Efforts To Enforce $2.6B Gas Row Award Halted In Sweden

Law360 (June 14, 2018, 5:59 PM EDT) -- A Swedish appeals court on Wednesday suspended the enforcement of a $2.56 billion arbitral award issued to Ukraine's national oil and gas company following a contract dispute with Russian natural gas giant Gazprom, though the Ukrainian company vowed on Thursday to challenge the ruling.

Gazprom said the Svea Court of Appeal granted its motion to suspend enforcement of the award, which had been issued in February to resolve a dispute with Ukraine's Naftogaz arising from Gazprom's alleged failure to deliver a minimum volume of gas between 2009 and 2017 under a 10-year gas purchase agreement.

The majority Russian-government-owned company said it intends to use the decision to challenge Naftogaz's enforcement efforts that are also ongoing in Switzerland and the Netherlands.

"The Court of Appeal's order ... removes any justification for Naftogaz of Ukraine to attempt to seize Gazprom's foreign assets,” Gazprom said in a statement posted on Twitter

Naftogaz, meanwhile, said on Thursday that the decision is only temporary and was made before it was given an opportunity to be heard in the suit.

"Naftogaz will request that the decision be reversed based on decisive counter-evidence, and expects that its request will be granted shortly," the Ukrainian company said in a statement, noting that the decision does not affect the validity of the arbitration award.

Earlier this month, Naftogaz said it had won an asset freeze by a Dutch court on shares Gazprom holds in its Dutch subsidiaries and any debts owed from these subsidiaries to Gazprom.

The ruling on Wednesday comes in the midst of an appeal lodged by Gazprom on March 29 seeking the partial set-aside of the award on the grounds that the tribunal committed "significant" procedural errors, according to Gazprom.

The Russian company later expanded the suit to seek a complete reversal of the award, arguing late last month that a globally recognized expert linguist had determined a "considerable portion" of the award was written by a third party and not by the arbitrators.

Gazprom claims this new evidence shows the award violates Swedish law and the rules of the Stockholm Chamber of Commerce, and that it must be overturned.

The total amount due to Naftogaz under the proceeding was actually more than $4.6 billion, but it was offset by a $2.03 billion plus interest award in a parallel arbitration ordering Naftogaz to pay Gazprom for certain allegedly unpaid gas deliveries in 2014 and 2015.

The awards soon set off another dispute between Gazprom and Naftogaz. In March, days after Naftogaz had claimed victory in the arbitration, Gazprom management committee chairman Alexey Miller told Russia's prime minister, Dmitry Medvedev, that the tribunal's ruling had been "asymmetrical" and that it undermined the balance of interests between the companies.

Miller said the underlying contracts were no longer economically viable and Gazprom had decided to terminate them, according to a transcript posted on Gazprom's website.

--Editing by Alanna Weissman.

www.law360.com/articles/1053786/efforts-to-enforce-2-6b-gas-row-award-halted-in-sweden