Wednesday

20th Nov 2019

Russian pipeline firm launches anti-EU dispute

  • Most of the Nord Stream 2 pipeline from Russia to Germany already laid on Baltic Sea bed (Photo: nord-stream2.com)

The company behind the Nord Stream 2 gas pipeline has attacked EU energy law in new arbitration proceedings.

"[The] Nord Stream 2 [consortium] has now decided to ask the arbitral tribunal to determine that the European Union is in breach of its international law commitments under the ECT [Energy Charter Treaty] and to make orders requiring the EU to discontinue its breach," Sebastian Sass, the company's spokesman said.

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"A notice of arbitration was served on Thursday (26 September)," he added in an emailed comment.

The ECT is a legal regime created in 1991 to give confidence to Western firms investing in the former Soviet Union.

If new governments there passed laws which threatened their projects, they could call for international arbitration in tribunals in The Hague or Stockholm, for instance, citing ECT commitments, to settle the disputes.

Arbitration rulings are final and can award billions of euros in damages.

The Nord Stream 2 case turns the ECT on its head in historical terms, by pitting a Russian-owned firm based in Switzerland against allegedly unfair practice in the Western bloc.

The way the EU changed its gas laws back in 2017 was "discriminatory" against Nord Stream 2 and "in breach of the EU's obligation to guarantee fair and equitable treatment", given the bloc's ECT membership, Sass said.

The amended gas laws extended EU anti-monopoly rules to offshore pipelines lying in the territorial waters of member states.

Pipelines that were completed by 23 May 2019, when the new laws entered into force, could seek exemptions, but Nord Stream 2 is due to start operations in 2020.

The pipeline has attracted controversy because it would concentrate Russian gas exports to Europe directly to Germany, helping Moscow to cut off unfriendly transit states such as Poland or Ukraine.

The US has also threatened to impose sanctions on the five EU firms involved in the project, causing transatlantic tension.

Several Nordic and eastern European EU states had urged the EU to take action in recent years, creating political pressure around the European Commission's gas law tweak in what amounted to the allegedly "discriminatory" treatment, Nord Stream 2 alleges.

The company has also filed a lawsuit at the EU court in Luxembourg to get the gas laws overturned.

"Separately to the arbitration for breaches of the ECT, Nord Stream 2 will proceed with the action for annulment for breaches of EU law before the Court of Justice of the European Union which was submitted in July," Sass said.

The EU's gas law amendment "was clearly designed and adopted for the purpose of disadvantaging and discouraging the Nord Stream 2 pipeline", the company also said at the time.

"We as a prudent investor are committed to protecting our investments," the company's German CEO, Matthias Warnig, added in July.

The firm has so far laid 1,855 kilometres of pipeline in the Baltic Sea zones of Russia, Finland, Sweden, and Germany, accounting for three-quarters of its final length.

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