German utility Uniper has won a multi-billion euro arbitration against former long-time supplier Gazprom, allowing it to terminate dormant gas supply contracts and potentially setting a precedent for similar cases.
The ruling, announced on Wednesday, marks a significant victory for Uniper, which was rescued by the German government in 2022 after Russia’s Gazprom cut and later suspended gas supplies, forcing Uniper to buy replacement volumes at sky-high prices on the spot market.
Landmark ruling and its implications
The arbitration tribunal in Stockholm issued the ruling on June 7, following a process initiated by Uniper in late 2022.
The tribunal awarded Uniper more than 13 billion euros ($14 billion) in damages for the gas volumes not supplied by Gazprom since mid-2022, when the Russian state-owned company first cut contractually agreed deliveries.
Uniper CEO Michael Lewis stated,
This ruling provides legal clarity for Uniper. With the right of termination that we received in the arbitration ruling, we are ending the contracts with Gazprom Export.
The ruling enables Uniper to terminate existing gas supply contracts, which legally still exist even though no gas is flowing.
It was earlier reported that the arbitration tribunal could allow Uniper to terminate 250 terawatt hours of dormant Russian gas contracts, some of which run until the middle of the next decade.
Canceling these contracts removes a major risk ahead of Uniper’s planned return to the stock exchange next year.
Symbolic victory for Germany
Gazprom did not immediately respond to a request for comment. The damages award primarily marks a symbolic victory for Germany, as legal sources told Reuters last month that it is unlikely large sums will flow.
Uniper’s Lewis confirmed this, stating that any money that does flow will go to the German government, which holds more than 99% of Uniper.
The German Finance Ministry, which oversees the government’s stake in Uniper, said the Federal Government was not a party to or involved in the arbitration proceedings, adding that Berlin had no influence on the company’s operational management.
Impact on Uniper’s operations and future
Terminating the contracts removes the last significant risk Uniper faced regarding its Russian exposure after the group wrote down its financing in the Nord Stream 2 pipeline as well as its holding in its Russian subsidiary Unipro.
This arbitration victory severs the last remaining ties of what was a decade-long energy partnership between Berlin and Moscow, which came to an abrupt halt following Russia’s attack on Ukraine in 2022.
Additionally, Uniper has been involved in talks to ensure the continuity of gas supply through Ukraine to southeastern Europe. Bloomberg reported on Monday that Kyiv announced in March it would not extend a transit deal with Russia’s Gazprom beyond the end of this year.
The German government is participating in discussions between the European Commission and countries still dependent on Russian gas.
Economy Minister Robert Habeck said on Tuesday, “I am personally very involved in it,” adding that the talks aim to ensure secure gas supply for southeastern Europe without filling Russia’s coffers.
Road cleared for Uniper’s IPO
Uniper’s arbitration victory against Gazprom is a significant milestone, allowing the German utility to terminate dormant gas contracts and secure over 13 billion euros in damages.
This ruling provides legal clarity and removes a major risk ahead of Uniper’s planned IPO in 2024. As the company moves forward, it continues to engage in efforts to secure stable gas supplies for Europe amidst ongoing geopolitical tensions.
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