Stockholm arbitration sided with Gazprom

Finland may return to purchases of Russian gas, but for rubles

The Finnish company made an attempt to challenge Russia’s demand to pay for gas in rubles, but lost. The Stockholm arbitration in a dispute with the Finnish Gasum recognized President Putin’s decree on payment for gas in rubles as force majeure under the contract, confirming the validity of the suspension of supplies and obliging Russia to pay a debt of more than 300 million euros. This was announced by the Gazprom Export company. In other words, European justice considered that in this situation the domestic supplier has the right to put forward such requirements. Experts believe that the decision of the arbitration may lead to the normalization of gas relations between the countries and Finland will return to purchases on an ongoing basis.

In Sweden, the court decided to order the Finnish energy operator to pay 300 million euros after Gazprom stopped gas exports in May and the Russian company demanded to pay in rubles. The amount includes a penalty for late payment.

The Stockholm arbitration sided with Gazprom on the issue that the company could not fail to comply with the norms of national legislation. From the point of view of the law, the Russian company was forbidden to accept payment for gas in any other currency – only in rubles. In making its decision, the arbitration took into account the fact that Gazprom could not do otherwise, since any company is obliged to comply with national legislation.

These are legal disputes, which, after Russia’s decision to accept payment for gas in rubles, would have begun anyway, says Artem Deev, head of the analytical department at AMarkets. Right now there is only one such case, there may be more in the future.

“Stockholm’s decision means recognition of the fact that the sanctions imposed against the Russian Federation have become a force majeure event, force majeure. And Russia’s further demand to pay for gas in rubles is also recognized as legitimate, although initially in the West they constantly said that this was a violation of existing contracts, the expert says. – The actions of Gazprom, which did not receive payment on time and therefore stopped deliveries, were also accepted by the court and recognized as correct. In addition, the results of the trial implicitly admit that it will be difficult for Europe to do without our raw materials. Otherwise, the rhetoric of the court decision would have been completely different. It is possible that this decision will be indicative for other European buyers, who are still considering whether they should sue the Russian Federation on this issue.”

Gazprom suspended deliveries because it had not received payment for the gas it had already delivered. It turns out that the company has been supplying fuel for the whole month, and from the next month, when payment was due, by presidential decree, Gazprom was forbidden to accept payment in any foreign currency. As a result, the gas was delivered, but the payment did not reach, and Gazprom stopped the gas shipment. The arbitration considered that the Russian company acted legally and in accordance with the current contract.

According to Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, the outcome of the proceedings was unexpected for everyone. “Everyone was sure that the decision would not be in favor of Russia,” he says. — But the Stockholm Arbitration found the demands of Gazprom legitimate and ordered Gasum to pay the Russian company a debt of more than 300 million euros. At the same time, the decree of the President of Russia may not apply to this amount. Consequently, the Finnish company can pay the fine not in rubles, but in foreign currency.”

According to the interlocutor of MK, there is a possibility that the Finnish company will return to purchases from Gazprom. Many countries have already switched to payment in rubles.

“In principle, since the arbitration has confirmed that this is normal, Finland can return to purchasing pipeline gas from us. Thus, they will calmly go through the heating season. They will also have the opportunity to resell this gas to Estonia and other countries. This is a matter of political decision: whether they dare to take such a step or not,” Yushkov concluded.