On Unreasonably Disproportionate Penalty

The draft resolution of the Plenum of the Supreme Commercial Court ‘On some issues of the application of article 333 of the Civil Code of the Russian Federation’ limits the right to reduce unreasonably disproportionate penalties.

A creditor must prove non-fulfilment or improper fulfilment of obligations. The burden of proving that the penalty is unreasonably high lies with a defendant.

The issue of reducing the penalty can only be considered in the court of first instance. The court of cassation cannot reduce the amount of penalties. It can, however, increase the penalty if the lower court reduced it on its own initiative.