Finnish court orders Russian asset seizure under Naftogaz arbitration award

A Finnish court has ordered the seizure of Russian assets in Finland valued at tens of millions of dollars following a petition from Ukraine's Naftogaz, the state-owned gas company said Oct. 28.

Naftogaz is currently looking to enforce a $5 billion arbitration award made in its favor in April 2023 by an arbitration court in The Hague for losses caused by the seizure by Russia of Naftogaz assets in Crimea in 2014.

Moscow has not yet voluntarily paid the funds required by the award.

In a statement, Naftogaz said the district court of the city of Helsinki satisfied the company's petition and imposed the seizure of certain assets belonging to Russia in Finland.

Naftogaz said the decision by the Helsinki court was part of the company's "global strategy to collect compensation for the losses caused by the seizure of assets in Crimea in accordance with the decision of the Hague arbitration."

"This is also the first publicly known successful seizure of assets outside of Ukraine to enforce an arbitration award in cases of lawsuits by Ukrainian companies against Russia regarding the expropriation of property in Crimea in 2014," it said.

"It is an intermediate step on the way to the actual recovery of assets in favor of Naftogaz."

Naftogaz said that because Russia refused to voluntarily pay Naftogaz the funds stipulated by the Hague decision, it would continue to use "all available mechanisms" to recover them.

"Today, we are one step closer to restoring justice. At the same time, we are taking active actions to enforce the arbitration decision in other target jurisdictions where there are Russian assets," CEO Oleksiy Chernyshov said.

In December last year, a UK court recognized the $5 billion arbitration award in favor of Naftogaz while in June 2023 Naftogaz also filed a petition with the US District Court of the District of Columbia in an attempt to enforce the arbitration ruling.

Naftogaz said it had the right to start the process of recognition and admission to the enforcement of the decision on the territory of those states where Russian assets are located.

Naftogaz assets

Naftogaz owned a number of oil and gas assets in Crimea before its annexation by Russia in March 2014.

They included gas producer ChornomorNaftoGaz, two drilling rigs worth $400 million each at the time, underground gas storage facilities and gas pipelines.

ChornomorNaftoGaz produced 1.65 Bcm of gas in 2013 and was targeting an increase in output to 3 Bcm in 2015.

Russia also seized more than 2 Bcm of gas that had been kept by Naftogaz at Crimean underground gas storage facilities before the annexation, according to Ukrainian officials.

Naftogaz initiated arbitration proceedings in 2016 and in February 2019 the court found that Russia was liable for "unlawfully expropriating Naftogaz's investments" and that the actions were in violation of Russia's obligations under a Russia-Ukraine bilateral investment treaty.

Ukrainian gas production was already stagnating before Russia's full-scale invasion of Ukraine in February 2022 and output dropped to just 18.5 Bcm that year.

But it managed to raise output to 18.7 Bcm last year and is targeting another annual increase in 2024 to be able to meet demand over the winter without resorting to European imports.

Eliminating the need for imported gas this winter is a key priority for Kyiv not least given the current high cost of gas in Europe.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price on Oct. 25 at Eur43.47/MWh.