Czech energy giant, ČEZ, has initiated an arbitration case against Russia’s Gazprom for allegedly delivering less natural gas supplies than agreed upon in the contract. The case will be settled by a three-member tribunal in Geneva and ČEZ is seeking to recover €42 million in damages.

According to Petr Tomášek from the Faculty of Law at Charles University, if ČEZ can prove that Gazprom did not comply with the contract, it could be awarded compensation. This is because Russia has ratified the New York Convention on international arbitration, meaning that Gazprom’s foreign assets could potentially be seized. However, it is unlikely that this would happen for assets located in Russia.

Gazprom, which holds the world’s largest natural gas reserves and has a monopoly on the export of the raw material from Russia, may argue that it was impossible to fulfill the contract due to EU sanctions or another “greater force” such as pipeline explosions.

Before the Russian invasion of Ukraine, Czechia was heavily dependent on Russian gas imports, but in the past eight months, the country has reduced its dependency from 97% to 3-4%. Gazprom is also facing another arbitration case from two German companies, Uniper and RWE, who decided to sue at the end of last year.

In conclusion, the case between ČEZ and Gazprom highlights the challenges faced by companies operating in an increasingly globalized and complex business environment. With the possibility of compensation and potential seizure of assets, it will be interesting to see the outcome of this arbitration case and how it may impact the relationship between the two companies and the energy sector as a whole.

Article by Prague Forum