One year ago, the Stockholm arbitration tribunal ruled in favor of Naftogaz regarding the most important issues in its dispute with Gazprom. The tribunal awarded USD 4.63 billion in compensation to Naftogaz, with USD 2.1 billion set off against Naftogaz’s debt for gas delivered in 2014-2015 but not paid due to a price disagreement. This gas was sold in Ukraine and taxes were paid to the state budget.
Gazprom still owes Naftogaz USD 2.56 billion as well as interest on this debt.
The award came following a marathon four-year arbitration process between the two companies over gas sales and gas transit contracts. If Naftogaz had lost the two cases, the damage сould have totalled USD 94.7 billion.
After refusing to comply with the arbitration award, Gazprom challenged the verdict with the Svea Court of Appeal. The hearing on the merits and the decision of the Court of Appeal is expected in 2020.
According to international law, challenging an international arbitration award does not prevent its automatic enforcement until the decision on appeal. A national court can suspend the enforcement in a certain country upon the relevant application from the debtor. Gazprom therefore solicited the Svea Court of Appeal to suspend the enforcement of the international arbitration award. Initially, the Court of Appeal accepted Gazprom’s application without hearing the arguments of the opposing party, but this decision was later cancelled following an application from Naftogaz.
Naftogaz has initiated debt enforcement procedures against Gazprom under the arbitration award in several jurisdictions including the Netherlands, the UK, Switzerland, the US, and most recently in Luxembourg. Similar proceedings may also start in other countries in the near future.
These proceedings require the identification of assets directly owned by Gazprom along with application to the relevant national court for enforcement. Naftogaz also solicits to attach these assets in order to prevent Gazprom from moving them outside the country.
In the Netherlands and the UK, where Naftogaz succeeded in identifying Gazprom assets, they have been attached by courts in response to Naftogaz requests. In the UK, Gazprom committed itself not to withdraw those assets. The courts in said jurisdictions are currently considering when it would be possible to start debt enforcement procedures against Gazprom through the sale of its assets. Naftogaz continues to search for Gazprom assets in additional jurisdictions.
During the year that has passed since the Stockholm arbitration award, Gazprom has tried to block its enforcement, suffering substantial financial and reputational damage as a result.
Meanwhile, Gazprom representatives have attempted to blackmail Naftogaz, insisting that the Ukrainian company should reject its arbitration victory.
“Naftogaz is not submitting and will never submit to this blackmail. We will make Gazprom comply with the transit award and pay us USD 2.56 billion with nearly USD 200 million in interest for the past year,” said Naftogaz Executive Officer Yuriy Vitrenko.
NJSC Naftogaz of Ukraine