Archived material, originally published on 15 June 2025. This is a translation of the original case report, not legal advice or an update on current case law.
The contracting authority’s procurement commission approved a contract with a sole contractor for work. One commission member had an interest in the transaction because they held an ownership interest in the contractor company.
The prosecutor challenged the contract in court and sought repayment of the funds received by the company to the contracting authority.
The first-instance and appellate courts declared the transaction void but refused restitution. They noted that both parties had already performed the contract. The completed work could not be returned to the contractor, and repayment without corresponding compensation would upset the balance of interests.
The cassation court disagreed, noting that:
- A court may decline to apply the consequences of an invalid transaction if doing so would conflict with the foundations of public order or morality (Article 167(4) of the Russian Civil Code).
- Declaring a contract void because of a clear, substantial breach of Federal Law No. 223-FZ means the contractor carried out the work without a valid contract.
- In this case, the parties acted in bad faith to circumvent the law for an unlawful purpose, breaching the principles of competition and public interests. The transaction was void.
- The lower courts’ conclusion that restitution was impossible effectively allowed a contractor that violated public order to benefit from its unlawful conduct.
The court declared the transaction void and ordered the contractor to repay the payment for work performed without a valid contract.
Document: Ruling of the Arbitration Court of the North-Western District of 23 April 2025 in case A05-1204/2024. Read the court ruling (Russian).