The government was forced to pay the debt for repairs to the Kyiv-Odesa highway

The State Agency for Infrastructure Restoration and Development of Ukraine has definitively lost a lawsuit filed by the Turkish company “Onur” for more than one billion hryvnias for repairs to the Kyiv–Odesa highway. The highest judicial authority rejected the arguments regarding the lack of funds in the state budget.

This is stated in the ruling of the Commercial Cassation Court of the Supreme Court dated October 14.

A payment certificate issued by an international engineer was recognized as sufficient grounds for payment of the debt.

Enforcement of the court decision has resumed. The Supreme Court’s ruling has entered into legal force; it is final and not subject to appeal.

The contract between the state contracting authority and the representative office of the Turkish company “Onur” was signed in 2020. It provided for the major repair of three sections of the M-05 highway. The agreement was signed in accordance with FIDIC international standards. The work was to be financed through loans from the European Bank for Reconstruction and Development and the European Investment Bank.

However, in 2020–2021, the international financial institutions suspended funding, and the project was never included in the state budget program. Due to the lack of funding, and subsequently the start of a full-scale invasion, the contractor announced the termination of the contract.

An Independent Engineer, acting as a neutral party under FIDIC rules, confirmed the termination of the agreement and issued a final payment certificate. According to this document, the client was required to pay the contractor 21.2 million euros in principal debt and 172.4 million hryvnias in VAT. Since the State Agency for Reconstruction failed to pay the funds, the Turkish company filed a lawsuit.

Throughout the lengthy court proceedings, the state client attempted to challenge the jurisdiction of the Ukrainian court, citing the existence of an arbitration clause in the contract. The defendant also emphasized the absence of standard Ukrainian acceptance certificates for completed work and claimed that it was unable to make the payment due to a lack of budgetary allocations.

After reviewing the case, the Supreme Court rejected all of the State Agency for Reconstruction’s arguments. The court noted that under FIDIC contracts, the Engineer’s payment certificate constitutes sufficient proof of the scope and cost of the work; therefore, there is no basis for requiring additional domestic primary forms.

The court also emphasized that the lack of funds in the state budget does not relieve a government agency of its obligation to fulfill its contractual obligations.
 

Юлія Калабайда