBK Legal lawyers evaluated whether such contractual terms and provisions were valid and complied with the currency regulation law. In line with the laws effective at the time of the conclusion of such contracts, we pointed out that the specified provisions contravened the legislation because Law No. 173-FZ “Concerning Currency Regulation and Currency Control” required residents to receive money in payment for goods supplied abroad on accounts with Russian banks and prohibited any offset of liabilities with non-residents. Our lawyers analysed several existing exemptions and concluded that such offset exemptions were not applicable to the client’s offset of liquidated damages.

We explained to the client possible restrictions, risks and liability, and proposed appropriate wordings of contractual terms and provisions that could be used by the client in future contracts.
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