OREANDA-NEWS. On April 14, 2009 the Supreme Arbitration Court of the Russian Federation, in exercise of supervisory power, revoked a judicial act of a Cassation Instance, which invalidated the decision of the Karachaevo-Cherkessia Office of the Federal Antimonopoly Service (OFAS Russia) that "Caucasus Regional Gas Selling Company " Ltd ("Kavkazregiongaz" Ltd.) had violated the Federal Law "On Protection of Competition" by imposing contract conditions upon a counteragent on payment in excess of the contracted gas, under 1.9 coefficient (from 15th April to 15th September) and 1.5 coefficient (from 16th September to 16th April), reported the press-centre of FAS Russia.

On 27th December 2007, the Karachaevo-Cherkessia OFAS Russia found that "Kavkazregiongaz" Ltd. violated Part 1 Article 10 of the Federal Law "On Protection of Competition" and issued a determination requesting the company to strike out the contract terms and conditions that contravened the antimonopoly legislation.

The case was initiated upon a petition of "Cherkessk SMPMK-1" OJSC.

"Kavkazregiongaz" Ltd. sent a draft long-term contract for gas supply to "Cherkessk SMPMK-1" OJSC.

The draft contract included, in particular, a fine clause for taking the gas by the consumer in excess of the contract volume, for all days within a month when the overbalance occurred. In response, "Cherkessk SMPMK-1" OJSC sent a Protocol of disagreement to "Kavkazregiongaz" Ltd. proposing that the clause should be excluded from the contract. "Kavkazregiongaz" Ltd. refused to accept the terms and conditions proposed by "Cherkessk SMPMK-1" OJSC and the supplier rejected the company's proposal.

"Kavkazregiongaz" Ltd. appealed the decision and determination of the Karachaevo-Cherkessia OFAS Russia to the Arbitration Court. The Court of the First Instance and the Appeal Court ruled that the supplier violated the antimonopoly legislation by imposing coefficients, not specified in the Gas Supply Rules, to the cost of the gas accepted in excess of the contract volume.

The Arbitration Court of a Cassation Instance ascertained the fallacy of illegitimacy of the penalty coefficients proposed by the supplier. The Court stated that the coefficient specified in Clause 17 of the Gas Supplying Rules, being a pricing element, did not exclude the forfeit penalty as a punishment for unauthorized deviation from the contract conditions, which constituted default in performance of obligations and entailed forfeit payment.

The Karachaevo-Cherkessia OFAS Russia petitioned to the Supreme Arbitration Court of the Russian Federation to reconsider the judicial act in exercise of supervisory power, and on 14th April 2009 the Presidium of the Russian Supreme Arbitration Court issued its Decree.