The Naftogaz - Gazprom Saga, debunking myths about the arbitration awards

On 30 December 2019, Ukrainian JSC "NJSC Naftogaz of Ukraine" ("Naftogaz") and Russian PJSC Gazprom ("Gazprom") (together the "Parties"), settled a number of multi-billion dollar disputes arising under their Gas Sales and Transit Contracts from 2009 (the "2009 Contracts"), concerning prices, payments, the legality of contractual provisions and anti-competitive conduct under the 2009 Contracts (the "Settlement"). The Settlement settled disputes under the 2009 Contracts, which had been on-going since both Parties' initiated arbitration under the Gas Sales Contract in June 2014 (the "Gas Sales Arbitration"),[2] and Naftogaz initiated arbitration under the Transit Contract in October the same year (the "Transit Arbitration") (together the "2014 Arbitrations").[3]

This case note concerns the arbitrations that the Parties initiated in 2014, and describes the background for the disputes, the disputes and the awards that were rendered in the 2014 Arbitrations in 2017 and 2018 (the "Awards"), as well as the subsequent proceedings and the Settlement.[4] In particular, we refute some myths about the Awards, namely that i) the Take or Pay obligation under the Gas Sales Contract was regular, ii) that the Awards were politically motivated and relied on Ukraine's economic difficulties, and iii) that the Awards made the overall contractual relationship between the Parties imbalanced. For completeness, we also briefly describe the subsequent proceedings and the developments leading up to the Settlement.

THE BACKGROUND FOR THE DISPUTES

On 19 January 2009, Naftogaz and Gazprom entered into two Contracts, one for gas sales to Ukraine (the "Gas Sales Contract") and one for gas transit through Ukraine (the "Transit Contract").[5]

The two contracts were signed following a three-week stand-off where Gazprom cut gas supplies first to Ukraine and then to Europe,[6] most likely in an attempt to embroil Europe in the dispute and impose a new regime on the Ukrainian gas transmission system (with itself as part owner).[7]

The Gas Sales Contract

The Gas Sales Contract had a term of eleven years, from and including 2009 to and including 2019.[8] The initial Annual Contract Quantity ("ACQ"), i.e. Gazprom's maximum annual delivery obligation, was 40 bcm for 2009 and 52 bcm for 2010 to 2019.[9] The latter is an extraordinarily large quantity which covered Ukraine's total gas consumption. The take-or-pay provisions stipulated that Naftogaz should pay for 80% of the ACQ regardless of whether Naftogaz took delivery of the Natural Gas or not,[10] without earning any credit towards future gas deliveries, so called make-up-gas. Make-up gas is a regular element in European take-or-pay clauses.[11] Naftogaz had no contractual entitlement to adapt the volumes to its changing needs.

The Contract Price was established in a Price Formula which linked the price of Natural Gas to the prices of gas oil and fuel oil.[12] This Price Formula rapidly brought the Contract Price out of touch with market prices, as European gas prices were decoupled from oil product prices and the oil price surged. Both Parties were entitled to a revision of the Contract Price in case of significant changes in the fuel and energy market and if the Contract Price did not reflect the level of market prices.[13]

The Contract also contained a destination clause, prohibiting Naftogaz from selling gas delivered under the Gas Sales Contract outside of Ukraine, and a mandatory sales clause, obliging Naftogaz to sell 25 per cent of the gas delivered to a Ukrainian subsidiary of Gazprom.[14]

The Transit Contract

The Transit Contract initially provided for transit of at least 110 bcm of natural gas per year through Ukraine to Europe and Moldova, in the eleven years from 2009 to 2019.[15] That volume covers approximately 50-60 per cent of Russian Natural Gas exports to Europe. The Contract was essentially a prolongation of the Parties' previous transit contract from 2002, except that from 2010 onwards, the tariff was supposed to reflect European principles of tariff formation and the tariff level in the European gas market.[16]

Gazprom could adapt the annual volumes to be delivered for transit based on its actual transport needs by following an agreed procedure.[17] Essentially, all Gazprom had to do was to notify Naftogaz sufficiently in advance to allow Naftogaz to offer the released capacity to other shippers.

A tariff revision provision entitled both Parties to a revision of the tariff if there was a significant change in the determination of transit tariffs in the European gas market, and if the tariff under the Transit Contract did not correspond to the level of transit tariffs in the European gas market.[18]

The Transit Contract also contained a regular damages clause, entitling each Party to damages for the other Party's breach of contract.[19]

THE GAS SALES ARBITRATION

Following the Maidan revolution in Ukraine, Gazprom first cancelled one politically motivated gas price discount granted in December 2013[20] Effectively, this "discount" only brought the price back to market levels.[21] Subsequently Gazprom also cancelled the gas price discount which passed on a Russian gas export tax reduction based on the Kharkiv Treaty.[22] The Gas Sales Contract price immediately and significantly increased far above European market prices. 

Against this background, Naftogaz initiated the Gas Sales Arbitration on 16 June 2014. Naftogaz claimed a significant reduction of the gas price pursuant to the price revision clause of the Gas Sales Contract, and/or that Gazprom reinstate the discounts that had been cancelled. Naftogaz also requested that the volume and take-or-pay provisions be declared invalid ab initio and significantly revised for the future based on competition law and/or Swedish contract law, and that certain other anti-competitive and unconscionable provisions, including the destination clause and the mandatory sales clause should be invalidated.[23]

On the same day as Naftogaz initiated arbitrations, Gazprom initiated a separate arbitration under the Gas Sales Contract,[24] and cut deliveries to Naftogaz. [25] The two arbitrations were consolidated into one. Gazprom denied all of Naftogaz's requests, and pursued a USD 46 billion take-or-pay claim. Gazprom also claimed payment for gas delivered in specific months of 2013 and 2014.[26] Naftogaz paid USD 3.1 billion for this gas in November and December 2014,[27] and accepted that Gazprom might be entitled to additional payments, depending on the outcome of Naftogaz's request for price revision, and/or whether the cancelled discounts would be reinstated.

THE TRANSIT ARBITRATION

In October 2014, Naftogaz also initiated arbitration under the Transit Contract.[28] In particular, Naftogaz claimed i) revision of the Transit Contract to bring it into line with European and Ukrainian competition and energy law, ii) tariff revision pursuant to the tariff revision clause, and iii) damages for Gazprom's under-deliveries of transit gas in all years from 2009 to 2017 inclusive, based on the regular damages clause in the Contract.[29]

Gazprom rejected all of Naftogaz's claims. The arguments were that neither European nor Ukrainian competition and energy law applied, that the conditions for tariff revision had not been fulfilled, and that Gazprom had not breached the Transit Contract since it allegedly was not obliged to transit any specific volumes under the Transit Contract, and even if it was, it could not be held liable for damages in case of breach. Gazprom also lodged a counterclaim for payment at penal rates for transit gas which Naftogaz allegedly had taken.[30]

THE ARBITRATION PROCEEDINGS

The two arbitrations were held under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce (the "SCC").[31] The cases were formally separate, but the same Arbitral Tribunal was appointed in both, and the Parties made extensive cross-references to arguments and evidence between the cases.[32]

The arbitrators were three distinguished Scandinavian jurists: the Danish attorney Jens Rostock-Jensen  was appointed by Naftogaz, and the former Chairman of the Swedish Supreme Court Johan Munck was appointed by Gazprom. The SCC appointed the Swedish attorney Tore Wiwen-Nilsson as Chairperson (the "2014 Tribunal"). With each Party's consent, the Tribunal appointed Dr Boel Flodgren, a senior Swedish law professor, as Administrative Secretary.[33]

THE AWARDS

In the Gas Sales Arbitration, the 2014 Tribunal issued two awards. First a Separate Award on 31 May 2017, deciding on all legal issues of principle.[34] Then a Final Award on 22 December 2017, deciding on Naftogaz's requests for declaratory relief and resulting monetary claims.[35]

The 2014 Tribunal partly granted Naftogaz's claim for a market-reflective price under the Gas Sales Contract based on a regular application of the price revision clause, with effect from 2014.[36] Naftogaz's requests for reinstatement of the previous discounts were rejected.[37] In particular, the cancelled rent payments for Crimean naval bases was found to be a matter between Naftogaz and the Russian Federation.[38]

The 2014 Tribunal rejected Gazprom's USD 46 billion claim for take-or-pay payments and reduced the take-or-pay volume to approximately one tenth of the original volume going forward.[39] Gazprom's future delivery obligation was reduced correspondingly.[40] The destination clause and the mandatory sales clause were set aside.[41] As will be further explained below, the clauses were revised because they were contrary to market practice and competition law.[42]

In the Transit Award, issued on 28 February 2018, Naftogaz was awarded USD 4.6 billion in damages for Gazprom's under-deliveries of transit gas pursuant to the Transit Contract's damages clause.[43] The damages were partly set off against payments for delivered gas awarded to Gazprom in the Final Award in the Gas Sales arbitration.[44] The end result was a net payment to Naftogaz from Gazprom of USD 2.56 billion.[45] Until Gazprom paid the net amount awarded to Naftogaz, interest of more than half a million USD per day would accrue.

The 2014 Tribunal rejected Naftogaz's request for tariff revision with effect from 2010 on procedural grounds.[46] Essentially, the 2014 Tribunal found that Naftogaz's request from 2009 was not valid, and did not consider it on the merits.[47] The 2014 Tribunal also rejected Naftogaz's claims for revision of the Transit Contract to comply with European and Ukrainian law, deferring to the relevant regulatory authorities on this point.[48]

Gazprom's counterclaim for payment at penal rates for transit gas allegedly taken by Naftogaz in specific months of 2014 was rejected on the merits. Naftogaz had not taken any transit gas.[49]

MYTHS ABOUT THE AWARDS

In the aftermath of the Awards, certain myths about them have appeared. In particular:

(i) The so-called Take or Pay clause in the Gas Sales agreement was a regular Take or Pay clause;

(ii) The Awards were politically motivated and the 2014 Tribunal relied on Ukraine's economic difficulties; [50] and

(iii) The Awards made the overall contractual relationship imbalanced.[51]

In the following we refute each of these myths, with references to the publicly available underlying documentation.

Myth: The so-called Take-or-Pay clause in the Gas Sales Agreement was a regular Take-or-Pay clause

Take-or-pay means that the buyer has to pay for a specific minimum volume of gas, even if he does not take it. Usually, however, the buyer may take gas so paid for later, at no or little additional cost, so-called make-up gas. The take or pay provisions in the Gas Sales Contract lacked provisions for such make-up gas. The take or pay volumes were very large, covering Ukraine's total gas consumption, and would, if effective, leave Naftogaz to purchase gas only from Gazprom. 

That the take-or-pay clause under the Gas Sales Contract was irregular is best demonstrated by the 2014 Tribunal's grounds for invalidating the clause.

In its defence against Gazprom's USD 46 bln take or pay claim, Naftogaz invoked both i) European Competition Law and ii) Swedish Contract Law.

With regard to European Competition Law, Naftogaz in particular argued that the volumes Naftogaz was obligated to off-take far exceeded the thresholds established in the "e.on” case by the German Bundeskartellamt (anti-monopoly body). There, the Bundeskartellamt prohibited the dominant German gas supplier “e.on” from entering into new contracts:

"which run for more than four years and which cover more than 50 per cent of actual gas requirements, or which run for more than two years and cover more than 80 per cent of requirements."[52] (the principle was subsequently upheld in the German Federal appellate court).

Also, the Take-or Pay Clause had to be considered in combination with the destination clause which prohibited Naftogaz from selling the gas volumes purchased under the Gas Sales Contract outside of Ukraine. In our opinion, this was a textbook example of market foreclosure.  

However, although the 2014 Tribunal concluded that the Gas Sales Contract directly affected the European gas market,[53] it nonetheless concluded that European Competition Law was not applicable to the Gas Sales Contract, based on the then prevailing case law of the European Court of Justice.[54]

With regard to Swedish Contract Law, Naftogaz inter alia argued that the take-or-pay clause under the Gas Sales Contract was akin to a penalty clause, due to the lack of a make-up gas clause, and that the provision exceeded market practice and was contrary to European Competition Law.  

The 2014 Tribunal applied Section 36 of the Swedish Contract Act, which states that a contract term may be modified or set aside if such term is unconscionable. This provision is, with some minor variations, common to the Nordic legal systems and largely codifies previous case law related to revising or setting aside contractual terms or entire contracts in exceptional circumstances.

As a starting point, the Tribunal stated that "though the principle of unconscionability is technically applicable in relationships between commercial parties, the principles of pacta sunt servanda ("agreements must be kept") and rigor commercialis (freedom of contract) are fundamental in Swedish Contract Law, and Section 36 is seldom applied." However, the case law opened up for applying Section 36 also in business-to-business situations.

The 2014 Tribunal agreed with Naftogaz that the particular take-or-pay clause in the Gas Sales Contract operated as a penalty clause ("vite" in Swedish) and that the penalty is far higher than Gazprom's loss, if any at all. I recall that the take-or-pay clause lacked a make-up provision, meaning that Naftogaz never would get any of the gas they had to pay for, and Gazprom would be free to sell the gas Naftogaz paid for to others. The Tribunal then noted that the Swedish Supreme Court has pointed out that the total compensation under a penalty clause could be so great that this can be a reason for modifying such a clause in a commercial contract.

However, other arguments were even more important. The 2014 Tribunal's decisive reasoning is set out in paragraphs 3855-3861 of the Separate Award. In short, the 2014 Tribunal found it decisive that the volume, take-or-pay and destination clauses were contrary to market practice and general principles of competition law, and concluded that if it had applied EU competition law, then the provisions would clearly be set aside. It thereafter stated:

"Hence, the situation is that the Take or Pay provisions rules deviate from generally accepted principles of competition law, but there is no competition law to be applied. The Tribunal considers that this is a such special situation where the Section 36 would actually be applied in a commercial relation to achieve the balance that would otherwise have been obtained by applying the competition law provisions. The Tribunal holds that Articles 2.2 [the volume clause] and 2.2.5 [the take-or-pay clause] as these articles are now formulated shall be declared invalid."

In summary therefore, the 2014 Tribunal found that the Gas Sales Contract Take-or-Pay provisions were far from regular. On the contrary, they were so irregular that they created a "special situation" in which Section 36 could be applied to a commercial contract, something which is seldom done.

Myth: The Awards were politically motivated

Some media outlets have referred an argument that the Awards were politically motivated. However, an analysis of the Awards, demonstrates that the Awards in fact are remarkably apolitical.

All of the 2014 Tribunal's decisions are based on regular Swedish contract law. Furthermore, the Awards avoid decisions that could be perceived as political. Notably, as already indicated, the 2014 Tribunal did not accept that Gazprom could be held liable for the cancellation of the gas price discount as a rent payment for Russian naval bases in Crimea. The 2014 Tribunal also avoided direct application of European competition law, despite its conclusion that the Gas Sales Contract affected the European gas market, instead relying on contract law to achieve the same result. Also, as already indicated, the 2014 Tribunal deferred to the relevant regulatory authorities on the matter of adapting the Transit Contract to relevant energy law, and only granted Naftogaz's purely contractual damages claim in the Transit Arbitration.

A part of this myth is that the 2014 Tribunal relied on Ukraine's economic difficulties as a reason for invalidating the Take-or-Pay provisions and rejecting Gazprom's take-or-pay claims. In fact, the opposite is true. Naftogaz invoked Ukraine's economic challenges after the 2008 financial crisis and the 2014 Russian assault and the consequent collapse in gas consumption as failed assumptions justifying a revision of the Take-or-Pay provisions. However, the 2014 Tribunal explicitly found that this argument was not sufficient to allow application of Section 36.[55]

Myth: The Awards made the overall contractual relationship imbalanced

In the aftermaths of the Awards, Gazprom argued that the Awards, "undermined the balance of interests between the parties to the two contracts – the contract for gas supplies to Ukraine and the transit contract" and that as a result, the contracts had become economically unsound, or unviable for Gazprom. Essentially, the alleged bases for these statements were i) the overall monetary result of the two Awards and ii) the possible future consequence of the Awards whereby Naftogaz could amass significant monetary claims against Gazprom also for the years 2018 and 2019.[56]

Thus, the main issue which in Gazprom's view led to the alleged imbalance was the 2014 Tribunal's consideration of the Parties' respective volume obligations under the two contracts,[57] but also the price mechanisms as these in combination with the volume provisions have a direct effect on the monetary results under the two contracts.  

First and foremost, the Contracts were entered into as two separate contracts. This is confirmed by contemporaneous statements by both then Russian Prime Minister Putin and representatives of Gazprom's management.[58] This separation was deliberate, and specifically intended to avoid repeating the problems experienced in January 2009 when Gazprom ceased transit through Ukraine in an attempt to force a solution to a dispute concerning supplies.[59] Consequently, the Contracts were always separate and were not intended to balance each other in the first place.

Furthermore, Gazprom's volume obligation under the Transit Contract was not at all similar to Naftogaz's volume obligation under the Gas Sales Contract. Under the Gas Sales Contract, Naftogaz had the volume risk for offtaking or paying for 41.6 bcm of gas each year, without any make-up right, and with no contractual entitlement to reduce the volume to its actual needs. Under the Transit Contract, Gazprom was entitled to reduce its volume obligation to reflect its actual needs prior to the beginning of each year pursuant to a specific procedure. All Gazprom had to do, was to notify Naftogaz of the volumes it actually needed sufficiently in advance of the new year, allowing Naftogaz to offer the freed capacity to third parties. Thus, effectively, Naftogaz had the year on year volume risk also under the Transit Contract. Gazprom was also uniquely placed to relieve itself of any within year volume risk. There was nothing in the Transit Contract that prevented Gazprom from transferring its capacity in the Ukrainian gas transmission system to third parties.[60] Gazprom could have done this by entering into a variety of contract structures with third party gas producers in Russia,[61] and/or Central Asia:

(i) it could have entered into agency or commission agreements with these third parties under which it would have charged a fee for transporting their gas through Ukraine to Europe;

(ii) it could have entered into sale and purchase agreements under which it would purchase third party gas at export netback prices and then delivered this gas to the European customers of the third party producers;

(iii) it could also have entered into repurchase agreements under which it would buy the gas of third party producers and then allow them to repurchase it once it had transited through Ukraine and reached Europe;

(iv) finally, it could have entered into swap agreements with third party producers. 

Gazprom's significant room for mitigating its volume risk under the Transit Contract, meant that it was entirely possible for Gazprom to avoid any additional claims for damages under the Transit Contract from Naftogaz. However, that would have required Gazprom to open up access to the Ukrainian and European markets to other Russian and Central Asian gas producers, which Gazprom evidently chose not to do. 

As regards the price mechanisms, the Contract Price under the Gas Sales Contract rapidly increased to almost twice the market price. At the same time, the Transit Tariff under the Transit Contract was too low to even cover Naftogaz's costs of transiting the gas through Ukraine, even though it was supposed to reflect European tariff principles from 2010, pursuant to which cost reflective tariffs are the main rule.

Thus, when the Awards adjusted the volume and price provisions under the Gas Sales Contract, the Gas Sales Awards corrected an inherent imbalance under the Gas Sales Contract. The Transit Award simply enforced the Transit Contract by ordering Gazprom to pay damages for breach of contract. What remained after the Awards to bring complete balance to the Parties' contractual relationship was essentially to revise the Transit Tariff under the Transit Contract.

 THE SUBSEQUENT PROCEEDINGS AND THE SETTLEMENT

The subsequent proceedings

Gazprom challenged all three Awards before the Svea Court of Appeal in Stockholm.

If successful in its challenges of the Separate and Final Awards, Gazprom would have reinstated a take-or-pay liability for Naftogaz that could amount to as much as USD 80 billion under the Gas Sales Contract. A successful challenge of the Transit Award would have prevented Naftogaz from enforcing the USD 2.56 billion payment awarded, and given Gazprom a possibility to resuscitate the payment for delivered gas awarded to it in the Final Award.

Gazprom refused to pay the USD 2.56 billion plus interest awarded to Naftogaz in the Transit Award. This compelled Naftogaz to initiate enforcement of the Transit Award in multiple jurisdictions.[62] Naftogaz attached significant assets in England,[63] the Netherlands,[64] and Luxembourg.[65]

Gazprom also initiated a new arbitration,[66] in which it expressly sought to reverse parts of the outcome of the 2014 Arbitrations, with a claims value of USD 5-6 billion. Specifically, Gazprom sought to reverse the USD 4.6 billion in damages awarded to Naftogaz in the Transit Arbitration, and hence to revive the USD 2 billion payment claim for gas delivered in 2013 and 2014, which had been settled by set-off in the Transit Award.

Naftogaz rejected Gazprom's approach as contrary to principles of legal force (a party cannot legally re-litigate issues that have been finally decided), and also submitted counterclaims to improve the contractual balance. In particular, Naftogaz pursued a tariff revision claim amounting to USD 12.6 billion. Finally, Naftogaz requested a declaration that the gas Gazprom had delivered to the areas of the Donetsk and Lugansk regions, was not delivered under the Gas Sales Contract, pre-empting a payment claim of perhaps USD 2.6 billion from Gazprom.

In further pursuit of the rule of law in European gas markets, Naftogaz submitted a Competition Law Complaint against Gazprom to the European Commission in May 2019 (the "Complaint").[67] The Complaint concerned four abuses by Gazprom of its dominant position in gas transportation and supply in the EU. The Complaint also proposed a series of remedies that would mitigate Gazprom’s anti-competitive behavior.[68]

The Settlement and its background

During the autumn of 2019, the Parties met bilaterally and also trilaterally with the European Commission. However, the discussions initially did not lead anywhere.[69]

On 1 November 2019, Naftogaz submitted a comprehensive Statement of Defence and Counterclaim in the 2018 Arbitration. The Statement of Defence thoroughly rejected Gazprom's claims.[70] The Statement of Counterclaim explained in detail the legal and factual basis for Naftogaz's tariff revision claim of USD 12,6 billion. Thus, the lack of upside and the significant downside for Gazprom in the 2018 Arbitration was made clear to Gazprom.

On 27 November 2019, the Svea Court of Appeal rejected Gazprom's challenge of the Separate Award in its entirety. The judgement could not be appealed.[71]

This judgment also effectively left Gazprom's challenge of the Final Award, which rested on an assumption that the Separate Award was tainted by procedural errors, without any prospect of success. Consequently, Gazprom had lost all realistic possibilities of reviving the Take-or-Pay claims rejected by the 2014 Tribunal and the corresponding leverage against Naftogaz and Ukraine.

On 21 December 2019 the Trump administration approved a sanction bill targeting Nord Stream 2 and the firms constructing the pipeline.[72] This immediately halted the construction of the Nord Stream 2 pipeline,[73] which, once operational, will complete Gazprom's bypass of the Ukrainian transit route.[74] This complicated Gazprom's plans to avoid gas transit through Ukraine altogether, and incentivized Gazprom to make new Ukrainian transit arrangements before the Transit Contract expired in the morning of 1 January 2020.

On 19 and 20 December 2019, representatives of Ukraine, the Russian Federation and the European Union met and agreed, in the presence of representatives of Naftogaz, Gazprom and the Ukrainian gas transmission system operator (the "GTSOU"), on a protocol outlining a possible settlement of the disputes between Naftogaz and Gazprom as well as of an unrelated dispute between Gazprom and the Ukrainian State (the "Protocol").[75]

After the conclusion of the Protocol, Naftogaz and Gazprom entered into negotiations on whether and how to implement the settlement outlined in the Protocol. In particular, Naftogaz and Gazprom met in Vienna for intense negotiations in person from 26 to 30 December 2019. During the negotiations in Vienna, on 27 December 2019, Gazprom paid the USD 2.9 billion (including delay interest) it owed Naftogaz, as envisaged in the Protocol.[76]

On 30 December 2019, Naftogaz and Gazprom then settled all other outstanding matters, inter alia in relation to the Awards and the 2009 Agreements, leading to the conclusion of a new, five-year transit arrangement for Russian gas through Ukraine compliant with European law, and the scheduled termination of all legal proceedings between Naftogaz and Gazprom. The Parties also waived any and all current and future claims related to the 2009 Contracts. [77]

Dag Mjaaland, Partner

Aadne M. Haga, Partner

Anne-Karin Nesdam, Specialist Counsel

Haakon Orgland Bingen, Senior Lawyer

Ulrikke Størseth, Senior Associate

Hilde Tørnblad, Associate

Wikborg Rein Advokatfirma AS ("Wikborg Rein"), Oslo[1]

[1] Mr Dag Mjaaland and his team from Wikborg Rein (the authors) acted as lead counsel to Naftogaz against Gazprom in the disputes described below.

[2] SCC Arbitration Cases 2014/078/080.

[3] SCC Arbitration Case V2014/129.

[4] The 2009 Gas Sales and Transit Contracts were published by the Ukrainian news site "Ukrainska Pravda" almost immediately after their conclusion and the main terms were analysed and debated in public at the time. Inter alia because the Gas Sales Contract was public, the Svea Court of Appeal rejected Gazprom's request to keep parts of the court file secret in the judgment ending Gazprom's challenge of the Separate Award, see page 39 of the Svea Court of Appeal's Judgment in Case No. T-10191-17. The Judgment and an unofficial translation to English are made freely available at the Swedish Arbitration Portal, a project facilitated by the SCC to increase transparency in arbitration: https://www.arbitration.sccinstitute.com/views/pages/getfile.ashx?portalId=89&docId=3816089&propId=1579 (original),  https://www.arbitration.sccinstitute.com/views/pages/getfile.ashx?portalId=89&docId=3816089&propId=1578 (unofficial translation).

Furthermore, to be as transparent as possible, Naftogaz has published redacted versions of the Awards on its website.

[5] Separate Award § 4; and O. Shchedrov and R. Popeski, “Russia and Ukraine sign 10-year gas supply deal”, Reuters, 19 January 2009, https://www.reuters.com/article/us-russia-ukraine-gas-idUSTRE5062Q520090119, accessed 4 December 2020.

[6] T. Gustafson, The Bridge: Natural Gas in a Redivided Europe (Harvard University Press, 2020) (Kindle Edition), loc 6734 and 6742.

[7] S. Pirani, J. Stern and K. Yafimava, “The Russo-Ukrainian gas dispute of January 2009: a comprehensive assessment”, OIES Paper: NG27 (2009), pages 35 – 36; and “TIMELINE: Gas crises between Russia and Ukraine”, Reuters, 11 January 2009, available at https://www.reuters.com/article/us-russia-ukraine-gas-timeline-sb-idUSTRE50A1A720090111, accessed 4 December 2020.

[8] Gas Sales Contract Clause 2.2.

[9] Ibid.

[10] Gas Sales Contract Clause 2.2.5.

[11] A. Brautaset, Norsk Gassavsetning (Sjørettsfondet, 1998), pages 213-214; and P. Roberts, Gas and LNG sales and transportation agreements (Sweet & Maxwell, 2014) 4^th ed. pp. 218-219.

[12] Gas Sales Contract Clause 4.1.

[13] Gas Sales Contract Clause 4.4.

[14] Gas Sales Contract Clauses 3.10 and 9.7, respectively.

[15] Transit Contract Clause 3.1.

[16] Transit Contract Clause 8.7.

[17] Transit Contract Clause 3.2 second sentence.

[18] Transit Contract Clause 8.7.

[19] Transit Contract Clause 3.10.

[20] Press statement following a meeting of Russian-Ukrainian Interstate Commission, 17 December 2013, http://en.kremlin.ru/events/president/transcripts/19854 accessed on 4 December 2020.

[21] “Ostchem raises loan from Gazprombank to buy 5 bcm of Russian gas, says Firtash”, Interfax Ukraine, 19 November 2013, https://en.interfax.com.ua/news/economic/175663.html accessed on 4 December 2020.

[22] “Ukraine extends lease for Russia's Black Sea Fleet”, The Guardian, 21 April 2010, https://www.theguardian.com/world/2010/apr/21/ukraine-black-sea-fleet-russia accessed on 4 December 2020.

[23] Separate Award pages 679-689.

[24] Separate Award §194.

[25] “Russia halts gas supplies to Ukraine after talks breakdown“, BBC, 1 July 2015, https://www.bbc.com/news/world-europe-33341322 accessed 4 December 2020.

[26] Separate Award pages 689-690.

[27] “Naftogaz repays second part of USD 3.1 billion debt to Gazprom”, Offshore Energy, 24 December 2014,  https://www.offshore-energy.biz/naftogaz-repays-second-part-of-usd-3-1-billion-debt-to-gazprom/ accessed on 4 December 2020

[28] Naftogaz press release, “Naftogaz Initiates Arbitration Procedure Regarding Transit Contract with Gazprom to Ensure Stability of Gas Transit to EU”, 21 October 2014, https://www.naftogaz.com/www/3/nakweben.nsf/0/DA5433A36F4A9C01C2257D780036DD5F?OpenDocument&year=2014&month=08&nt=News& accessed on 4 December 2020

[29] Transit Award pages 686 - 887.

[30] Transit Award pages 887 - 890. 

[31] Gas Sales Contract Clause 8.2 and Transit Contract Clause 12.2.

[32] Cf. i.a. Separate Award §§113 and 3491.

[33] Cf. i.a. Separate Award §228 and Transit Award § 274 . 

[34] Separate award §342. 

[35] Final Award Section 11

[36] Separate Award page 775, Declaration (2).

[37] Separate Award Section X.3.2.12, particularly §§3708-3709.

[38] Separate Award Section X.3.2.12, particularly §§3718-3719.

[39] Separate Award, page 775, Declarations (4) and (5).  Declarations (ii), (iii), (iv) and annex 2 of Final Award

[40] Separate Award, page 775, Declarations (5).   Ibid.

[41] Separate Award, page 775,  Declarations (6) and (7).

[42] Separate Award §§3855-3861, and §3865., cf. also Section 8.2 below

[43] Transit Award §4050.

[44] Transit Award §§4053 - 4054.

[45] Transit Award §4045, §§ 4053 - 4054 and §4088(i).

[46] Transit Award Section 9.6.1.1

[47] Transit Award Section §3883.

[48] Transit Award Section 9.5.2.3 and 9.5.6.5.

[49] Transit Award §4038.

[50] “Putin: there is an arbitration ruling that awarded Naftogaz $2.6 bln, but there is also Kyiv's $3-bln debt on Eurobonds”, Interfax Ukraine, 19 December 2019, https://en.interfax.com.ua/news/general/631366.html accessed 4 December 2020.

[51] Gazprom press release, “Alexey Miller briefs Dmitry Medvedev on Gazprom’s performance in winter period”, 13 march 2018, https://www.gazprom.com/press/news/2018/march/article411844/. Mr Miller's statement is subsequently referred in numerous news articles: “Gazprom to cancel contracts with Ukraine's Naftogaz”, TASS, 2 March 2018, https://tass.com/economy/992541; “Gazprom napravil uvedomlenie v Naftogaz o rastorzhenii kontraktov”, Interfax, 5 March 2018, https://www.interfax.ru/business/602461; “Naftotgaz Ukrainy poluchil uvedomlenie Gazproma o rastorzhenii gazovykh kontractov”, Vedomosti, 5 March 2018, https://www.vedomosti.ru/business/articles/2018/03/05/752696-gazprom-kontrakti-ukrainoi, all accessed 4 December 2020. The notion has also been represented by S. Pirani, “After the Gazprom-Naftogaz arbitration: commerce still entangled in politics”, Oxford Energy Insight: 31, March 2018, pages 5 and 6,

https://www.oxfordenergy.org/wpcms/wp-content/uploads/2018/03/After-the-Gazprom-Naftogaz-arbitration-commerce-still-entangled-with-politics-Insight-31.pdf accessed 4 December 2020.

[52] Bundeskartellamt press release, Bundeskartellamt prohibits E.ON Ruhrgas' long-term gas supply contracts with distributors, 17 January 2006, https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2006/17_01_2006_EON_Langfristvertr%C3%A4ge_eng.html accessed 5 December 2020.

[53] Separate Award §§3855-3861.

[54] Separate Award §§3775- 3783.

[55] Separate Award §3855.

[56] Gazprom press release, “Alexey Miller briefs Dmitry Medvedev on Gazprom’s performance in winter period”, 13 march 2018.

[57] Gas Sales Contract Clause 2.2 and Transit Contract Clause 3.1.

[58] Gazprom press release, “Russian gas deliveries towards Ukraine initiated”, 20 January 2009, https://www.gazprom.com/press/news/2009/january/article67744/; and press release by the Russian government, 11 October 2011, http://archive.premier.gov.ru/events/news/16708/print/#, accessed on 4 December 2020.

[59] Ibid.

[60] While Clause 13.8 of the Transit Contract does prohibit Gazprom from assigning its rights and obligations without Naftogaz's consent, a transfer of capacity would not trigger this clause since Gazprom would remain the nominal shipper. Even if the clause were triggered, Naftogaz would readily consent to such a transfer.

[61] E.g. Novatek, Rosneft, Lukoil.

[62] Naftogaz initiates enforcement of Stockholm Awards, Naftogaz press release 30 May 2018 https://www.naftogaz.com/www/3/nakweben.nsf/0/40A805A4A0EDAB3EC225829D004027D7 accessed on 6 December 2020.

[63] "UPDATE 2-Naftogaz says British court grants Gazprom asset freeze in UK", Reuters, 19 June 2018,  https://www.reuters.com/article/ukraine-naftogaz-gazprom/update-2-naftogaz-says-british-court-grants-gazprom-asset-freeze-in-uk-idUSL8N1TL4DS accessed on 6 December 2020.

[64] Court seizes Dutch assets of Gazprom worth $2.6 bln upholding Naftogaz petition, TASS, 5 June 2018, https://tass.com/economy/1007971 accessed on 6 December 2020.

[65] "Netherlands and Luxembourg courts denied Gazprom’s appeals within Stockholm award enforcement", Naftogaz press release 19 July 2019, https://www.naftogaz.com/www/3/nakweben.nsf/0/678D0F0EEB00276CC225843C00472FDA?OpenDocument&year=2019&month=07&nt=News& accessed on 6 December 2020.

[66] Gazprom reignites gas wars  with Naftogaz in wake of award,Global Arbitration Review, 5 March 2018 https://globalarbitrationreview.com/gazprom-reignites-gas-wars-naftogaz-in-wake-of-award accessed on 6 December 2020.

[67] Ukraine's Naftogaz files complaint to European Commission over Nord Stream 2, Reuters, 6 May 2019 https://uk.reuters.com/article/ukraine-naftogaz-gazprom/ukraines-naftogaz-files-complaint-to-european-commission-over-nord-stream-2-idUSR4N22C00I accessed on 6 December 2020

[68] Ibid.

[69] Latest Russia-Ukraine Gas Talks Fail to Bring Breakthrough, the Moscow Times 29 October 2019,  https://www.themoscowtimes.com/2019/10/29/russia-ukraine-gas-talks-fail-a67951 accessed on 6 December 2020.

[70] Naftogaz сlaims $12.2 billion in new arbitration with Gazprom, News.ru, 5 November 2019 https://news.ru/en/economics/naftogaz-slaims-12-2-billion-in-new-arbitration-with-gazprom/ accessed on 6 December 2020.

[71] Arbitral award in a dispute regarding supply of natural gas remains unchanged, Press release by Svea Hovrätt, 27 November 2019, https://www.domstol.se/nyheter/2019/11/arbitral-award-in-a-dispute-regarding-supply-of-natural-gas-remains-unchanged/ accessed on 6 December 2020.

[72] Nord Stream 2: Trump approves sanctions on Russia gas pipeline, BBC,  21 December 2019 https://www.bbc.com/news/world-europe-50875935 accessed on 6 December 2020.

[73] Allseas stops Nord Stream 2 works citing U.S. sanctions, Offshore Energy, 23 December 2019, https://www.offshore-energy.biz/allseas-stops-nord-strea-2-works-citing-u-s-sanctions/ accessed on 6 December 2020.

[74] Russian Oil and Gas - Tickling Giants page 9, Sberbank CIB Investment Research, May 2018. https://globalstocks.ru/wp-content/uploads/2018/05/Sberbank-CIB-OG_Tickling-Giants.pdf accessed on 6 December 2020.

[75] Protocol of gas transit negotiations between Russia, EU and Ukraine unveiled, 112.ua, 23 December 2019 https://112.international/politics/protocol-of-gas-transit-negotiations-between-russia-eu-and-ukraine-unveiled-46853.html accessed on 6 December 2020.

[76] S. Pirani and J. Sharples, The Russia-Ukraine gas transit deal: opening a new chapter, Energy Insight: 64, page 3, https://www.oxfordenergy.org/wpcms/wp-content/uploads/2020/02/The-Russia-Ukraine-gas-transit-deal-Insight-64.pdf, accessed on 4 December 2020.

[77] Gazprom press release, “Package of documents signed for Russian gas transit across Ukraine to continue beyond 2019, 30 December 2019, https://www.gazprom.com/press/news/2019/december/article497259/, accessed on 4 December 2020.