Gazprom's appeal in dispute with Naftogaz defeated?

Gazprom's appeal in dispute with Naftogaz defeated?

Sweden's Svea Court of Appeal has refused to uphold an appeal of Gazprom against an arbitration's decision in its transit dispute with Ukraine's Naftogaz.

"Svea Court of Appeal has today announced its judgment in a case regarding the setting aside of a separate arbitral award between a Russian company and a Ukrainian company. According to the judgment, the claim of the Russian company is dismissed. Two more cases between the same parties are expected to be decided in 2020," the court said in the press release.

"In the arbitration proceedings concerning the supply agreement there were i.a. claims for payment and claims for invalidity or replacement of certain contractual clauses. The arbitral tribunal did not rule in favor of Gazprom regarding these issues. In the proceedings before the Court of Appeal, Gazprom claimed that two declarations regarding these issues in the separate award should be set aside," the court explained.

According to the press release, Gazprom claimed that the arbitral tribunal had committed several errors, which should result in the award being set aside.

"Gazprom claimed i.a. that the arbitral tribunal had exceeded the scope of its authority in its assessment of the parties’ requests as regards the annual contract volume of natural gas that should apply to the contract. Naftogaz claimed that Gazprom’s claims should be dismissed, since no errors had been committed by the arbitral tribunal," the court informed.

According to today’s judgment, Gazprom’s claim is dismissed. Therefore, the separate arbitral award is not set aside. The Court of Appeal stated that in its assessment of the case, it did not find that the arbitral tribunal committed any error during the arbitration proceedings.

Svea Court of Appeal’s judgment cannot be appealed, TASS reported.

The legal disputes between Gazprom and Naftogaz of Ukraine on gas supply and transit have been ongoing since 2014. In February 2018, the Stockholm Arbitration Court ordered the Russian company to pay about $2.56 billion to the Ukrainian company for the shortfall in transit volumes.

In the summer of 2018, Naftogaz began the process of forcibly recovering this amount from Gazprom through the seizure of the assets of a Russian holding in Switzerland, the UK and the Netherlands. The Svea Court of Appeal in Sweden suspended the execution of the Stockholm arbitration ruling, but this measure was later canceled.

Deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, speaking to Vestnik Kavkaza, noted that the decision of the Court of Appeal was quite expected. "Gazprom did not have the opportunity to challenge the decision of the Stockholm arbitration on a transit contract, and the sole purpose of this appeal was to delay paying off the debt to Naftogaz," he said.

"As far as I understand, Gazprom expected this process to last until 2020. Now the only thing Gazprom can count on is that Naftogaz will agree to resolve financial disputes informally and refuse claims. Alas, Ukraine has repeatedly said that it will not happen," Alexei Belogoryev noted.

"If this decision were made in the spring of 2020, Gazprom would have some opportunity to appeal in respect of set-off. Our company did not have any additional moves to postpone payments or refuse payments to Naftogaz," the deputy director of energy policy of the Institute of Energy and Finances concluded.

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