Discovery Loses Lawsuit Against Russian Cable Operator That Dropped Its Networks

Russia Foreign Ministry Building Moscow - H - 2015
Associated Press

The broadcaster appealed the judgment, which, if upheld, could create a dangerous precedent for foreign broadcasters.

Discovery has lost a lawsuit against the regional Russian cable operator Volgogaztelekom, which dropped the broadcaster's networks from its offerings earlier this year, breaking an earlier long-term agreement.

Moscow's arbitration court ruled that the unforeseeable circumstances clause could be applied to the situation as the original contract between Discovery and the operator stipulated payments in U.S. dollars, and when the ruble took a plunge against the US currency last year, Volgogaztelekom could no longer afford to carry Discovery networks.

Discovery disagreed with the judgment.

"Changes in exchange rates are not substantial circumstances and therefore cannot be a ground for breaking a contract under clause 451 of the Russian Civil Code," a spokesperson for Discovery told The Hollywood Reporter. "We have already appealed the judgment."

Volgogaztelekom, located in Central Russia's Volga region, signed a five-year contract to carry Discovery's networks, including Discovery Channel, Animal Planet and Eurosport back in 2012. This February, it informed the broadcaster that it is unilaterally terminating the contract as of April and stopped making payments thereafter. Discovery subsequently sued the operator.

Meanwhile, if the arbitration court's judgment is upheld by an appeals court, it could create a dangerous precedent as many local companies would want to get out of long-term, dollar-denominated contracts with Western broadcasters.