Swedish court rejects Turkey’s Akfel Gaz challenge in Gazprom price dispute

LONDON (ICIS)–A Swedish court on Tuesday dismissed a challenge by Turkish importer Akfel Gaz in a price dispute with Russia’s Gazprom.

The Svea Court of Appeal upheld an award by the Stockholm arbitration tribunal, which in November 2018 said Gazprom could adjust the price formula and remove a discount included in the supply contract with Akfel Gaz.

Akfel Gaz, one of Turkey’s largest independent importers, challenged the award, insisting the arbitration tribunal had handled Gazprom’s claim incorrectly.

The dispute dates back to 2015 when, under the terms of the supply contract signed by Akfel Gaz with Gazprom in August 2012, the parties were entitled to request a price review between 1 January 2015 and 8 December 2015. The price embedded in the contract was indexed to oil and calculated according to a formula.

On 8 December 2015, Gazprom notified Akfel Gaz of its intention to remove a discount previously included in the contract and to increase the base import price.

In its written adjustment request, Gazprom referred to the decline in Brent crude oil price.

After Gazprom requested a price adjustment, parties reached a supplementary agreement for a provisional price for 2016.

However, no agreement was reached for the period after 2016 and Gazprom reiterated its demand for the removal of the discount and the increase in the base price.

As the parties failed to reach an agreement, Gazprom initiated arbitral proceedings against Akfel Gaz and the tribunal awarded in its favour in 2018.

AKFEL CHALLENGE

However, Akfel Gaz disputed Gazprom’s claim that the review period ran until 31 December 2016, insisting that the review period spanned 1 January-8 December 2015.

Akfel Gaz also challenged the arbitral award, noting the tribunal had not given it the opportunity to calculate its prices after Gazprom split its claim regarding the proposed price increase.

The Svea Court rejected Akfel Gaz’ challenge to both accounts, noting that it would have been “natural for a party to submit an investigation of the entire claim and not just parts of it”.

It added it should not have been particularly difficult for Akfel Gaz to calculate what the new price adjustment requested by Gazprom would have been based on various elements of the contractual formula.

It also added that circumstances that occurred after the review period could be taken into account and that the arbitration tribunal had not committed any procedural error.

Akfel Gaz is part of Akfel Commodities Turkey Holding, a company which was nationalised by the Turkish state in December 2016.