PREFACE/ISSUE
Devil is in details as the saying goes
...could we find some footprints in legal documents and legal definitions, or legal cases?
Are those broken Nordstream pipelines possible to get fixed now?
I. Do sanctions against Nordstream insurance companies prevent claims to happen?
The sanctions against the Nord Stream 2 pipeline project and its insurers may have various impacts, including limiting the ability of the project to obtain financing or insurance coverage.
Regarding the insurance coverage for Nord Stream and Nord Stream 2 projects, the impact of sanctions could depend on the specific terms of the sanctions and the scope of the insurance policies.
If the sanctions prevent or limit insurance companies from making payments to the project in the event of a claim, it could potentially affect the project's ability to recover losses and continue its operations.
However, it's worth noting that insurance policies often contain exclusions and limitations that may apply in the case of certain events, including those that are caused by sanctions or other geopolitical risks.
In general, sanctions against insurance companies can have a significant impact on their ability to conduct business, particularly if the sanctions are issued by powerful countries or international bodies.
In some cases, sanctions may prohibit companies from doing business in certain countries, or may limit their ability to engage in transactions with specific individuals or entities. The impact of sanctions on insurance companies can vary widely depending on the specifics of the sanctions, the size and scope of the company, and the nature of its business operations.
Insurers of NS1:
The project is insured by a consortium of companies, including:
- Zurich Insurance Group: Zurich Insurance Group is a Swiss multinational insurance company headquartered in Zurich, Switzerland.
- Allianz SE: Allianz SE is a German multinational insurance company headquartered in Munich, Germany.
- AXA S.A.: AXA S.A. is a French multinational insurance company headquartered in Paris, France.
- Hannover Re: Hannover Re is a German reinsurance company headquartered in Hanover, Germany.
- Munich Re: Munich Re is a German reinsurance company headquartered in Munich, Germany.
These companies provide a range of insurance coverage, including property damage, business interruption, and liability insurance, among others. It's worth noting that the insurance coverage for the Nord Stream 1 project may have changed since its construction and completion, as insurance policies are subject to renewal and changes over time.
Insurers of NS2:
24 Feb 2021 - 15 Insurers Stop Doing Business with Nord Stream 2 Pipeline to Avoid Sanctions: Reuters
These 15 insurers that were providing insurance coverage for the Nord Stream 2 pipeline project as of February 2021 (insured some part of project, those first 4 were major ones):
- Zurich Insurance Group (Switzerland)
- Munich Re (Germany)
- Hannover Re (Germany)
- Swiss Re (Switzerland)
- Chubb (United States)
- Aspen Insurance Holdings Limited (United States)
- Liberty Mutual Insurance Group (United States)
- HDI Global SE (Germany)
- Atrium Underwriting Group Limited (United Kingdom)
- Antares Syndicate (United Kingdom)
- Hiscox Ltd. (Bermuda)
- StarStone (United Kingdom)
- CNA Hardy (United Kingdom)
- Markel Corporation (United States)
- Apollo Global Management (United States)
It's important to note that insurance coverage for the Nord Stream 2 project may have changed since the publication of this article, and the current composition of the insurance consortium may be different.
II. The "Act of Sabotage" vs "The act of terrorism"
The acts of sabotage and terrorism by a state have different legal implications and are governed by different sets of laws and conventions.Sabotage by a state is typically defined as an act of destruction or damage to property or infrastructure, carried out with the intent of causing harm or disruption to another state. The act of sabotage is generally considered a violation of international law, and can be subject to legal consequences, such as economic sanctions, diplomatic pressure, or even military retaliation.Terrorism by a state, on the other hand, is typically defined as an act of violence or intimidation carried out by a state or its agents against civilian populations or non-combatants, with the intent of creating fear or forcing a political or ideological agenda. Terrorism by a state is considered a violation of international law and can be subject to legal consequences, such as economic sanctions or diplomatic pressure, as well as possible criminal prosecution for individual perpetrators.The key legal difference between the two is that sabotage typically involves the destruction or damage of property or infrastructure, while terrorism typically involves violence or threats of violence against civilians or non-combatants.
Sabotage is generally considered to be a violation of international law, while terrorism is widely considered to be a crime against humanity.
It's worth noting that both acts of sabotage and terrorism can have serious political and diplomatic implications, and may result in military or other forms of retaliation by affected states.
The international community generally condemns both acts and calls for their prevention and prosecution.
[M: Note the post - "Who said it is a "Sabotage" first?" It tells a lot about who has done it and has not]
III. US, EU, UK policy toward insurers
December 2019, the United States passed legislation authorizing sanctions against companies involved in the construction of the Nord Stream 2 pipeline, including those providing services such as insurance and certification. The US government has since imposed sanctions on several companies involved in the project, including insurers.
Similarly, the European Union passed a regulation in 2020 allowing for sanctions to be imposed against individuals and entities involved in the construction of the Nord Stream 2 pipeline. The regulation allows for sanctions to be imposed on companies providing financial, technical, or material support to the project, which could include insurers.
The sanctions imposed on Nord Stream 2 insurers have had a significant impact on the project, as they have made it difficult for the pipeline's operators to obtain the necessary insurance and certification to complete construction.
Published 18 March 2014 The Russia (Sanctions) (EU Exit) Regulations 2019 ensure sanctions relating to Russia are implemented effectively after the UK leaves the EU.
The sanctions were introduced in 2014 following the Russian annexation of Crimea and the ongoing conflict in eastern Ukraine. The sanctions target individuals and entities that are deemed to be undermining Ukraine's sovereignty and territorial integrity, including companies involved in the Nord Stream 2 project.
In 2020, the UK government imposed further sanctions on entities involved in the construction of Nord Stream 2, citing concerns about the project's impact on European energy security and Ukraine's position as a transit country for Russian gas.
On 21 July 2022, the UK’s recent sanctions against Russia came into force. This latest round of sanctions impacts the oil, insurance, energy, gold and coal markets, as well as providing for certain restrictions on the provision of professional and business services to Russia. Whilst broadly looking to align themselves with existing EU sanctions, there are notable differences between how these UK sanctions will be applied which are now discussed within this update.
Impact on UK Insurance SectorThe restriction on providing financial services to oil and oil products has implications for the UK’s insurance sector, given that the definition of “financial services” includes the provision of insurance and reinsurance services (as defined under Section 61(1)(a) of the Sanctions and Anti-Money Laundering Act 2018).
As a result, from 31 December 2022, UK insurers will be prohibited from providing insurance services in respect of the import, acquisition and supply or delivery of the listed oil and oil products that originate in Russia or are located in Russia, that are destined for the UK.
Notably, however, there is no equivalent UK restriction to that of Article 3n of the EU Regulations.
Alignment with EU Oil Ban
There are subtle differences between the two jurisdictions’ restrictions. For example, the EU restrictions are limited to oil products under commodity codes 2709 00 (crude) and 2710 (other petroleum oils). Meanwhile, the UK sanctions include a significantly broader list, comprising products falling under commodity codes 2709 to 2715 (including petroleum gases and jelly), 2207 (ethyl alcohol) and 3826 (biodiesel oil).
Further, whilst the EU sanctions separate the wind-down periods for CN Code 2709 (crude, 5 December 2022) and CN Code 2710 (certain petroleum oils, 5 February 2023), the expansive list of oil and oil products under the UK restrictions are simply prohibited from 31 December 2022. Accordingly, under the UK rules, all transactions caught by the new restrictions described above must be concluded by 30 December 2022.
The sanctions have been a major source of controversy, with some arguing that they represent an overreach of US, UK and EU power and others arguing that they are necessary to address concerns about the pipeline's potential impact on European energy security and geopolitical stability.
11th May 2022 - Russian sanctions and the insurance industry
The challenge now for financial institutions globally is to ensure that their sanctions and AML programmes are sufficiently robust, to ensure effective compliance in this rapidly evolving landscape. For the insurance industry this may cause loss of business and trigger loss claims. Some of the sanctions are directly aimed at blocking Russian entities and interests from accessing global insurance markets, and many other restrictions may affect insurers’ business.
The pace of change will be a challenge for the industry and will render companies unable to insure a sanctioned person or reinsure a sanctioned insurer, irrespective of the type of business. While keeping tabs on sanctions as business as usual will continue to be a challenge.
In December 2019, the US government imposed sanctions on several companies involved in the construction of Nord Stream 2, including the Swiss-based Allseas Group, which was responsible for laying undersea pipes for the project. Following these sanctions, Zurich Insurance Group announced that it was withdrawing from the Nord Stream 2 project and would no longer provide insurance coverage for it.
In February 2021, it was reported that Allianz SE had resumed coverage for the Nord Stream 2 project, joining other insurers including Munich Re and Hannover Re.
However, in April 2021, Zurich Insurance Group announced that it would resume coverage for the Nord Stream 2 project, despite ongoing opposition from some Western countries. The company stated that it had reviewed the situation and concluded that it was appropriate to resume coverage for the project. The resumption of insurance coverage is seen as a boost to the project, which has faced significant delays and opposition in recent years.
[M: Note that UK told their companies to get out of Russia - post here]
IV. Was the EU Top Court or the Swiss court decision The Trigger for blowing Nordstream pipelines?
July 2021 - European Parliament: The Nord Stream 2 pipeline - Economic, environmental and geopolitical issues
12 July 2022 - Gazprom’s Shunned Nord Stream 2 Wins Spat Over EU Pipeline Rules
- EU top court says gas project’s challenge is admissible
- Lower EU court will have to rule on substance of dispute
Russia’s shunned Nord Stream 2 gas pipeline won a legal boost in its pre-war challenge against European Union rules that subjected all new and existing pipelines involving foreign suppliers to the EU’s energy market-opening requirements, after the bloc’s top court said its appeal can be heard.
While the ruling is a win for Nord Stream 2, its impact may have been overtaken by events in Ukraine, which led Germany to withdraw its backing for the project.
19 August 2022 - Reopen Nord Stream 2 to ease our energy crisis, senior German politician urges
A senior figure within one of Germany's ruling parties has said the controversial Nord Stream 2 gas pipeline with Russia should be reopened, in a sign of an emerging rift over energy supplies as winter approaches...
8 September 2022 - Swiss court gives Nord Stream 2 more time to avoid insolvency.
In May, the court granted a provisional moratorium against bankruptcy proceedings for the first time, which was valid until September 10. This period has now been extended by another four months.
V. Was this supposed to be the Catch-22 but did it fail?
31 October 2022 - Nord Stream insurance position unclear following major explosions
The lack of clarity surrounding responsibility for the explosions that impacted both Nord Stream pipelines last month has left the insurance position in limbo.
Should the insurance not be renewed, any prospect of repair for the pipeline and the recommencement of gas supplies via the pipeline to Europe would become more unlikely than they are already.
VI. Exclusion clauses
Definitions: ...self sabotage or war, neither of which are generally covered by insurance.
A war exclusion clause in an insurance contract refers to the protection of an insurer who will not be obligated to pay for losses caused by war-related events.
- A war exclusion clause in an insurance policy excludes insurance coverage for damages related to war or similar activities.
- The reason insurance policies have war clauses is that insurance companies cannot accurately compute the premiums to charge for damages sustained by war.
- Insurance companies also do not cover war damages because the cost of the claims could potentially be astronomical, driving the company into bankruptcy.
- War exclusion clauses were expanded and became standard after the September 11 terrorist attacks.
Damaged Nord Stream 1 gas pipeline in re/insurance dilemma
...if Russia is implicated, insurance companies could argue it was “self-sabotage”, given Gazprom is state owned. If this is the case, as it was a deliberate act by the policyholder, they would not be allowed to file an insurance claim,..
VII. Latest developments
22 Nov 2022 - Gazprom wins appeal against huge Nord Stream 2 antitrust fine in Poland
Russia’s Gazprom has won an appeal against a fine of over €6 billion imposed on it by Poland’s antitrust authority, UOKiK, for constructing the Nord Stream 2 gas pipeline without first seeking Polish approval. UOKiK now says that it plans to challenge the ruling.
22 Nov 2022 - Polish regulator to appeal annulment of $6.3 billion fine imposed on Gazprom
Poland's consumer rights watchdog, known as UOKiK, will appeal a court ruling that annulled fines imposed on Russian energy giant Gazprom and five other companies responsible for building the Nord Stream 2 gas pipeline, the Polish regulator said on Nov. 21...
In 2020 the regulator fined Gazprom over 29 billion zlotys ($6.33 billion) for building the Nord Stream 2 gas pipeline without Warsaw's approval.
28 Dec 2022 - Nord Stream 2 pipeline firm gets 6-month stay of bankruptcyA Swiss court has granted a six-month “stay of bankruptcy” to the operating company for the never-opened Nord Stream 2 pipeline, which was built to bring Russian gas to Germany but put on ice shortly before Russia invaded Ukraine in February.Nord Stream 2 AG, a subsidiary of Russia’s Gazprom, is based in Zug. Nord Stream 2′s court-appointed administrator, Transliq AG, sought the extension.9 Jan 2023 - Nord Stream 1 and 2 – Outcome of the Commission's investigation
04 April 2023 - Exclusive: German insurers renew cover for blast-damaged Nord Stream gas link
[M: this news has huge implications (!)]
Do sanctions against repair companies prevent pipelines to be fixed?
01 Feb 2023 - EU sanctions blocked Nord Stream repairs – company
Norway’s Equinor on Wednesday revealed that it was the government in Oslo and EU sanctions that blocked it from responding to a request for assistance in dealing with the damage to Nord Stream pipelines.
Equinor is the Norwegian oil company that administers the Pipeline Repair and Subsea Intervention (PRSI) Pool, established by Oslo to deal with leaks and ruptures. The Swiss-based operators for Nord Stream and Nord Stream 2 are among the 72 members of PRSI, and sent requests for assistance in October, shortly after both pipelines were damaged by undersea explosions.
Because PRSI “adheres to current legislation related to sanctions,” it “notified NS1 and NS2 (operators) that we were not able to do work as requested,” Equinor said in the statement.
22 February 2023 - Failure to find out how the Nord Stream blast happened & who is responsible may encourage the malign actors to take advantage of the situation and even give rise to more terrorist acts. This puts the interests of all countries at stake, and they have every reason to be concerned.
Addendum - legal - case
Germany is well-positioned to characterize the project suspension as a permissible and proportional countermeasure to induce Russia’s compliance with the Charter of the United Nations and jus cogens prohibitions against unilateral use of force and continuing forcible annexation of territory in Ukraine.One can well anticipate that Gazprom could, down the line, bring Germany to investor-State arbitration under the 1989 Germany-Russian Federation BIT, alleging possible damages from investment treatment obligations of Germany relative to the suspension of the Nord Stream 2 gas pipeline.
Addendum - legal - maritime law
The explosions have been described ‘acts of sabotage’ (here), which may be criminal acts under some domestic laws. But, the sabotage of pipelines/cables as such is not specifically prohibited under the law of the sea – albeit other rules of international law, including obligations to preserve and protect the marine environment, may be violated by such conduct.i
Conclusion
There are no insurance payments being prevented due to any bombing incident on Nord Stream pipelines. However, the project has faced significant political and regulatory challenges, including pressure on insurance companies. However, sanction against companies which could repair pipelines are still in place and prevent pipelines to be put back in service.
Concluding questions:
[M: Several questions:
- Did sanctions had any reverse unintended impact on European energy security and geopolitical stability?
- Has the state actor researched policies of insurance companies have toward Nord Stream 1 & 2 companies and warned them to withdrew?
- Why are some states proposing that it was an act of sabotage and not an act of state terrorism? Does this mean cover/collusion?
- West is pushing for "Sabotage" while RU, CN state "terrorist act". Why?
- Was the UK The first to impose sanctions affecting NS insurance companies pushing them out of contracts? Who was 1st?]
- The post "UK government does not like Nordstream" tells the story how UK wants to inflict economical damage to Russia. Why?
SUM: o get one step further one needs to find out who promoted the "sabotage" definition -> see here
[M: On personal note - I have written to these insurers about my investigation several times.]
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