The Amsterdam District Court has frozen 100% of the shares in the South Stream Transport B.V., a subsidiary of Russia's Gazprom gas company, based on a lawsuit filed by Ukraine's national energy company, Naftogaz, it announced late Friday.
Naftogaz said that it took this action to prevent Gazprom from taking further steps to avoid payment of a $2.56 billion Stockholm Chamber of Commerce arbitral award and accrued interest in favor of Naftogaz.
"To date, Gazprom has refused to pay this award and has used a variety of methods to try to prevent Naftogaz from enforcing the award, including by transferring assets such as the South Stream shares out of its name," it explained.
The Ukrainian company said that it has initiated fraudulent conveyance proceedings before the Amsterdam District Court to challenge the transfer of the South Stream shares to a subsidiary of Gazprom.
The shares of South Stream Transport B.V. are now attached.
South Stream Transport B.V said in a statement that the situation would not affect the TurkStream natural gas pipeline's construction.
"We are currently preparing for the first gas flow through the TurkStream natural gas pipeline, which is scheduled for the end of 2019," the company said.
- Arbitration process
After four years of arbitration proceedings between Naftogaz and Gazprom, the Stockholm Arbitration has delivered two fateful awards: the first came on Dec. 22, 2017 concerning a gas supply contract based on the "take or pay" principle, and the second one on Feb. 28, 2018 with respect to a transit contract.
Initiated in 2014, the arbitration proceedings have become the largest commercial arbitration ever.
Mutual claims amounted to about $125 billion, which threatened to bankrupt both Gazprom and Naftogaz.
The Stockholm arbitration also satisfied Naftogaz's claim for compensation of $4.63 billion for Gazprom's failure to deliver the agreed volumes of gas for transit.
Following the results of the two proceedings, Gazprom has to pay Naftogaz $2.56 billion adjusted to a $2.1 billion set-off for gas delivered in 2014.
Reporting By E. Gurkan Abay in Moscow
Writing By Murat Temizer