Pricing, payment and financing for shipbuilding in Russia

Pricing, payment and financing

Does the law in your country have different provisions for ‘fixed-price’ contracts and ‘labour-and-cost-plus’ contracts?

No.

Does the builder have any statutory remedies available to charge the buyer for price increases of labour and materials despite the contract having a fixed price?

In accordance with the provisions of the Civil Code, the builder is generally entitled to demand an increase of the contract price if, owing to circumstances beyond its control, the total increase of cost of the building works exceeds the original estimate by more than 10 per cent.

Can a buyer retract consent to an increase in price by arguing that consent was induced by economic duress?

Theoretically, Russian law allows the invalidation of a transaction that has been entered into under the influence of deceit, error, violence, threats, conspiracy between the representative of one party and another party to the contract, or if it has been entered into by one of the parties in difficult circumstances and on extremely unfavourable terms. In practice, however, it is highly unlikely that the court will be willing to satisfy such a claim in case of a transaction between two businesses, other than in truly exceptional circumstances.

May the builder and the buyer agree to exclude the buyer’s right to set off, suspend payment or deduct certain amounts?

Yes, the parties are entitled to restrict the right to set-off, suspend payments and deduct payments in the contract.

If the contract price is payable by the buyer in pre-delivery instalments, are there any rules in regard to the form and wording of refund guarantees? Is permission from any authority required for the builder to have the refund guarantees issued?

There are no special requirements for refund guarantees other than those that exist in respect of guarantees or suretyships of any kind, and no official permissions are required.

What formalities govern the issuance of advance payment guarantees and parent company guarantees?

As with refund guarantees, there are no specific requirements for payment and parent company guarantees other than the general legal requirements concerning such types of obligation. Regarding practical formalities, it must be noted that many Russian companies restrict the authority of their executive bodies to issue and undertake financial obligations, especially guarantees and suretyships. In many cases, the issue of such undertakings requires explicit approval from particular managing bodies of the company such as the board of directors or the general meeting and may be invalidated in case of failure to obtain such approval.

Can the builder or buyer create and register a mortgage over the vessel under construction to secure construction financing?

Yes. It is possible to mortgage a vessel under construction, provided that it has been, prior to the registration of a mortgage, registered as a vessel under construction (see question 12). However, it should be noted that in accordance with the current regulations, if the vessel is being built for a foreign customer or buyer, its mortgage may not be registered in Russia.