The Arbitration Court of St. Petersburg and the Leningrad Region satisfied the claim of Ruskhimallyans (a joint venture between Gazprom and RusGazDobycha), one of the operators of the construction of a gas processing plant in Ust-Luga, and seized the Russian assets of the former contractor of the project, the German engineering company Linde – worth 35 billion rubles. Rushimalliance intends to recover more than €970 million in damages from a foreign company. The chance to recover money for the structure of Gazprom is more real than the prospect of quickly finding a replacement for the contractor, experts say.
The Arbitration Court of St. Petersburg and the Leningrad Region arrested the Russian assets of the transnational chemical company Linde in the amount of 35 billion rubles, follows from the card of the arbitration case published on the website of the court. We are talking about Linde GmbH from Germany and its parent company Linde PLC, registered in Ireland. In 2022, a German contractor withdrew from a project with Gazprom to build an LNG plant in Ust-Luga due to sanctions. The lawsuit was filed by one of the operators of the construction of the complex for the processing of ethane-containing gas – Rushimalliance LLC. Having received a court ruling on interim measures in the form of seizure of property, Rushimalliance intends to apply to the Hong Kong International Arbitration Center with a claim against Linde, which complies with the terms of the contract, the court decision says.
The price of the Rushimalliance lawsuit against the defendants will be €946.5 million of the unworked advance payment and €25.7 million (7.6 billion rubles), according to the court ruling. Within 15 business days of the award of injunctive relief, the claimant must proceed with pre-trial settlement of the dispute with Linde, namely, send a notice of referral of the dispute for consideration by senior management. After another 45 days and five business days, a notice of arbitration must be sent to the Hong Kong International Arbitration Center. The seat of the dispute is Hong Kong, the place of hearing is Stockholm, Sweden.
“International arbitration takes quite a long time, therefore, based on the results of the sanctions in the light of the SVO, it is too early to talk about successfully resolved disputes and subsequent penalties. The trend at this stage is not obvious,” explains Varvara Knutova, lawyer, partner at Sotby law firm. At the same time, the lawyer notes that the Stockholm arbitration, for example, ordered the Finnish company Gasum to pay €300 million to Gazprom, and the arbitration also agreed that Gazprom had the right to suspend the supply due to the refusal of the Finnish company to pay for gas in rubles, although did not oblige the buyer to pay in rubles henceforth. “Thus, our companies have small but significant successes in the light of international arbitration, despite the general sanctions and political pressure,” Ms. Knutova draws attention.
In the situation of a dispute between Rushimalliance and a contractor, the plaintiff’s chances of a positive resolution of the dispute in arbitration are very high, continues the representative of the law firm Sotby. “Obviously, the unreasonable deduction of an advance is unacceptable, whatever law may be applicable to the contract. The defendant’s reference to sanctions as a basis for retaining the undisbursed part of the advance will ultimately not find support from the arbitration. In world practice, arbitration tribunals consider disputes even with the participation of companies from countries under UN sanctions,” the expert explains.
The success or failure of Rushimalliance largely depends on whether the Hong Kong International Arbitration Court recognizes the imposition of sanctions against the Russian Federation as a circumstance sufficient (perhaps even force majeure) for non-compliance with Linde’s obligations to the Russian counterparty, the managing partner of the bureau expresses a different point of view legal strategies Legal To Business Svetlana Guz.
The press service of Rushimalliance did not comment on how things are going with the choice of a new contractor for the construction of the LNG plant in Ust-Luga and how much the project will be delayed. Independent expert Anton Sokolov believes that Linde’s withdrawal from the Rushimalliance project will most likely lead to a shift in the timing of its implementation to the right, since it will be necessary to find a contractor capable of implementing complex projects at the level of the enterprise as a whole, and not individual installations. “At the same time, the stages of design or construction supervision today, in my opinion, are slightly less important than the selection of equipment suppliers for a future enterprise,” the expert clarifies. “In Russia, large-scale international EPC projects have been implemented for the last 10–15 years in single volumes so the market, in fact, is just emerging, but, of course, there are companies that can handle the project in Ust-Luga.”
According to Mr. Sokolov, among Russian companies, NIPIGAZ (which was replaced by Linde in 2021, see Kommersant dated 03/14/2021) or Peton will be able to take the place of Linde, with certain reservations. “The list of foreign companies is now limited to the Asian region – there are certainly worthy companies there, but in the face of sanctions uncertainty, their participation is likely to be in question,” the expert added.
