Gazprom Export case - Uniper terminates Russian gas supply contracts

12 June 2024 - Düsseldorf, Uniper terminates Russian gas supply contracts

• Formal end to gas supply relationship with Gazprom Export after positive ruling for Uniper in arbitration proceedings 
• Arbitration tribunal has awarded Uniper the right to terminate its long-term gas supply contracts and an amount of more than €13 billion in damages for non-delivery of gas 
• Uniper CEO Michael Lewis: “The ruling provides legal clarity for Uniper” 

Uniper decided today to terminate its long-term Russian gas supply contracts and thus legally ended the long-term gas supply relationship with the Russian state-owned company Gazprom Export. The decision was made possible after an arbitration tribunal on June 7 awarded Uniper the right to terminate the contracts and awarded it an amount of more than €13 billion in damages for the gas volumes not supplied by Gazprom Export since mid-2022. Although only limited gas volumes had been delivered since June 2022 and no gas volumes since the end of August 2022, the long-term gas supply contracts between the two companies were still legally in force and individual contracts would have continued to exist until the mid-2030s.

After Uniper suffered substantial losses due to the Russian gas supply restrictions, the company initiated arbitration proceedings against Gazprom Export at the end of 2022. The option of dispute resolution via an arbitration tribunal was contractually agreed and had in the past in respect of other disputes been invoked repeatedly by both sides. The tribunal, seated in Stockholm, ruled in accordance with Swiss law. The arbitration ruling is legally binding and final.

7 May 2024 - Uniper appeals Russian court ruling as legal tussle with Gazprom drags on

Uniper, opens new tab has appealed a Russian court decision requiring the German utility to pay more than 14 billion euros ($15 billion) if it continues arbitration proceedings against its former main gas supplier Gazprom, opens new tab, it said on Tuesday.

24 May 2024 - Russian court bans Czech CEZ from disputing with Gazprom Export abroad

The Arbitration Court of St. Petersburg and the Leningrad Region has upheld Gazprom Export's claim against the Czech Republic’s CEZ banning it from continuing foreign arbitration proceedings, a TASS correspondent reported from the courtroom.

In case of violation of the ban, the court ruled to recover 57.7 mln euro from the Czech company in favor of Gazprom Export.

 27 May 2024 - European court tells Gazprom not to run away from its responsibility for halting gas supplies

Gazprom's counter-claims

Since the end of last year, Gazprom Export has filed 11 counterclaims with the same arbitration court in St. Petersburg, Russia, against its former European customers and shippers.

The company has already obtained eight rulings in writing, ordering European companies to halt their international arbitration proceedings or pay penalties in Russia.

Russian arguments

In eight already rubber-stamped rulings, the court in St. Petersburg argued that the arbitration cases against Gazprom Export should be moved to Russia because Gazprom Export will be unable to have a fair trial in courts in so-called “unfriendly nations”.

In 2022, Moscow designated more than 50 foreign states as “unfriendly” after they approved wide-ranging sanctions against Russia in response to its invasion of Ukraine.

The Russian court has lashed out at European sanctions, saying in rulings that Russian lawyers who could have represented Gazprom Export in arbitration hearings in Europe face the denial of entry visas, while their laptops and smartphones may be confiscated by authorities on arrival. 

13 March 2024 - Russian court bans Uniper subsidiaries from disputing with Gazprom Export abroad

In case of violation of the ban, the court ruled to recover 14.3 billion euros from German companies in favor of Gazprom

Lawyers for Gazprom Export stated the impossibility of equal adversarial participation in foreign arbitration due to sanctions against Russia and Russian companies, as well as due to the lack of complete freedom to choose legal services, since some European law firms publicly announced their refusal to work with companies from Russia.

About legal dispute

In late November 2022, it became known that the German concern Uniper filed a lawsuit against Gazprom Export to compensate for losses incurred from the short supply of Russian gas. Uniper then estimated the current costs of replacing Russian gas at no less than 11.6 billion euros. The Russian company, in turn, stated that it was studying the received statement of claim from Uniper, but did not recognize the violation of contracts and the legality of the German company’s stated claims for damages.

Uniper considered the force majeure declared by Gazprom on gas supplies to be a violation of the contract. Since the end of August 2022, the German concern has completely stopped receiving gas from Russia and considers this a violation of contractual obligations on the part of Gazprom. Uniper stated that it does not expect the resumption of Russian gas supplies and is awaiting a decision in the court case with Gazprom Export due to their termination in 2024.

Previously, Gazprom also filed lawsuits in the Russian court against the Polish Orlen, the Dutch gas transport company Gasunie Transport Service (GTS), the Czech NET4GAS, Naftogaz of Ukraine and the Polish-Russian company Europol GAZ, which owns the Polish section of the Yamal-Europe gas pipeline, demanding prohibit the continuation of arbitration proceedings in foreign courts. For the last three lawsuits, the Russian company achieved a ban on the continuation of arbitration, for the lawsuit against GTS, the court hearing is scheduled for March 15, for Orlen - for April 10. 

16 March 2023 -  Gazprom in arbitration proceedings with ENI, Engie, RWE, PGNIG, Gasum, Naftogaz - report

Ukraine's Naftogaz has requested arbitration against Gazprom at the International Chamber of Commerce's International Court of Arbitration. Naftogaz is demanding payment for services not rendered by it under an agreement on the provision of services for the transportation of natural gas through the territory of Ukraine dated December 30, 2019. On September 27, Gazprom sent letters of objection regarding arbitration's jurisdiction to consider the demands of Naftogaz due to a fundamental change in circumstances. On February 15, 2023, Gazprom was notified by the ICC secretariat about a decision by the ICA to allow the arbitration tribunal to consider the case on the merit. Gazprom currently has no information as to whether an arbitration tribunal has been formed.

Finland's Gasum Oy on May 13, 2022, notified Gazprom Export LLC that arbitration proceedings had commenced on the termination of the contract for natural gas supply dated March 12, 1994 and the cancellation of obligations to pay invoices previously served to it. A ruling was issued on November 14, 2022. Gasum's claims and Gazprom Export's counterclaims were partially satisfied. The arbitration tribunal, among other things, ordered Gasum Oy to pay Gazprom Export LLC debt of more than 300 million euros for gas supplies and in connection with the failure to honor a take or pay obligation, as well as interest for payment arrears. In addition, the tribunal recognized the issuance of a Russian presidential decree No. 172 dated March 31, 2022 on the transition to payment for gas in rubles as a force majeure circumstance under the contract and confirmed the legitimacy of the suspension of natural gas supplies in the event the buyer fails to pay in rubles in accordance with the Decree No. 172. The tribunal also ordered the parties to continue negotiations on the contract in order to resolve the situation with further gas supplies.

*******

12 June 2024 - ICIS VIEW: Uniper arbitration award could shape future EU gas supplies

Given the sheer size of the award and the estimated 25 billion cubic meters that Uniper imported annually from Russia before Gazprom Export curtailed them, there is no doubt that the steps taken by Uniper to recover the award could impact future gas supplies to Europe at least in the mid term.

The award made on 7 June came nearly three weeks after Austria’s OMV Gas Marketing and Trading, which has a long-term supply contract with Gazprom Export, said it had received a notice from an unnamed European company seeking to seize payments due to the Russian producer as part of a court ruling.

 FALLING PRODUCTION:

This makes it mindful of the fact that low production could lead to shut-ins with irreversible damage to gas wells.

The alternative for Uniper and Gazprom, therefore, might be to settle for an option where Gazprom would keep its production going while Uniper would receive the equivalent of the award’s financial value in natural gas deliveries.

The issue may in fact gather momentum as various European stakeholders are now considering the possibility of continuing the transit of gas through Ukraine once the existing agreement expires on 1 January 2025.

It may not be mere coincidence that just hours before Uniper announced the arbitration award, the German economy minister Robert Habeck said Europe was engaged in ‘intense’ work to keep gas flowing via Ukraine.