Gazprom seeks protection from Europol Gaz in the Russian Federation

Gazprom is trying to prohibit the Polish Europol Gaz, which owns the Polish section of the Yamal-Europe gas pipeline, from suing the Russian company in arbitration in Stockholm. The company applied to the arbitration court of St. Petersburg and the Leningrad region with a corresponding anti-suit ban. The Polish company, in which Gazprom previously controlled 48%, is trying to recover $1.5 billion from the monopoly for the alleged loss of future payments for the transit of Russian gas. Lawyers note that appealing to a Russian court will allow Gazprom not to recognize the decision of a foreign court in the Russian Federation.

The Arbitration Court of St. Petersburg and the Leningrad Region accepted a statement of claim from Gazprom Export to the Polish Europol Gaz for a ban on continuing arbitration proceedings in Stockholm, it follows from the court file. A preliminary hearing in the case is scheduled for October 26.

Gazprom did not comment on whether the company will participate in the proceedings in Stockholm and how it assesses the risks of seizure of its assets abroad in the event of a loss there.

Europol Gaz is a former joint venture of Gazprom (it was 48%) with the Polish state-owned company PGNiG, which owns the Polish section of the Yamal-Europe gas pipeline. This gas pipeline was used to transport Russian gas through Belarus and Poland to Germany and was one of the three main pipeline routes for gas supplies from Russia to Europe.

Since the end of 2021, Gazprom has sharply reduced the volume of supplies through the Yamal-Europe gas pipeline after the Polish side, as part of the implementation of European legislation, switched from long-term transit contracts to auctions for booking pipe capacity. In 2022, Gazprom completely stopped supplies through the pipeline due to the Polish side’s refusal to pay for gas in rubles. Last May, Moscow banned Gazprom from any interaction with Europol Gaz. Since then, gas has been supplied through the pipeline only in reverse mode, that is, from Germany to Poland. In September 2022, Poland imposed sanctions on Gazprom, thus freezing its rights to shares in Europol Gaz and receiving dividends, then in November external management of Gazprom’s share was introduced.

In May it was reported that Europol Gaz filed a claim against Gazprom Export in arbitration at the Stockholm Chamber of Commerce, demanding compensation of about $1.5 billion. The claims relate to lost profits from the cessation of gas transportation via the Yamal-Europe gas pipeline until 2045 in the amount of 5.357 billion zlotys, as well as debt for gas transportation in the amount of 848 million zlotys. It is unclear how exactly the Polish side intends to justify its lost profits, since Gazprom has had no obligations to pump through the Yamal-Europe pipeline since October 2021, and the company booked capacity based on its current needs.

Russian legislation (Article 248.2 of the Arbitration Procedure Code of the Russian Federation) allows for the application of an anti-suit prohibition, that is, a prohibition on a foreign person to initiate or continue proceedings in another jurisdiction, including in an international arbitration institution agreed upon by the parties, says BIRCH LEGAL senior lawyer Elizaveta Belotserkovskaya. This remedy, she said, is available to persons affected by restrictive measures by foreign states. “Today, an extensive practice of its application has already been formed, including at the level of the Supreme Court of the Russian Federation. Satisfaction of the application, among other things, will lead to the fact that the potential decision of the Stockholm Arbitration against Gazprom Export LLC will not be recognized and enforced on the territory of the Russian Federation,” she notes.

However, if Europol Gaz wins in Stockholm, it may try to enforce the arbitration decision in those foreign countries that have signed the New York Convention and in which Gazprom has assets. However, in the vast majority of European countries, Gazprom’s assets were either de facto lost in 2022 or transferred to other jurisdictions.

Tatiana Dyatel