Naftogaz Enjoys Big Win in Court Battle With Gazprom

Ukraine’s state gas company, Naftogaz, has claimed victory in a four-year legal fight with Gazprom, the world’s largest gas producer. An arbitration tribunal in Stockholm ruled on February 28 that the Russian group should pay Naftogaz 4.63 billion US dollars. Since the court has previously ordered Naftogaz to pay Gazprom for gas-supply arrears, the net payment Gazprom will have to make to Ukraine is 2.56 billion US dollars.

“This is an important day for the people of Ukraine and for the future of European gas markets,” Andriy Kobolyev, Naftogaz’s chief executive, said in a statement late on February 28. “We are pleased that we won the arbitration case on major accounts.”

Gazprom issued a statement March 1 saying that it confirmed the details of the Stockholm court’s ruling, but that it disagreed with the court’s decision requiring it to pay compensation.

“Taking into account the results of the two proceedings regarding the relationship between Gazprom and Naftogaz for supplies and transit, there was a significant imbalance that violated the basic principles of Swedish law, which regulated the contract. Gazprom will defend its rights in all ways available to it in accordance with the applicable law,” read the statement.

The award centres on a dispute between the two companies over the transit of natural gas through Ukraine, whose president Petro Poroshenko welcomed the news.

“This is a true victory,” he said. “The decision taken today at the Stockholm arbitration tribunal provides Ukraine with 4.63 billion US dollars. These funds will cover the price of gas consumed by us in the very difficult year of 2014, and will see the budget of Naftogaz get 2.56 billion US dollars. This is the result of coordinated work between Naftogaz, the government and the president,” Poroshenko said.

In the summer of 2014, Gazprom and Naftogaz lodged claims against each other at the Arbitration Institute of the Stockholm Chamber of Commerce, which resolves commercial disputes, running to many billion euros. This latest ruling, which concludes the dispute, dealt with Naftogaz’s claims that it was owed compensation by Gazprom for not sending a certain amount of gas annually via Ukraine, and for paying too little for the gas that did transit Naftogaz pipelines.