On 29 May 2007, the respondent (the bank) and the claimant (the borrower) concluded credit agreement No 023/07, pursuant to the Financial Cooperation Agreement between the Government of the Federal Republic of Germany (Kreditanstalt für Wiederaufbau) and the Government of Uzbekistan on the provision of loan funds under a credit programme aimed at promoting investment in private-sector entrepreneurship. Under this agreement, a loan of up to EUR 172,300 was granted for the acquisition of equipment for the production of wrapping paper. [This equipment was to be] supplied within the framework of this project under Contract dated 1 November 2006 No 011106, concluded between the claimant and a Chinese company.

Since the funds transferred by KfW to a Chinese bank were returned, on 17 September 2007 the claimant sent the respondent a letter terminating the credit agreement and demanding the return of funds previously debited in performance of the credit agreement. As the debited funds were not returned by the bank, the claimant brought a claim seeking recovery of UZS 3.8 million of damages, UZS 50 million of lost profit, and UZS 10 million of moral [non-pecuniary] damages.

In the claimant’s view, the return of funds by the Chinese bank to KfW was caused by the fault of the respondent, who failed to specify in the payment details that the funds were credited by KfW on behalf of the claimant in favour of the Chinese company.

[The Judicial Collegium cited Art 55 (1) of Commercial Procedural Code, Arts 14 (2) and 324 (3) of the Uzbek Civil Code]. The claimant’s business plan for the production of paper for corrugated boxes, approved by the claimant’s director on 15 November 2006 (whereas the credit agreement was concluded on 29 May 2007), which envisaged the commencement of production in January 2008, cannot serve as evidence of the measures taken by the company to obtain profit or of preparations made for that purpose.

The amount of damages in the form of lost profit should have been determined by the courts on the basis of the claimant’s expenses incurred to obtain such profit. Since the case record contains no evidence of the existence of the above-mentioned factors, the judgment and resolution in the part awarding UZS 32.4 million in lost profit from the bank are subject to cancellation, with a new decision in that part dismissing the claim.

The resolution of the court of appellate instance in the part awarding UZS 3.8 million in damages from the bank, representing expenses related to the conclusion of the credit agreement, is lawful and should be upheld.

The court resolution in the part terminating the proceedings with respect to the claim for UZS 10 million in moral damages, on the basis of Article 86 (1) of the Commercial Procedural Code, is also to be upheld.

Accordingly, the judgment and resolution in the part concerning recovery of the lost profit are subject to cancellation, with a new decision in that part dismissing the claim. In the remaining part, the resolution is to be left unchanged.