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Deal 5: STEP Head of Legal Yulia Nikolaeva on Dispute with Pharmasintez-Nord

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On October 15, 2020, CEE Legal Matters reported that Kachkin & Partners had successfully helped Russian general contractor STEP LLC reach a settlement with Pharmasintez-Nord JSC in a dispute regarding payment for work and related claims worth over RUR 100 million. CEEIHM spoke with Yulia Nikolaeva, Head of Legal Service at STEP LLC, to learn more.

CEEIHM: To start please tell us a few words about STEP LLC.

Yulia: STEP is a Russian general contracting company carrying out the construction of large industrial facilities. We have been working in the construction market since 1993, providing services in several industrial construction areas. Each direction has its own team, which has unique experience in building objects for its industry and knows its specifics and nuances.

CEEIHM: What was the dispute with Pharmasintez-Nord JSC about?

Yulia: STEP's policy is focused on creating a caring attitude towards our customers and their needs. We have been cooperating with many customers for several years and have worked on several projects together. It is not customary for us to bring a dispute with a customer to court – we always try to resolve our disagreements through negotiations.

With Pharmasintez-Nord we were realizing our first joint project. The situation began to escalate in January 2020 with the customer delaying the acceptance of our work and making payment. Unofficially, the customer's management reported that it expected to receive an additional discount from us, which was not agreed. The attempts to negotiate weren't bringing clarity. We made the decision that it was time to solve the matter.

CEEIHM: How did the dispute play out from your perspective? At what point did you involve Kachkin & Partners in the process – and what work did it entail for your internal teams to prepare for it?

Yulia: Kachkin & Partners had helped us with previous complex disputes, so we turned straight to them. At stake was a significant amount for us – about 100 million rubles. Dmitry Nekrestyanov and Lyudmila Stepanova of Kachkin & Partners quickly connected to the issue; the work was done jointly by them and the lawyers of STEP. The lawyers of STEP were responsible for the pre-trial phase, and the preparation and filing of the claim was the responsibility of the specialists from Kachkin and Partners. As it turned out, the customer was not prepared for the fact that we would quickly file a claim with a court. This interfered with their plans. For this reason, Pharmasintez-Nord came to us with a proposal to negotiate.

CEEIHM: What was the final outcome – what concessions did you have to agree to and what aspects were you particularly happy with that led to you accepting the settlement?

Yulia: I would like to note that Dmitry Nekrestyanov elaborated a strong strategy for reaching agreements with Pharmasintez-Nord: first, documents for all work on which there was no dispute should be signed, and payment for that work should be made. And only after that would we sit down and discuss the issues on which the parties opinions differed. This strategy helped to get most of the debt even before the first court session. After that, it was easier to move towards each other and conclude a settlement agreement: we agreed to reduce our fee by 2.6 million rubles, and the customer returned the guarantee retention of 11 million rubles to us. And the settlement agreement has been implemented by both parties. 

CEEIHM: Finally, why did you choose Kachkin & Partners to represent you on this matter?

Yulia: As I said earlier, this is not the first time we have used their services. Thanks to their extensive experience in construction disputes, cooperation with them is always a strong support for us and a good result was achieved.

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