All news

Gazprom appeals against court decision on gas transit contract with Ukraine's Naftogaz

Gazprom and Naftogaz signed the current contract for the supply of gas to Ukraine in January 2009 and it is valid until December 31, 2019

MOSCOW, March 30. /TASS/. Gazprom filed an application to the Svea Court of Appeal in Stockholm to challenge and partially cancel the final decision on arbitration proceeding with Naftogaz of Ukraine on the gas transit case on March 29, 2018.

Gazprom explains the filing of an application by significant procedural irregularities committed by the arbitrators in making the decision.

On March 21, Gazprom has sent a petition to the Svea Court of Appeal in Stockholm for a partial cancellation of the Stockholm arbitration decision in the proceedings with Naftogaz of Ukraine on gas supplies. In November last year, Gazprom filed an application to the Court of Appeal to challenge a separate decision on gas supplies and its partial cancellation.

Gazprom vs Naftogaz

Gazprom and Naftogaz signed the current contract for the supply of gas to Ukraine in January 2009 and it is valid until December 31, 2019. Under the contract, the volume of supplies was to be 40 bln cubic meters of gas in 2009, and starting from 2010 - 52 bln cubic meters annually. However, since 2012, Naftogaz failed to fully intake the contracted volume. Since November 2015, Kiev has not bought Russian gas, replacing it with reverse gas from Europe.

In 2014, Gazprom and Naftogaz filed lawsuits against each other in the Stockholm Arbitration. The Stockholm Arbitration satisfied the requirements of the companies only partially. In December 2017, the court ordered Naftogaz to pay Gazprom $2 bln for the deliveries, but reduced the annual contractual volume of purchases to 5 bln cubic meters. At the same time, the "take or pay" condition was preserved for 80% of this volume. This condition will be effective only in 2018.

The court also rejected most of Naftohaz's claims to Gazprom which concerned overpayment for gas. Only the price of gas received by the Ukrainian company in the second quarter of 2014 was lowered (from $485 to $352 per 1,000 cubic meters). Naftogaz wanted a retroactive price change starting from May 2011.

In the gas transit contract, Naftogaz and Gazprom agreed that the Russian holding will pump 110 billion cubic meters of gas through Ukraine annually. However, the contract notes that the annual volume is specified in additional agreements to the contract, depending on the obligations of Gazprom to European consumers.

Naftogaz demanded that Gazprom should pay $17 bln for the failure to supply the agreed volumes for transit. It also sought the revision of tariffs and conditions for the transit of Russian gas through Ukraine.

The Stockholm court ruled that Gazprom should pay about $ 4.7 bln to Naftogaz (taking into account the satisfied counter claims, Gazprom has to pay $2.56 bln). At the same time, Gazprom said that the arbitration court rejected Naftogaz's demands to increase the tariff for gas transit and change the contract in accordance with Ukrainian legislation.

Gazprom disagreed with the decision of the Stockholm Arbitration Institute and announced that it would immediately start the procedure for the termination of gas contracts with Naftogaz.

Gazprom CEO Alexei Miller said that the Stockholm arbitration, "guided by double standards, adopted an asymmetric decision on our contracts with Naftogaz of Ukraine regarding supply and transit of gas."

"The decision seriously violates the balance of interests of the parties under these contracts," he said.

Earlier, the company’s Deputy CEO Alexander Medvedev said that Gazprom had returned the money Naftogaz paid for gas supplies in March and would not start them due to the lack of the approved supplement to the current contract.