Russia’s Gazprom sues EU for loss of Nord Stream 2 capacity

Nord Stream 2 AG, the Swiss subsidiary of the Russian company Gazprom, has taken the EU government to court regarding the gas legislation amendments that prohibit the Russian company from using more than 50% of the capacity of the Nord Stream 2 gas pipeline.

As reported by Interfax, Gazprom informed potential investors about the start of the litigation through a memorandum on the placement of Swiss franc-denominated eurobonds that is scheduled to take place in mid November.

Gazprom believes that by amending the EU Gas Directive to make marine gas pipelines subject to the same regulations as land pipelines, especially the requirement that they cannot belong to the gas supply company, Brussels has contravened its obligations according to the Energy Charter Treaty.

The supposed breaches concern articles 10 and 13 of the treaty. The former has to do with the protection of investment, which in the case of Nord Stream 2 was €10 billion, including €5 billion from Gazprom’s European partners. The latter prohibits the expropriation of invested funds or assets.

The amendments to the Gas Directive, which were adopted by European Parliament in April and came into effect in May, obligate Gazprom to make at least half of the pipeline’s capacity, i.e. 27.5 billion out of 55 billion cubic meters per year, available to other gas suppliers.

According to Gazprom, the decision is “discriminatory”, violates the principles of equality of proportionality, goes beyond the EU’s authority, and was adopted in contravention of professional standards.

Nord Stream 2 AG has also appealed to the European Court of Justice, demanding a partial revocation of the amendments. The company claims that an “unreasonably short deadline” has been set for applying for exception status, which effectively makes such a procedure impossible, or at least extremely unlikely.

In November, Germany’s ruling coalition of social democrats and the CDU/CSU joined the efforts to save the project. A bill was put forward in the Bundestag to exempt Nord Stream 2 from the requirements of the gas directive. The parliamentarians’ idea was to change the definition of “project completion” so that it refers not to the actual completion of construction (scheduled for the end of 2019), but to the date of the last investments. With this interpretation, the not yet complete Nord Stream 2 would be considered completed in May 2019, before the law that disrupted the initial project scheme came into effect. However, in the voting on November 8, the project received only 133 out of the necessary 355 votes. No date has been set for another round of voting.

  Gazprom, EU, Nord Stream