On 14 November the Stockholm Chamber of Commerce Arbitration Institute passed its decision on the case between Finnish state energy provider Gasum and the Russian Gazprom Export. The arbitration procedure was initiated by Gasum in May, when Gazprom insisted on being paid in rubles for its gas deliveries. As a results of the Finnish side’s refusal to comlply, Gazprom cut off its gas supply for the country on 21 May.
There are few publicly confirmed facts on the arbitration case, as trade disputes are settled by the Stockholm Arbitration Institute under conditions of full confidentiality. The only available information therefore comes from the two disputing companies. Their public statements, which overlap only partially, have given rise to conflicting interpretations and speculation on Bulgarian media.
Comments on the topic were also made by Boyko Borissov in a press conference held by GERB on 18 November on the occasion of the new ammendments to the Election Law: „Yesterday in Stockholm the arbitration said what Delyan Dobrev had been warning us about for months. Yet he was being light-heartedly dismissed, we were told there would be no problem. And now the arbitration has sentenced Finland to pay 300 million euro under the contract with Gazprom and recognised the force majeure of Putin’s order. If the same court, or another one, was to pass a similar ruling on Bulgaria, we would have to pay over 2 billion levs [approx. 1 billion euro – editor’s note], Borissov said.
Prompted by a question from Vessela Nikolaeva, Factcheck.bg examined the known facts on the topic.
What does the arbitration award say
The Stockholm Chamber of Commerce (SCC) does not discuss any of its operations in public and it does not deny or confirm its clients’ statements, the SCC press office explained in reply to Factcheck.bg’s enquiry. That is also the reason why there is no impartial official announcement on the arbitration award in the dispute between Gazprom and Gasum.
The only overlapping element in the two companies’ statements regarding the resolution is that arbitration award ordered the two sides to continue their negotiations and seek to resume their compliance with the contract terms.
The Russian and the Finnish side have announced information on some of the points in the arbitration award but those points do not fully match and are not confirmed by what the other side is saying:
- Finland must make the due payments under the contract
According to the Russian company the arbitration ordered Gasum to pay over 300 million euro for gas deliveries plus interest on the delayed payments. In their public statement Gazprom explains that the obligation was based on the so-called “take or pay” clause, according to which the buyer must pay for the contracted amounts even when they were not accepted.
- The arbitration recognised cutting off deliveries as legitimate
According to Gazprom’s statement, the arbitration recognised that president Putin’s order requiring payment in rubles constituted a force majeure circumstance. That means that according to the arbiters the president’s order hindered the providers from fulfilling their contract obligations for reasons beyond their control. Gazprom interprets that decision as a recognition that cutting off gas supplies to Finland was legitimate under the contract. The Russian company does not say the arbitration recognised the demand for payment in rubles as legitimate, as some Bulgarian media have speculated.
What does the Finnish company say?
- Gasum is not obligated to pay in rubles
„According to the arbitration award, Gasum is not obligated to pay in rubles nor through the proposed payment procedure.” That is one of the main points in the Finnish company’s press release and features in the headlines for many reports by Finnish media on the topic.
- The Finnish energy provider will cover its obligations
Factcheck.bg contacted Gasum’s communications director Olga Väisänen, who confirmed that “naturally, [the company] will pay the outstanding amounts according to the contract in euros.” She did not specify the amount of those due payments.
- The company will not comment of the arbitration award while negotiations are ongoing
Olga Väisänen refused to comment on Gazprom’s statements and the claim that the arbitration recognised a force majeure circumstance as grounds for the discontinued gas supplies. In an interview for Finland’s public broadcaster, Gasum said its experts were still analysing the arbitration award and considering their next steps. Gasum refuses to announce further details or comment on the arbitration outcome while the negotiations continue.
- Deliveries of Russian gas to Finland will not be resumed
According to some Finnish media, the resolution that negotiations must go on in order to resume the fulfilment of the contract may in effect force Finland to continue buying Russian gas or paying for it even without receiving it. Gasum addressed this issue in their statement, saying they are not planning any renewed gas deliveries from Russia.
What is international arbitration
Trade arbitration is not a court. It is an internationally established way of settling commercial disputes outside the public court system. Arbitration is carried out on the basis of a contract between two sides, in which they must have agreed to settle their disputes under the rules of the given institution, in this case the Stockholm Chamber of Commerce. Under the arbitration procedure there is no next level of appeal but the awards must comply with certain legal requirements and their quality can be challenged before a court, if either of the sides chooses to do that. The decisions of international arbitration institutions have legal power in over 150 countries – those who have signed the so-called New York Convention of 1958. Arbitration proceedings are always carried out under strict confidentiality.