The Stockholm arbitration ordered the Finnish Gasum to pay Gazprom 300 million euros

The Arbitration Tribunal in Stockholm ordered the Finnish energy company Gasum to pay “Gazprom export (a 100% subsidiary of Gazprom) of more than 300 million euros under the current contract for the supply of Russian gas, Gazprom Export reported on November 17.

As explained by the Russian company, the decision was made following the ad hoc arbitration in Stockholm on November 14, 2022. The amounts of payments include debt for gas supplies, payments in connection with the failure to fulfill the obligation to “take or pay” (take-or-pay), as well as late payment interest.

The message also says. that the tribunal recognized the issuance of a decree of the President of the Russian Federation of March 31, 2022 on the transition to payment for gas in rubles by unfriendly countries as a force majeure circumstance under the contract. Thus, he notes “Gazprom export”, the tribunal confirmed the legality of suspending gas supplies in the event that the buyer fails to pay in rubles.

The company also confirmed that the arbitration ordered the parties to continue negotiations on the contract to resolve the situation with further gas supplies.

The day before, Gasum reported that the Stockholm arbitration determined that the company is not obliged to pay for Russian gas supplies in rubles through Gazprombank (GPB). The court also ordered Gasum and “Gazprom Export” to continue bilateral negotiations on a contract to resolve the current situation, the Finnish energy company noted.

“Gazprom» from April 1, 2022, transferred payments for Russian gas supplies to unfriendly countries into rubles by decree of the President of Russia. 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 conditions and became the first European energy company to challenge this requirement of Gazprom (Vedomosti wrote about this on May 18). Olga Vyasyanen, Vice President for Communications and Sustainable Development of Gasum, explained to Vedomosti that the company also disputes the amount of the minimum obligation to purchase gas in the agreement with Gazprom and the amount of penalty payments.

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 (2/3 of the total gas consumption in Finland). Due to the refusal to pay for gas in rubles, Gazprom also stopped deliveries to companies from Poland, Bulgaria, Germany, the Netherlands, etc. Some consumers, such as the Italian Eni and the German Uniper, agreed to the new conditions.

Yury Fedyukin, managing partner at Enterprise Legal Solutions, notes that the arbitration decision in favor of Gazprom in terms of paying debts for gas supplies and interest on delays is a “significant event”. “This means a small victory for Gazprom in this conflict. And the fact that the court recognized the transition to payment for export gas in rubles as a force majeure circumstance refers to the fact that the European court is not ready to take drastic measures against the Russian supplier,” the expert says

Anton Imennov, senior partner at Pen & Paper, notes that in order to collect debts, “Gazprom export” will have to apply to the court of the country where the execution of the award is planned (probably Finland as the country of origin of Gasum) with a request for recognition and enforcement of the award made by the arbitration. Even if Gasum refuses to voluntarily execute the decision, it can be executed in the prescribed manner. The lawyer draws attention to the fact that no sanctions have been imposed on Gazprom Export, so there are no obstacles to receiving the funds awarded by the arbitration. Fedyukin assesses the chances of “Gazprom” to receive these funds as “quite realistic.”

Fedyukin also believes that Gasum will try to challenge the decision by all available means. “But the court is unlikely to cancel this decision, since, taking into account force majeure, there is clearly a deliberate violation by the consumer company of its obligations under the contract,” he says.

Imennov notes that it is difficult to draw a conclusion from the statements of the two companies about the position of the arbitration on the issue of the legitimacy of demanding payments for gas in rubles. “It is likely that both aspects are reflected in the arbitration award: in the absence of payment, it is logical not to supply gas, while a unilateral change in the terms of the contract could be considered unlawful,” the lawyer notes.