Seven Suns VS Eurograd: 20-year construction

20 years ago, the construction of a multifunctional residential complex, the satellite city of Eurograd, was announced.

But despite the long existence of the project, not a single residential facility has been put into operation. On the contrary, legal proceedings are currently underway between developers, developers and land owners.

Development plans

The location of the multifunctional residential complex was planned, among other things, at the ring road. To implement the project, the developer Seven Sans signed land purchase and sale agreements with Eurograd. In the agreement, Eurograd assumed the accompanying obligations to carry out general construction work and build an exit from the ring highway, which is extremely important for the future satellite city. The congress was supposed to ensure transport accessibility to the residential complex.

Eurograd has given Seven Suns assurances that the land plots will be provided with access to the Congress by the deadline specified in the agreement. Thus, land plots purchased for the construction of a residential complex had to meet certain parameters.

Eurograd did not fulfill its obligations to build and commission the congress, so Seven Suns filed a lawsuit for a penalty of 130.2 million rubles.

Judicial proceedings

Eurograd indicated that the deadline was due to the fact that the developer did not fulfill its payment obligations (opening a letter of credit).

Assessing this argument, the court pointed out that the agreement does not provide for the postponement of the construction of the congress until payment is late.

The court noted that Seven Suns's obligation to pay for the land plot is counter to Eurograd's obligation to transfer ownership of the land plot, but not counter to Eurograd's obligation to build a congress. Even if Seven Sans missed the payment deadline, without a special instruction in the contract, such a violation does not give Eurograd the right to suspend the construction of the congress (article 328, paragraph 2, of the Civil Code). Thus, Eurograd is obliged to build and put the congress into operation.

In its defense, Eurograd argued that the failure to fulfill obligations under the contract was caused by force majeure circumstances that occurred due to the commencement of the SVO and the imposition of sanctions by the United States.

The court did not accept this reference. Circumstances can be recognized as force majeure only after:

• assessing their impact on a particular debtor;
• establishing criteria for emergency, unavoidability and irresistibility;
• establishing a causal link between the circumstances and the debtor's failure to fulfill its obligation.

As a result, the court found no grounds for applying the rules Article 333 of the Civil Code, which make it possible to reduce Eurograd's liability, and awarded Seven Suns a penalty of 50 million rubles.

Lawyer's opinion

Dina Shibzukhova, Partner and Head of the Dispute Resolution Practice at K&P.Group, answered questions about the trial.

Why did the court only partially satisfy Seven Suns's demands?

It is most likely that the court reduced the penalty due to disproportionality. The plaintiff also could not exclude from the penalty period time periods during which financial sanctions were not subject to payment due to the moratorium established by the Government of the Russian Federation.

How do you assess the prospects for Eurograd to challenge this decision?

As practice shows, the appellate court often agrees with the court of first instance that there are grounds for reducing the defendant's financial penalty.

How often do such disputes occur between developers and land owners?

Most often, disputes with developers are initiated by shareholders due to violations of the terms of the construction equity agreement and the law on consumer protection. But disputes with owners of land transferred for residential construction are also common in judicial practice.

‍