Avoiding Payment by Pursuing the Contractor

Abstract

This report examines how a refusal to pay for completed and accepted work under a Russian defence contract became the personal debt of the contracting company's owner, L. In 2015 L.'s company concluded contracts with an enterprise of the Ministry of Defence acting as head contractor. In 2016 the company delivered equipment to a military airfield and carried out construction and installation work; the head contractor accepted both and signed the acceptance certificates. The head contractor paid for the equipment but not for the work.

In March 2017 the head contractor sued the company, calling the RUB 3 million advance "unearned" and claiming interest and a penalty on the full contract price; six weeks later the Ministry of Defence paid the head contractor for the work at this airfield. In 2019 the claim, RUB 18.25 million, was admitted as the company's debt in its bankruptcy. In 2021-2023 the court held L. personally liable for the company's entire unpaid debt, RUB 84.5 million, and decided the amount with no one present to defend L.; the company's records, stolen from its office in 2017, were found by the police in October 2021. In 2024 L. was declared bankrupt, and the Ministry of Defence became his personal creditor. The process continues as of October 2026.

We read the case as an example of law used as an instrument for avoiding payment, and analyse at which stages violations of law led to these consequences.