On Tuesday, the Court of Arbitration of the Kamchatka Region (Far East) rejected a request by the Kamchatenergo power supply company to postpone the debt payment of $200m to the Swiss Woodbridge Trading Ltd company.
The court found no circumstances hindering the implementation of the ruling by the London Court of International Arbitration and handed it over for execution, the Kamchatka Court of Arbitration reports.
On March 2002 the London Court of International Arbitration ruled the Kamchatenergo to pay debt to the Woodbridge Trading Ltd. company. The Kamchatka regional court of general jurisdiction pronounced the decision valid in the Russian Federation and launched a debt recovery procedure.
The demands of Woodbridge Trading Ltd put the company on the brink of bankruptcy, Kamchatenergo's press service reports.
The Woodbridge Trading Ltd company purchased Kamchatenergo's debts to foreign companies engaged in shipping oil products to the peninsula in 1996-1998. Over that period fuel oil prices in Russia's domestic and foreign markets were comparable, which made it more profitable to ship oil from abroad than use domestic resources.
During the period the total sum of savings reached about $20 million at the then rate of exchange. Oil products shipment payments were delayed. Following the 1998 default and a slump in the ruble exchange Kamchatskenergo failed to pay out all its debts estimated at $85.9 million.
Besides insisting on the principle debt recovery, the Woodbridge Trading Ltd company wants Kamchatskenergo to pay $108.2 million towards interest. Kamchatskenergo will also pay 115,000 pounds in legal costs.
The punitive damages imposed on Kamchatskenergo by the Kamchatka Court of Arbitration violate the basic principles of the Russian Constitution, the Unified Energy System of Russia joint stock company believes. The damages exceed the principle debt significantly and are disproportionate to the cost of violation, the company believes.
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Russia experienced default on August 17, 1998. Today, 20 years after those events, the economic situation in Russia does not seem stable to many