German Wintershall Dea initiated two arbitration proceedings against Russia
One of Gazprom's former key partners in Europe, Wintershall Dea, initiated two arbitration proceedings against the Russian Federation, citing expropriation of assets. After leaving the Russian Federation, the company estimated its losses at €5.3 billion, part of which, obviously, it wants to return through arbitration. Lawyers say that the prospects of the case depend on the interpretation of the concept of “expropriation”, and the implementation of the court decision can be complicated by sanctions.
A participant in several large Gazprom projects, the German Wintershall Dea (a structure of the BASF concern) initiated two arbitration proceedings against the Russian Federation, citing the “expropriation” of Russian assets, the company reported. Wintershall Dea believes that the Russian Federation has violated its obligations under the bilateral investment protection agreement with Germany and the Energy Charter agreement.
Wintershall Dea in the Russian Federation owned 25.01% in the Achim Development project for the development of two blocks of the Achimov deposits of the Urengoy field and 35% in Severneftegazprom. The latter is developing the giant Yuzhno-Russkoye field with reserves of more than 1 trillion cubic meters of gas in the ABC1+C2 category. Wintershall's partner in two projects was Gazprom, and the Austrian OMV also had a stake in Severneftegazprom. In addition, Wintershall owned 15.5% in the operator of the gas pipeline along the Baltic Sea from Russia to Germany, Nord Stream 2.
In January 2023, Wintershall announced its intention to withdraw from the Russian market. And at the end of 2023, Russian President Vladimir Putin signed decrees on the sale of shares of foreign shareholders, including Wintershall, in joint ventures to national owners. In 2024, by government decree, Russian companies were created to manage these enterprises without the participation of foreign shareholders as part of special economic measures - Severneftegazprom LLC, Gazprom YURGM Trading LLC and Gazprom YURGM Development LLC.
Wintershall estimated losses from the deconsolidation of joint ventures with Gazprom in Russia at €5.3 billion. The former head of the company, Mario Meren, said that Wintershall was considering options to minimize the damage from leaving Russia, including filing claims against the Russian authorities. At the end of 2023, Wintershall announced the sale of its oil and gas business, excluding projects with Gazprom, to Harbor Energy. Wintershall itself will continue to operate until the completion of proceedings on the status of assets in the Russian Federation and the sale of the remaining enterprises.
Birch Legal lawyer Vladislava Berlina explains that arbitration allows foreign investors to protect their rights outside the jurisdiction of the country in which they do business. She believes that, despite the potential difficulties, Wintershall has a chance of success if it can effectively prove the right to investment protection and provide convincing evidence of losses. Leading lawyer of AB KIAP Rostislav Kats notes that investment arbitration is “a very complex procedure”, and Wintershall lawyers will need to collect a huge array of arguments. Thus, it will be necessary to prove that the cessation of activities in the Russian Federation was not the free will of the company or a forced decision due to sanctions from Western countries, but the result of decisions or actions on the part of Russian government agencies, he says. According to Mr. Katz, historically, the prospects for resolving a dispute are usually on the side of states.
Nordic Star partner Anna Zabrotskaya recalls that Russia has faced a number of similar lawsuits over the past two years, including the cases of ExxonMobil and Uniper. ExxonMobil filed a lawsuit in 2022 in connection with the termination of participation in the Sakhalin-1 project, and Uniper initiated arbitration over losses associated with Nord Stream 2. According to Ms. Zabrotskaya, the prospects for the Wintershall Dea case will depend, among other things, on the interpretation of the concept of “expropriation”, the application of possible exceptions for reasons of security or public necessity, as well as the objections of the Russian Federation. But even if the plaintiff wins, sanctions may complicate the process of enforcing the arbitration tribunal’s decision, she adds.
