National Joint Stock Company “Naftogaz of Ukraine” position on lawsuit of PJSC “UKRNAFTA”

In recent days, disinformation has been actively spread about the “Ukrnafta versus Naftogaz” lawsuit.

The problem began in 2006-2013, since then litigation has been going on in Ukrainian courts, and since 2015 in foreign courts.

The information that Naftogaz reached agreement with businessman I. Kolomoisky, or signed a settlement agreement with Ukrnafta, or agreed to give away 3.5 billion cubic meters of gas, or other volumes of gas, or money, etc., is not true. The assumption that Naftogaz has already given some volumes of gas to I. Kolomoisky is also untrue. Naftogaz has not transferred any volumes of gas or funds to Ukrnafta since the appointment of Yuriy Vitrenko as Naftogaz CEO (28 April 2021).

We’d like to emphasize that a lawsuit is ongoing between Joint Stock Company “National Joint Stock Company “Naftogaz of Ukraine” and PJSC “UKRNAFTA” for the recovery of 9.067 bcm of natural gas and all revenues that National Joint Stock Company “Naftogaz of Ukraine” received or could receive from the sale of this natural gas.

Naftogaz does not agree with Ukrnafta’s claims. Naftogaz’s position has remained essentially unchanged since the first court hearing in this case.

Naftogaz stated in this lawsuit that the court shall apply the statute of limitations to Ukrnafta’s claims, as the circumstances to which Ukrnafta refers in the lawsuit were known to it more than three years before the lawsuit was filed. It should be noted that Ukrnafta objects to the court’s application of the statute of limitations and provides its justification.

Naftogaz also provided information to the court that earlier in other lawsuits, the company stated the need to oblige Ukrnafta to enter into a sales contract for disputed volumes of gas, taking into account the fact that this gas was consumed by households and that Naftogaz was sending letters to Ukrnafta starting from 2006 with a proposal to enter into a sales contract for the disputed gas.

Position of National Joint Stock Company “Naftogaz of Ukraine”:

• Naftogaz does not agree with Ukrnafta’s claims to transfer to it the disputed volumes of gas

• Naftogaz does not agree with Ukrnafta’s claims to compensate for the cost of disputed volumes of gas at the current market price

Naftogaz discloses information about litigation with Ukrnafta as openly as possible, for example, the relevant information is contained in the consolidated financial statements for 6 months of 2021 ( p.38).

Naftogaz advocates a lawsuit open to the media.

Naftogaz provides the necessary documents in the proceedings. It should be noted that since 2018, the State Investigations Bureau has been conducting an investigation into the failure to provide the court with documents that could harm the interests of the national company.

Background of the issue:

The problem has its roots in 2006-2013. Since then, litigation has been ongoing in the Ukrainian courts. Since 2015, proceedings have also taken place in foreign courts. In February 2021, the Stockholm Court of Arbitration recognized its lack of jurisdiction in a lawsuit filed by Ukrnafta’s minority shareholders who wanted to collect more than USD 6 billion from Ukraine and interest accrued on that amount. The case had been pending since 2015.

The hearing of the case has been going on since 2015. Obviously, since the Stockholm Court of Arbitration refused to consider the issue of the disputed gas volumes on the merits of the case, almost immediately after that, Ukrnafta resumed proceedings in Ukrainian courts, in which it demands to consider this issue on the merits of the case. Ukrnafta made a respective appeal to the court on 19 April 2021 ( Thus, it is wrong to assume that the resumption of the proceedings is connected with the change of management of Naftogaz, which came following decisions taken on 28 April 2021.

Naftogaz does not deny the fact that the gas produced by Ukrnafta entered the unified gas transmission system operated by JSC Ukrtransgaz. The bulk of this gas was consumed by households. Naftogaz proved this in court. Ukrnafta, in turn, initially argued that it was not its gas that was used for household needs. Later, Ukrnafta changed its position and admitted that the disputed volumes of gas were supplied for the needs of households and made claims to have the disputed volumes of natural gas returned to it.

As of now, Naftogaz refuses to return the disputed volume of gas or reimburse its cost at the current market price.

We would also like to recall that a dispute is ongoing in the London Court of International Arbitration between Naftogaz and Ukrnafta’s minority shareholders. The matter of disputed gas volumes may be the subject of arbitration in London, so caution should be exercised in actions and public statements. It should be noted that in 2018, the first round of this arbitration on the Shareholder Agreement was actually lost by Naftogaz in terms of the most essential matters, although the public was informed only of the victory on minor matters, which brought almost no benefits to Naftogaz. The arbitration proceedings even forced Naftogaz to reimburse minority shareholders for the lion’s share of their costs. The current CEO of Naftogaz was not involved in the arbitration process at that time.

Regarding the split of assets of PJSC “UKRNAFTA”

The split of assets of PJSC “UKRNAFTA” is currently being elaborated as a decision of Ukrnafta itself. The procedure for preparation for the split complies with international standards and Ukrainian legislation. Ukrnafta has engaged independent international appraisers to assess assets that may be subject to the split. The decision needs to be approved by Ukrnafta’s supervisory board, which has a majority of independent members, and which meets international corporate governance standards. The splitting up of Ukrnafta has been ongoing for many years. In particular, in January 2021, the previous management of Naftogaz sent a letter to the company’s minority shareholders proposing a meeting of shareholders on this occasion.

Naftogaz’s supervisory board demanded that the split take place as soon as possible, accusing the current head of the company of artificially delaying the process.

International partners were informed on the initiative to split Ukrnafta. They never objected. On the contrary, they approved the idea of splitting up Ukrnafta so that companies associated with I. Kolomoisky would no longer be shareholders of Ukrnafta.

The reasoning behind the need to split up Ukrnafta includes preparation of Naftogaz for an initial public offering, attracting international partners, and fulfilling the resource potential of Ukrnafta. Naftogaz believes these tasks will be easier if Ukrnafta is not associated with I. Kolomoisky.

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