Stockholm arbitration allowed Finnish Gasum not to pay Gazprom in rubles

The arbitration court determined that the Finnish energy company Gasum is not obliged to pay for Russian gas supplies in rubles through Gazprombank (GPB), the company said on its website November 16. The court also ordered Gasum and “Gazprom export” to continue bilateral negotiations on a contract to resolve the current situation. The decision was made on November 14, the report says.

Olga Vyasyanen, Vice President for Communications and Sustainable Development of Gasum, explained to Vedomosti that the company’s claim was considered in the Stockholm Arbitration Court (Arbitration Institute of the Stockholm Chamber of Commerce; Stockholm Arbitration. – Vedomosti). This institution was usually prescribed in the contracts of Gazprom as a place for resolving disputes between the parties.

When asked if the company plans to file a lawsuit to recover a penalty from Gazprom Export, Väisänen did not answer. Vedomosti sent a request to Gazprom.

“Gazprom» from April 1, 2022, transferred payments for Russian gas supplies to unfriendly countries into rubles by decree of Russian President Vladimir Putin. Under the new payment scheme, an unfriendly gas importer must transfer the delivery fee in the contract currency into GPB. Then the Russian bank converts the currency into rubles and transfers them to the Gazprom account, only at this moment, according to the decree, the gas is paid. Putin explained that the new scheme was introduced because Western countries had frozen about half of the Bank of Russia’s gold and foreign exchange reserves, or about $300 billion.

Finland is on the list of unfriendly countries as a member of the European Union, so Gasum also had to switch to paying for gas in rubles. But Gasum, which had a long-term contract with Gazprom in euros, did not accept the new terms, the statement said. Also, the Finnish company did not agree with some other requirements of the Russian side. “For these reasons, Gasum referred the case to arbitration in accordance with the supply contract,” the company notes.

Gasum was the first European energy company to challenge Gazprom’s demand to pay rubles for gas (Vedomosti wrote about this on May 18). Then Vyasyanen explained to Vedomosti that the company also disputes the amount of the minimum obligation to purchase gas in the contract with Gazprom and the amount of penalty payments.

As a result, in May, Gazprom completely stopped supplying gas to a Finnish company because it did not pay for it in rubles. In 2021, Gazprom supplied Gasum with 1.49 billion cubic meters. m of gas, or 2/3 of the total gas consumption in Finland. Also, due to the refusal to pay for gas in rubles, Gazprom stopped deliveries to companies from Poland, Bulgaria, Germany, the Netherlands, etc. Some consumers, such as Italy’s Eni and Germany’s Uniper, have agreed to the new terms.

Deliveries of Russian pipeline gas to Europe in 2022 decreased significantly after the start of the NWO in Ukraine. The chairman of the board of Novatek, Leonid Mikhelson, estimated the reduction in supplies as of October 1, 2022 at 47% in annual terms. According to Gazprom, pipeline gas exports to non-CIS countries (Europe, Turkey and China) in the period from January 1 to November 15, 2022 decreased by 43.4% year-on-year to 93.2 billion cubic meters. m.

Kirill Rodionov, an expert at the Institute for the Development of the Fuel and Energy Complex, explains that after the cessation of gas supplies from Russia, Finland began to receive gas mainly from the Balticconnector gas pipeline (connecting the gas transmission systems of Finland and Estonia) with a capacity of 2.62 billion cubic meters. m per year. This is slightly higher than the average annual gas consumption in Finland in 2016-2020. (2.38 billion cubic meters per year), which creates risks for consumers during a period of high demand in winter, the expert notes. Also in October 2022, a terminal for regasification of liquefied natural gas (LNG) Hamina LNG with a capacity of 166 million cubic meters was commissioned. m of gas per year, and at the end of 2022 – beginning of 2023, a floating LNG regasification unit Exemplar with a capacity of 5 billion cubic meters will start operating in the country. m per year.

Pavel Ikkert, managing partner of Ickert & Partners law firm, believes that under the current conditions, Gazprom will file appeals against decisions made to protect its interests. Kira Vinokurova, Special Counsel for Sanctions at Pen & Paper, explains that Russian law now allows review of international arbitration awards and decisions on the possibility of their enforcement. Gazprom may transfer the dispute to Russian jurisdiction as a sanctioned person, she adds.

According to Ickert, filing a claim for a penalty by a Finnish company would be “abuse of process”. Vinokurova added that the possibility of filing such a claim “depends on the provisions of the contract and the applicable law.” The Stockholm arbitration, she adds, decided to continue negotiations between the companies, so “the question of the penalty and its amount has not yet been raised.” Ickert stressed that Gazprom would not refuse to pay for gas in rubles, because this would be contrary to the decree of the President of the Russian Federation.