RWE demands compensation from Gazprom for undelivered gas

Dusseldorf The Russian gas company Gazprom must be prepared for further claims for damages from Germany. The energy group RWE has initiated arbitration proceedings against Gazprom over the failure to deliver gas. A spokesman for the company confirmed this to the Handelsblatt.

Both Uniper and RWE had fixed gas supply contracts with Gazprom. But since the beginning of September, the Russian company has stopped delivering any gas through the Nord Stream 1 pipeline to Germany. Uniper and RWE therefore have to procure the gas on the world market at high prices – and continue to supply it to municipal utilities and other customers on favorable terms that have already been agreed. German companies want Gazprom to bear the resulting losses. But what are their chances of success?

In addition to Uniper and RWE, other European gas importers could try to get refunds from Gazprom. The former Gazprom Germania, which is now owned by the German state under the name Sefe, confirmed to the “Tagesspiegel Background” some time ago that it is currently examining “existing and future claims due to the cessation of gas deliveries”.

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The third largest German gas importer VNG also told the Handelsblatt that it was examining all options to limit the damage to the greatest possible extent. The Austrian gas importer OMV and the energy multinational Shell did not want to comment. But they too could theoretically make demands against Gazprom.

Very different sums of money are at stake for the companies. According to Uniper boss Klaus-Dieter Maubach, the additional costs for gas replacement purchases for the large gas importer Uniper have so far amounted to 11.6 billion euros. And billions more are likely to come in the coming months.

At RWE, on the other hand, the gas volumes that have failed are comparatively small. While Uniper was supposed to get around 200 terawatt hours of gas from Russia, RWE had only expected a delivery volume of 15 terawatt hours by 2023. The company received part of it as planned. Analyst Guido Hoymann from Metzler Bank estimates that RWE probably incurred costs of less than one billion euros as a result of the missing gas volumes. He bases this on the assumption that ten terawatt hours were not supplied and that RWE had to procure them on the market at an additional cost of around 100 euros per megawatt hour.

>> Also read: Habeck warns energy suppliers against unjustified price increases

However, both RWE and Uniper have apparently contractually agreed with Gazprom that an arbitration tribunal will be involved in a dispute like the current one. Meanwhile, Gazprom announced that Uniper’s claims for damages were “unlawful”.

It is therefore unclear whether Gazprom will even get involved in arbitration proceedings. According to the energy lawyer Anna von Bremen from the Berlin law firm Raue, if Gazprom refuses, an unusual situation will arise. She says, “It is rare for a party to refuse to conduct an arbitration.”

Arbitration award in favor of European importers conceivable

However, Gazprom will probably not be able to get away with a refusal that easily, because there are specific rules for arbitration proceedings. According to Uniper, the proceedings are to take place before an international arbitral tribunal in Stockholm. Therefore, a set of rules called “Stockholm Arbitration Rules” applies, according to von Bremen.

A German version of the Arbitration Rules of the Arbitration Institution of the Stockholm Chamber of Commerce states: “The failure of the defendant to submit a statement of defense does not prevent the arbitration from continuing.” In other words: Even if Gazprom did not respond to the arbitration proceedings initiated by Uniper and RWE, it could continue the procedure.

It is similar in the international guidelines on arbitration. It states that arbitrators have the power to continue a proceeding so that it cannot be thwarted by a party’s non-participation.

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It is still unclear what the German companies will gain from this. Lawyer Anna von Bremen believes: “In any case, Uniper’s chances are relatively good up to the accident of the Nord Stream pipelines.” But she also says: “The enforcement is then a different matter. You are dependent on the cooperation of Russian authorities.”

It is hard to imagine that Gazprom would pay compensation for the gas not supplied in the middle of the current conflict. However, this does not necessarily mean that European companies will get nothing. Here Anna von Bremen refers to a “New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards”: Gazprom has hundreds of subsidiaries in the USA and Europe. These could theoretically be seized.

More: Habeck warns energy suppliers against unjustified price increases.

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