United States: The VimpelCom Case: Moscow Court Sets Currency Band For Calculating US Dollar - Denominated Rent

Last Updated: February 17 2016
Article by Sergey Trakhtenberg

February was marked by a key event for the Russian commercial real estate market. The Moscow City Commercial Court finally released the full text of its high-profile decision in PAO Vimpel-Communications v. PAO Tizpribor. The court judicially modified a lease agreement, thus establishing upper and lower limits on the ruble / US dollar (RUB/USD) exchange rate which the parties may use when calculating rent payments.

Essence of the dispute

PAO Vimpel-Communications (VimpelCom), as tenant, sued PAO Tizpribor (Tizpribor), as landlord, seeking termination or judicial modification of a long-term lease.1 Under the lease, rent was payable in the form of the ruble equivalent of a dollar sum agreed by the parties, such ruble equivalent to be calculated based on the official RF Central Bank (CBR) RUB/USD rate prevailing on the date of payment.2

In its prayer for relief, VimpelCom asked the court inter alia to introduce into the lease a "currency band" provision, whereby:

  1. If on the date of payment the official RUB/USD exchange rate is less than 30 rubles, then settlement should be based on an exchange rate of 30 RUB/USD; and
  2. If on the date of payment the official RUB/USD exchange rate exceeds 42 rubles, then settlement should be based on an exchange rate of 42 RUB/USD.

VimpelCom's position

The following arguments formed the basis for VimpelCom's claims seeking termination or judicial modification of the lease:

  1. in the period from the date of the preliminary agreement (providing for the conclusion of the long-term lease agreement) up until signing of the long-term agreement in 2009, the official CBR RUB/USD exchange rate had not exceeded 32 rubles;
  2. the tenant agreed to the payment terms based on its understanding that the CBR had instituted a currency band in the form of upper and lower limits on the RUB/USD exchange rate and adjusted the ruble exchange rate through regular currency interventions. In November of 2014 the CBR discontinued the adjustment mechanism on which the tenant had relied when entering into the agreement. This led to a drop in the RUB/USD exchange rate and an increase in the actual ruble cost of rental by 250%, as compared with when the rent payment terms had been negotiated;
  3. the change in the CBR's currency policy and imposition of economic sanctions on Russia prevented the tenant from predicting the actual ruble cost of the lease. All of these circumstances together should be recognized as a material change of circumstances.

The above arguments are often seen in court claims in Russia, when plaintiffs seek modification or termination of agreements based on material change of circumstances (Art. 451 of the RF Civil Code). The difference is that VimpelCom did not refer directly to the exchange rate drop itself, but rather to the change in CBR policy (in addition to the economic sanctions imposed on Russia), which could not have been foreseen by the parties when they entered into the agreement, as an insurmountable circumstance now preventing VimpelCom from predicting rental expenses. VimpelCom carefully chose its line of argument, since established Russian court practice does not generally consider abrupt changes in exchange rates to be a material change of circumstances.

The change in policy by the CBR does not constitute a material change of circumstances

Upon consideration of the case, the court refused to terminate the agreement altogether. But the court nonetheless granted Vimpelcom's prayer for judicial modification to introduce a currency band into the agreement and thus establish a maximum ruble rental rate.

The court's refusal to terminate the agreement altogether was based on the standard arguments for cases in which one party seeks to modify or terminate an agreement claiming that a change in exchange rates constitutes a material change of circumstances. The court's stated reasoning was consistent with established court practice of rejecting such claims, as developed under RF Supreme Commercial Court decisions and applied following the 2008 economic crisis:

  1. the plaintiff has based its claim to terminate the agreement on a change in exchange rate;
  2. the court then finds that the change in the exchange rate alone does not constitute a reasonably unforeseeable circumstance;
  3. the court finds that the change in monetary or currency policy by the RF Government or CBR similarly does not constitute a material change of circumstances allowing for outright termination (note that the court in its decision did not comment on the argument regarding imposition of economic sanctions);
  4. the court finds that contractually denominating payment obligations in a foreign currency implies a risk of change in exchange rates, which the plaintiff (in our case, VimpelCom) always assumes as a standard business risk.

The court's reasoning

Bizarrely, having first rejected all of VimpelCom's arguments, the court nonetheless granted VimpelCom's prayer for judicial modification of the lease, based upon an entirely different rationale - which VimpelCom (as it appears from the court decision) itself had not even articulated:

  1. no one has the right to gain an advantage from their own misconduct;
  2. under the RF Supreme Commercial Court Plenum Ruling "On Freedom of Contract and its Limits," a court, when evaluating the good faith of a party's actions, goes by the conduct that is anticipated from any party to a business transaction, considering the rights and legal interests of the other party; where misconduct is found the court may take steps to secure the interests of a non-breaching party against misconduct;
  3. the amount of rent should not exceed typical rates paid for leasing similar premises in the given locality;
  4. substantially exceeding the market price for rent could entail unjust enrichment for a landlord;
  5. based on the expert opinions reviewed, the rent which VimpelCom is now paying indeed exceeds the market rent for similar premises;
  6. in order to maintain a balance between the parties' property interests, the court has decided to grant VimpelCom's claims and judicially modify the lease agreement, instituting a currency band for calculating the ruble equivalent of the rent;
  7. the court has therefore established limits on the RUB/USD exchange rate on the basis of VimpelCom's suggestions, in the absence of any competing suggestions from Tizpribor.

Following the court's logic, the court implicitly found that Tizpribor had acted in bad faith by merely refusing to renegotiate the rental with VimpelCom and instead demanding the contractually-agreed rental rate, which now appeared exorbitant when compared to the prevailing rental market. In the context of the RF Supreme Commercial Court Plenum Ruling "On Freedom of Contract and its Limits," this allowed the court to take steps securing VimpelCom's interests as the non-breaching party. That said, the text of the court's opinion did not expressly refer to any bad faith on the part of Tizpribor.
In our view, the court's rationale is dubious, both in law and logic. As follows from the court's reasoning, the court rejected VimpelCom's arguments entirely and instead formulated its own basis for the lawsuit, among other things, by emphasizing the RF Supreme Commercial Court Plenum Ruling "On Freedom of Contract and its Limits." Notably, in overt violation of the RF Commercial Procedure Code, various of the court's key findings do not specifically cite the laws or other regulations by which the court was guided. These and other circumstances give serious reason to believe that the judgment may be reversed – or at least substantially modified – upon appeal.

One-off controversial decision or new precedent?

Tizpribor has already appealed the case, without waiting for release of the full version of the decision. If the VimpelCom decision is upheld by the higher courts, this could trigger numerous lawsuits by tenants and completely turn the Russian commercial lease market into a ruble-based one.3 Moreover, it is no secret that in light of the drop in the RUB/USD exchange rate, many landlords have already made concessions to tenants and instituted currency bands. It is unclear whether the new practice could affect such agreements if tenants start bringing claims seeking further reductions in previously-agreed currency bands, or how (and by whom) such bands should be determined.

If unreversed, VimpelCom could also serve as grounds for the revision of other types of Russian-law contracts with payment obligations denominated in foreign currency (e.g., loan agreements, supply contracts, contractor agreements and the like).

It is apparent that in many ways it will depend on VimpelCom whether the Russian market sees a wave of attempts to revise foreign-currency-denominated contracts. That said, the issuance of a single judgment, even if highly unusual, does not always necessarily trigger formation of new court practice. Often such judgments remain isolated, one-off cases with little effect on general court practice.


1 The claims seeking termination and modification of the lease were originally filed as separate cases, which the Moscow City Commercial Court then consolidated into a single case in December 2015.

2 Readers will recall, it is common practice on the Moscow commercial real estate market for landlords to set rental payments in US dollars. At the same time, Russian foreign exchange regulations oblige Russian companies to effectuate actual payments between each other using only the ruble. Accordingly, their contracts often denominate obligations in US dollars whilst recognizing that the actual settlement will be in rubles (using the prevailing exchange rate at the time of settlement). This allows landlords to plan their rental streams accordingly, matching them to (often quite substantial) dollar-denominated financing obligations to lenders.

3 Notably, as many Moscow commercial landlords have US-dollar-denominated loans mortgaged by their properties, such a development could also easily push landlords into default under their loans.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com www.dentons.com.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
24 Oct 2017, Seminar, Washington, DC, United States

The Dentons Forum for Women Executives invites you to join us for a luncheon featuring guest speaker Liza Mundy, journalist and author. Ms. Mundy recently released her latest book, Code Girls, the riveting untold story of more than 10,000 spirited young American women who cracked German and Japanese codes to help win World War II.

27 Oct 2017, Seminar, New York, United States

Please join us for a milestone event, our 10th annual CLE Seminar for In-House Counsel.

1 Nov 2017, Seminar, Washington, DC, United States

Celebrate the 58th anniversary of Dentons' Government Contracts practice

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.