Don't ask the question if you are not prepared to stomach possible answers.
First of the legal battles between Gazprom and its Western buyers brought fruits - interesting ones.
As we saw the drastic cuts in Russian supplies to Europe, instrumented through various mechanisms and pretenses, it was clear, that legal battles would follow.
One of the first episodes back in April was a decree by the Russian government, requiring all gas export sales to be conducted in Roubles. In reality, it meant that the Euro payments should go through Gazprombank in Moscow, and did not change much economically for the buyers, but some companies took an exception to these demands and refused to play along. One of them was Gasum, the holder of the Finnish gas imports contract, and Gazprom was only too happy to cut the supplies as a result.
From my experience with contracts, when a government that rules over one of the parties issues a decree, that requires a change in the contract, so as to stay in compliance with the law, that party either invokes a Change in the Legislation clause, that’s quite common in contracts or a Force-Majeure, and then the other party may choose either to agree with the change, or disagree and ask for termination of the contract, or sometimes to have the contract put on hold until resolution of the matter. That’s what Gazprom did – called the Force Majeure.
Apparently, Gasum did not want to agree to the Force Majeure, or terminate the contract, as it would absolve Gazprom from its obligations to supply gas, Gasum would have to arrange for alternative supplies amidst the market panic, paying exorbitant prices, but if the contract would not be terminated and Gazprom would be found at fault, then Gazprom would have to make Gasum whole for its additional costs.
So, Gasum has taken the matter to Stockholm arbitration court and on 16.11.2022 it returned a verdict. Arbitration is a private matter between the parties, and arbitration verdicts and the reasoning behind them are usually not officially published, so the public has to figure things out from the press releases of the parties. Gasum’s press release focused on the fact that it did not have to pay in roubles. Gazprom’s statement in its Telegram channel (the website is not accessible from outside Russia anymore) announced that the arbitration court recognized the existence of Force Majeure and found Gasum liable for take or pay obligations.
The irony here is that apparently as Gazprom called Force Majeure, it was not obligated to supply gas under the old payment terms, and Gasum was not obliged to pay in a way, that was not described in the contract, but as it did not buy any gas and did not recognize Force Majeure, in courts’ opinion it was still bound by the contract take or pay clause.
I am not surprised that the court recognized the governmental decree, requiring a change in payment terms, as a valid reason for Gazprom to ask its counterparties for changes in the contracts – this is how the world works, when governments decide to engage in economic warfare, introduce export controls of various kinds, the companies do not have a choice, but to comply or cease operations, and it does not matter what their contracts say. This is exactly what happened when many Western companies stopped their trade with Russian counterparties after February 24th. I am a bit surprised with Gasum stance and commercial tactics, albeit I can see where they were coming from and what they were hoping for. But it was risky and apparently did not work.
Most likely, there are other similar complaints in the pipeline from other Gazprom counterparties refusing to participate in the new payment scheme. Arbitration does not explicitly recognize precedent, but nevertheless, now there is one, and it will have some weight in the future. One of the areas where it might matter is undersupply, stemming from the unavailability of the Yamal-Europe pipeline due to the state-decreed countersanctions against Poland and that pipeline.
But the most interesting legal battle will unfold around the Nord Stream gas turbines’ misfortunes and associated supply cuts, where this story about payment mechanisms would have little relevance.