Senior Legal Counsel at Jingsh Law Firm Ivan Fedorov commented to Kommersant on a draft law introducing a “take-or-pay” mechanism.

Kommersant published an article on Draft Law No. 1272483-8, which proposes incorporating the “take-or-pay” mechanism into the Civil Code of the Russian Federation. The proposed amendments would allow businesses to agree in advance on a fixed payment payable upon a party’s unilateral withdrawal from the performance of its contractual obligations.

Ivan Fedorov noted that the new mechanism would be particularly significant for industries in which contractual performance requires substantial upfront investment for a specific customer. These include the supply of industrial equipment and components, engineering and construction projects, and the manufacture of specialised products with long production cycles.

According to Ivan Fedorov, a customer’s withdrawal at a late stage of such projects often causes direct losses to the supplier: materials have already been purchased, production capacity has been reserved, and the resulting goods or works cannot always be promptly sold or supplied to another customer.

At the same time, the “take-or-pay” mechanism should not apply automatically where the contractor was itself not ready to perform the contract or uses the withdrawal payment as a means of exerting pressure on the counterparty.

Ivan Fedorov’s full comments and the article are available at the relevant link.

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