Arbitrations Against Russian Gas Giant Gazprom

01.03.2014 Arbitrations Against Russian Gas Giant Gazprom

TGS Baltic, together with other co-counsel, represents Lithuania's Ministry of Energy at the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) in an arbitration case against OAO Gazprom regarding unfair natural gas prices applied to the Republic of Lithuania by Gazprom.

The case is of significant importance for Lithuania due to the nature of the dispute and the amount of claim, which is 1.29 billion euros.

The firm also represents the Republic of Lithuania in an investment arbitration brought by Gazprom. Gazprom alleges that Lithuania breached a Bilateral Investment Treaty between Lithuania and the Russian Federation that protects Gazprom investments within the territory of Lithuania. Gazprom says Lithuania violated the treaty by adopting and implementing ownership unbundling laws as per the EU's Third Gas Directive, as EU law does not require Lithuania to choose an ownership unbundling regime. Gazprom asserts that the ownership unbundling frustrated its legitimate expectations as an investor in AB Lietuvos Dujos.

In addition, TGS Baltic has represented the Lithuanian Ministry of Energy in an arbitration case before the SCC brought by Gazprom against Lithuania regarding breach of the Shareholders’ Agreement concluded between, inter alia, Gazprom and the State Property Fund during the privatization of Lietuvos Dujos. Gazprom stated that by commencing a litigation regarding an investigation into Lietuvos Dujos, Lithuania breached the Shareholders' Agreement. Gazprom also requested damages allegedly incurred by this company.

As a shareholder of Lietuvos Dujos, the Ministry filed a claim in a Lithuanian court concerning an investigation of the activity of members of the company's board who were nominated by Gazprom, in accordance with the legal procedure for the investigation of a legal person’s activities provided in the Civil Code of the Republic of Lithuania. TGS Baltic represents the Ministry of Energy in this litigation as well. The case is suspended due to the application by the Lithuanian Supreme Court to the Court of Justice of the European Union for a preliminary ruling in another related dispute (see below).

The Arbitral Tribunal concluded in the award that the Shareholders' Agreement was breached, but that no damages were incurred by Gazprom. TGS Baltic also represents the Ministry of Energy of the Republic of Lithuania in litigation regarding the recognition and enforcement of the mentioned arbitral award. This case has been suspended by the Lithuanian Supreme Court as the court decided to apply to the Court of Justice for a preliminary ruling on whether the award in question is in conformity with EU law.