Swedish Appeal Court Rejects Gazprom Plea

Sweden's Svea Court of Appeal has rejected Gazprom's first appeal submitted November 7, 2017 in the case of its gas supply contract with Ukrainian monopoly Naftogaz, the latter said November 27. The award was made against the Russian gas giant by the Stockholm Chamber of Commerce (SCC) Tribunal May 31, 2017.

The tribunal fully rejected Gazprom's claims under the take-or-pay clause and ruled that Naftogaz was entitled to a market-reflective adjustment of the price formula. The award of May 2017 also cancelled the destination clause, allowing re-exports. The decision November 27 cannot be appealed.

The oral hearing on Gazprom's appeal against the second arbitration award – the final award in the supply case – is scheduled for February 2020. The hearing on the third award – in the transit case – is scheduled for next fall.  

All arbitration awards remain valid and in full effect during the appeal process. An award ceases to be valid only in case of and after a positive decision on the appeal, Naftogaz said in its statement. 

So far Gazprom has not paid any portion of the $2.6bn (plus interest) awarded against it in early 2017, claiming that it was not logical for Ukraine to win both the ship-or-pay and the take-or-pay disputes as both alleged breaches of contract had the same cause: unexpected low demand for gas in Europe.

Naftogaz has however successfully appealed to some courts to seize some of Gazprom's assets held in Europe. Gazprom has suggested that rather than paying money, it delivers gas instead. That gas would also be cheaper than gas imported from central European hubs, it said, as there would be a lower transportation element. The gas would come into Ukraine directly from Russia.