Russia to sue EU over Nord Stream 2

Nord Stream 2 AG – the operator of the Nord Stream 2 gas pipeline, intending to connect Germany and Russia, bypassing some West-Central European States, particularly Poland and Ukraine – has turned to the UN’s arbitration court to assert its rights allegedly ensured by an EU treaty, the Polish Press Agency reported, citing Russia’s Kommersant daily.

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Nord Stream 2 AG has undertaken legal action via the ad hoc arbitration procedure ensured by the rules of the United Nations Commission on International Trade Law (UNCITRAL). The Russian operator intends to claim its rights from the EU as part of the EU Energy Charter Treaty (ECT).

The ECT is set up to ensure open and non-discriminatory energy markets throughout its member states. This framework follows the rules of the multilateral trading system as embodied in the General Agreement on Tariffs and Trade (GATT), which later became the World Trade Organization (WTO).

According to the Russian daily, Kommersant, Nord Stream 2 AG claims that the overhaul of the EU gas directive, that was accepted by the EU Parliament on April 4, 2019, violates the ECT rules that forbid discrimination of infrastructural projects. An agreement on the directive was made possible by, among others, a change in the position adopted by Germany, which had long opposed the application of the EU’s legal rules to the Russian project, as well as the amendments to the directive which had been aimed at guaranteeing that.

The amended directive is the first document which clearly confirms the European Union’s jurisdiction in the case of Nord Stream 2; that is, it confirms that EU law applies to the part of the pipeline which will run through German territorial sea. This, therefore binds Russia to obey the EU law, thus making the Nord Stream 2 less detrimental to the economic interests of the countries bypassed by the gas pipeline, such as Poland.

However, according to Nord Stream 2 AG, the pipeline should be regarded, not as a new project to which the amended directive provisions should apply but as an older, pre-overhaul, free from obligations imposed by the amendment.

Russian oil giant Gazprom, the owners of Nord Stream 2 AG, may see a chance for success in legal proceedings, experts cited by Kommiersant argued, adding that the lawsuit may last as long as 3 to 4 years. Such a lawsuit would be the first of its kind, brought by an investor against the EU. Previously UNCITRAL cases have just involved suits against specified states.

Nord Stream 2 is a 1,200 km-long, two-strand pipeline that departs from the Russian coastal settlement of Ust-Luga, 110 km west of Saint Petersburg, runs along the seabed of the Baltic and terminates at the German town of Greifswald. The pipeline is set to be completed by 2019. Having concluded the pipeline’s construction, Russia would also cut down on gas flow via its other lines running through the territory of Ukraine.

Nord Stream 2 faces opposition from Poland, the Baltic States, Ukraine and the US. The construction of the pipeline was delayed by Denmark’s extended consideration as to whether the Russian pipes should be allowed to run on its territorial seabed. The country finally agreed to have the pipes laid in late October 2019.