1. Nord Stream 2: Can the EU or Germany (or indeed US, UK) be sued if sanctions are imposed on the pipeline? The short answer is no. The longer answer is below.
2. G lobbyists have said that if sanctions are imposed on NS2 there is not going to be a ‘snowball’ of litigation..no doubt the lobbyist team will be making all sorts of blood curdling noises of billion dollar claims
3. If damages claims were to be brought by NS2 they would either be direct actions the EU (as Germany is almost certainly going to seek sanctions via EU measures). Or damages claims under the Energy Charter Treaty (ECT) against the EU.
4.NS2 has already brought one dubious ECT claim against the EU for daring to enact legislation formally extending the gas directive to import pipeline. This is another example of lobbying by litigation with no actual prospect of success.
5. My more detailed demolition of that ECT claim can be found here: cepa.org/a-risky-case
6. In brief NS2 says that the pipeline was not complete by the cut off date 23rd May 2019 for completed existing pipelines who are exempt from the new regime. This is despite the fact that on 23rd May it was only 40% complete & did not have all its route permits in place.
7. A responsible investor would not have even committed to construction until all the route permits were in place. NS2 can hardly make a credible ECT claim when it should not have even have started construction at the cut off date.
8. It in fact NS2 did not get the green light from Denmark and its final route permit till October 2019. That is when it should have commenced construction. No doubt that is the part of the compelling legal argument that the EU's Legal Services will be putting to the arbit panel.
9. I would have thought therefore the Chancellery in Berlin can take the prospect with some equanimity of the threat of once again being sued by NS2 via the ECT. It just more work for the Legal Services of the EU Council & the European Commission.
10. Presumably the German government in consultation with EU allies, the UK and the US would initiate sanctions, UK, US and EU against NS2. Compensation for sanctions in US, EU and UK law is not usually available for the sanctioned.
11. A direct attack on sanctions under US, UK or EU law would be courageous. Flinty eyed judges in New York, London and Lux are likely to be v.skeptical at a claim for comp for sanctions by the sanctioned. US, UK and EU can all point to a legitimate objective to justify sanctions
12. Sanctions will be imposed for objectively justified public interest reasons in response to the poisoning of the leader of the opposition in Rus & Rus interference in Belarus. Those objectives would fall within the scope of the legitimate sanctions power of the US, UK & the EU
13. Equally how would NS2 be able to make a credible ECT claim? Again the sanctions are imposed on the basis of legitimate public policy objectives that can be objectively justified. How then can a credible ECT damages claim be sustained?
14. Then our Gazprom lobbyists will no doubt wail ‘but what about the poor EU firms who invested in NS2??’ The answer: No doubt the very expensive lawyers deployed by the likes of Shell & Engie would have ensured that Gazprom provided indemnities should the project be terminated
15. It would be amazing if the EU firms participating in the project had not sought indemnities. Remember back in 2016 the original idea had been for NS2 to have Gazprom as majority shareholder & theEU firms as minority shareholders-which had also been the corp structure for NS1
16. Then UKOKIK, the Polish competition authority stepped and opened a merger investigation of NS2. Gazprom was then faced with the prospect of a lengthy merger investigation, the prospect of a reference to the CJEU and ultimately a negative decision
17. NS1 was therefore restructured. Gazprom become the 100% owner of NS2, and the EU firms participated by providing investment funds. By this point 8 EU heads of government had opposed the project, and the EP was moving firmly against.
18. I cannot imagine in such a context the lawyers for the EU firms would have done otherwise than to press for an indemnity so that should the project be cancelled by G or terminated in any way eg by sanction their would be full indemnification
19. To be clear what is meant by full indemnification is that the EU firms involved in the project would be able to walk away from the project financially in the clear.
20. So if the Chancellery hears wailing from the lobbyists it should ask about the indemnification clauses in the NS2 contracts-& if there are no indemnification clauses then it really is the fault of the firms….to get involved in such a case and not to ensure indemnification.
21. So in sum, the chances of NS2 bringing a claim against properly drafted sanctions under US, UK and EU law is minimal. The chances of bringing a credible ECT claim against the UK or EU is also minimal. And the EU firms are almost certainly indemnified by NS2. Ends.
