Ukraine Secures Legal Win Against U.S. Arms Supplier for Undelivered Contract
A U.S. court has ordered an Arizona-based company to pay Ukraine more than €17 million for failing to fulfill a defense contract.
The Gaze reports on it, referring to The Mirror of the Week.
In 2022, the Ukrainian company Progress signed a contract with a small Arizona-based gun shop, OTL Firearms, to supply ammunition worth about $1 billion. Ukraine transferred €17 million in advance, but OTL did not make a single delivery, citing payment delays and problems with export licenses.
The contract provided for the delivery of a huge amount of Soviet-standard ammunition, including 10 million 23 mm caliber shells, 56,000 rockets for Grad multiple launch rocket systems, and 24,000 mortar mines. Despite the seriousness of the deal, OTL was a little-known company, registered only in 2020, with a limited reputation.
During the arbitration proceedings, OTL claimed that Kyiv lawyer Mykola Karanko, who represented Progress, was in fact working for the Ukrainian Ministry of Defense and requested that payments be transferred to third parties in order for the contract to remain valid. These claims remained unconfirmed, and Karanko himself declined to comment on the situation.
The details of the agreement indicate that OTL promised to supply ammunition allegedly originating from Serbia. However, the Serbian authorities did not make direct deliveries of weapons to Ukraine, and the company did not obtain U.S. export licenses to ship the goods either. In its letters, OTL stated that licensing issues and political reasons for blocking shipments prevented the contract from being fulfilled.
An arbitration tribunal in Vienna ruled that OTL did not have the necessary U.S. export licenses and ordered the company to return the advance payment with penalties. OTL's refusal to comply with the ruling forced the Ukrainian side to appeal to a U.S. federal court, which upheld the arbitration and increased the amount of compensation to over €20 million.
Read more on the Gaze: The War in Ukraine and the Global Arms Market: Who Has Profited the Most?