Blacklist of suppliers

Blacklist of suppliers – this is a list of counterparties who have failed to fulfill their obligations upon signing or performance of a contract concluded by certain types of legal entities or to meet state and municipal procurement needs[1].

The Federal Antimonopoly Service and its local offices are responsible for maintaining this blacklist and including bad faith suppliers in it. The supplier blacklist can be found at http://www.zakupki.gov.ru

Consequences of inclusion in supplier blacklist

Court practice sees the inclusion in supplier blacklist as a special punishment set to ensure fulfillment of the obligations assumed upon placement of state or municipal orders.

The following consequences arise upon inclusion in supplier blacklist:

1. Cash deposits made to secure application for participation in procurement are, in most cases, not returned to blacklisted suppliers (Article 44(15) Federal Law No. 44-FZ, Article 3.2(26) Federal Law No. 223-FZ);
2. Most procurement documentation requires non-inclusion in supplier blacklist. Such inclusion results in the impossibility of participating in procurement for 2 years;
3. Damaged business reputation.

Grounds for inclusion in supplier blacklist

 

	LAW No. 44-FZ (Article 104)	LAW No. 223-FZ (Article 5)
1.	Counterparty avoids concluding contract	Counterparty avoids concluding contract
2.	Contract with supplier terminated by court decision	Contract with supplier terminated by court decision due to material contract breach by supplier
3.	Unilateral withdrawal from contract by customer due to material contract breach by supplier	______

 

Procedure for inclusion in supplier blacklist

The law requires customers to inform the Federal Antimonopoly Service of any violations by suppliers of contract conclusion and performance. The law also sets deadlines for such notification by customers.

Antimonopoly authorities are to conduct an inspection within 10 working days of receipt of notification from customers to verify the accuracy of the information provided by customers. If the information provided is confirmed, suppliers are blacklisted within three working days[1]. And if contracts are terminated by court decision, antimonopoly authorities do not need to verify the accuracy of the information provided as effective court decisions validate such information.

Representatives of suppliers (procurement participants) are entitled to attend when antimonopoly authorities determine whether they should be blacklisted (1) for avoiding contract conclusion and (2) for contract termination due to unilateral customer withdrawal on grounds of material breach of contract terms[2]. Matters will still be considered by antimonopoly authorities even if suppliers or their representatives fail to attend such examination.

How to avoid blacklisting or how to get unblacklisted?

Blacklisted suppliers are automatically unblacklisted within 2 years of their inclusion in the supplier blacklist[3].

There are also other ways of getting unblacklisted or preventing blacklisting in the first place, namely:

• If a customer notifies its supplier that their contract will be terminated due to contract violation or avoidance of contract conclusion, the supplier should prepare and send to the customer a substantiated reply justifying the invalidity of such termination.
• Evidence and objections may be submitted to antimonopoly authorities to prevent blacklisting, and suppliers may attend consideration of the case (for example, the inability to conclude the contract could have arisen from an electronic failure, or the violations allegedly identified by the customer did not actually occur). Antimonopoly authorities could, as a result of such actions, decide not to blacklist the supplier (contractor).
• If a customer initiates a lawsuit for contract termination, the supplier could defend its interests in court;
• If antimonopoly authorities decide to blacklist a supplier, the supplier will be entitled to appeal against such decision in court. The deadline for such appeal is three months from issuance of blacklisting decision by antimonopoly authorities (Article 198 Code of Commercial Procedure). If there are valid reasons for missing this deadline, the court could renew this time period.

Consequences of invalidation of decisions rendered by antimonopoly authorities

• The procurement application submitted by the supplier is returned;
• The contract can be fulfilled;
• The supplier can participate in other procurement process;
• The supplier’s reputation is restored.

Our recommendations

If you find yourself in a situation of formal violation, or if a customer has instigated such violation, or there is actually no such violation, before proceeding with the actions described above to prevent you or your company to be blacklisted and get unblacklisted, we recommend considering the following questions:

• Has there been an actual violation on your part? If so, have you taken all the necessary measures to prevent it?
• Has there been any bad faith on your part? Why are your actions not unfair? How is this confirmed?
• Have there been any violations on the part of the customer (for example, violation of the procedure for unilateral contract termination)?
• Have there been any procedural violations on the part of antimonopoly authorities (non-compliance with deadlines for assessing the accuracy of evidence submitted by customers, non-compliance with deadlines for entering information in the supplier blacklist)?
• Have antimonopoly authorities investigated all the circumstances of the case, has all evidence been considered?

We would be pleased to assist in avoiding inclusion or with exclusion from the supplier blacklist, as well as provide more detailed information on this issue.

If you require further information or would like to discuss this article, please feel free to contact Julia Talagaeva.

Truly yours,

The Forte Tax & Law Team

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[1] Federal Law No. 223-FZ On Procurement of Goods, Work, Services by Certain Types of Legal Entities dated July 18, 2011  and Federal Law No. 44-FZ On Contract System for Procurement of Goods, Work, Services for State and Municipal Needs dated April 05, 2013

[2] Article 104(7) Law No. 44-FZ, Item 9 Rules for Keeping Supplier Blacklist approved by Russian Government Decree No. 1211 dated November 22, 2012

[3] Item 12 Rules for Keeping Blacklist of Suppliers (Contractors) approved by Russian Government Decree No. 1062 dated November 25, 2013

[4] Article 5(5) Law No. 223-FZ, Article 104(9) Law No. 44-FZ