Lawyers: ČEZ's arbitration with Gazprom will decide the circumstances of the damage, ČEZ has a chance

Lawyers: ČEZ's arbitration with Gazprom will decide the circumstances of the damage, ČEZ has a chance

Employees: ČEZ and Gazprom arbitrator will decide the circumstances š codes, ČEZ má šanci

Logo of the Russian energy company Gazprom.

Prague – For the outcome of the arbitration, which the energy company ČEZ started on Wednesday against the Russian gas company Gazprom due to the reduction of natural gas supplies last year, and in which it requests compensation for damages of around one billion crowns, the key will be the determination of the circumstances under which the possible damage to the Czech company occurred . If the Czech company proves non-compliance with the contract, it has a considerable chance of being awarded compensation. In such a case, ČEZ could affect Gazprom's assets in foreign countries, but in the case of assets located in Russia, such a possibility is unlikely. This was told to ČTK by lawyers from the universities. According to economists, CEZ's initiative to arbitrate is logical, but in practice it will probably not have much effect.

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“Without detailed knowledge of the submitted proposal, the contract between ČEZ and Gazprom and its applicable law, the outcome of the dispute cannot be predicted in any way,” said Petr Tomášek from the Department of Business Law of the Faculty of Law of Charles University. According to him, it will be important to define what the specifically caused damage consists of. Furthermore, the question of whether the damage occurred after the start of the conflict between Russia and Ukraine and the subsequent sanctions, or to some extent already, will be significant. From Gazprom's point of view, according to the legal expert, it will be crucial on what they base their defense in the dispute. “Hypothetically, for example, the impossibility of performance could come into consideration as a result of accepted sanctions or other force majeure,” Tomášek pointed out, recalling recent gas pipeline explosions or conjectures regarding the repair of turbines for Nord Stream 1 in Canada.

According to Zdenek Nový from the Department of International and European Law of the Faculty of Law of Masaryk University, if CEZ proves that it has not delivered gas in violation of the contract, it has a significant chance of being awarded a claim. At the same time, according to him, it is necessary to take into account the argument of Russian companies that the non-delivery was caused by circumstances of force majeure. That could be sanctions against Russia.

In the event that CEZ succeeds in the arbitration, both legal experts pointed out that Russia has ratified the so-called New York Convention, which ensures the recognition and enforcement of foreign arbitration awards. “Gazprom's assets in foreign countries may be affected. However, such a possibility is rather unlikely for assets located in Russia,” noted Tomášek.

Nový also pointed out that Gazprom could request on annulment of the decision. “Nevertheless, the chance of such a procedure is statistically small, as the Swiss Supreme Court, which is the only one to decide on such a proposal in a single instance, annuls only four percent of findings on average,” added Nový.

ČEZ had to start arbitration according to Capitalinked analyst Radim Dohnal. “After all, it is still a company that is supposed to do business for the purpose of profit. That is, they have to evaluate every possible compensation for damages and subsequently sue,” he said. According to him, the attitude of the Russians in the dispute will depend on what further development the Kremlin expects in relations with the West.

XTB analyst Tomáš Cverna also evaluates CEZ's initiative as a logical step, but perceives the significance of the arbitration itself as more political than political. economic. “ČEZ wants to show, on the one hand, that it is not indifferent to Gazprom's approach to contracts. On the other hand, damages in the amount of one billion crowns would not have a very significant effect on improving the company's finances,” Cverna pointed out.

The situation around the supply of Russian gas became more complicated after the start of the Russian invasion of Ukraine. In retaliation, the EU adopted a series of anti-Russian sanctions. Gazprom has the world's largest reserves of natural gas and has a monopoly on the export of this strategically important raw material from Russia through a network of gas pipelines.

The Geneva-based arbitration will be decided by a three-member arbitral tribunal.