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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

On nonlegal arguments

“Is there any guarantee that Ukraine will win the case in Stockholm?”
27 March, 2013 - 18:08

The stagnancy in gas negotiations between Ukraine and Russia stirs up the supporters of legal solution to this long-lasting conflict. On Tuesday, their ranks were joined by Dmytro Firtash, a Ukrainian businessman and president of the Federation of Employers of Ukraine. While answering journalists’ questions at the Zaporizhia Titanium and Magnesium Plant, Firtash said: “Is there any guarantee that Ukraine will win the case in Stockholm? Perhaps there are none. It cannot be said for sure. But I think there is an 80 or even 90 percent chance that Ukraine will win. This is my personal point of view.” At the same time Firtash, owner of Group DF, supported Ukrainian government’s intention to influence Gazprom’s tough attitude during the negotiations via decreasing the amount of gas purchased from the Russian Federation. “I think they made a right choice. Underground gas storages are full, we have no room for any more. And the money we give to Gazprom [as payment for the gas. – Author] is taken from the budget, from salaries, from the money that could be spent on road works.” “How could they have signed an agreement for buying 44 billion [cubic meters. – Author] of gas, when the internal demand was never so high?” asked the businessman, obviously reproaching the signers of the gas contracts drawn on February 19, 2009.

However, on the same day Ukraine’s Prime Minister Mykola Azarov said during his meeting with the US deputy state secretary Wendy Sherman that gas contracts with Russia gave no grounds for legal proceedings. This statement implies that it is not the absence of legally correct documents that impede court proceeding, but something quite different.

We got this impression after learning the views of a few Ukrainian lawyers, who supported the opinion of their colleague, director of the Lions Litigate Law Firm Stanislav Batryn. On March 6, the latter sued the Cabinet of Ministers of Ukraine and the State Property Fund for the wrongful acts of the state institutions, their refusal to protect the interests of the state and the people, and unwillingness to terminate onerous contracts on gas supply between Russia’s Gazprom and the National Joint-Stock Company “Naftohaz of Ukraine.” In his statement, the young lawyer demands that the court order the government to convene an extraordinary general meeting of Naftohaz of Ukraine’s shareholders and pass a resolution to terminate gas contracts with Gazprom. According to Batryn, without this, the abovementioned entity has no right to apply to the Arbitration Institute of the Stockholm Chamber of Commerce with a request to declare the agreements with the Russian side invalid. He thinks that only Naftohaz of Ukraine (but not the president or the Cabinet of Ministers) can initiate the revision of gas contracts and be a negotiating party with Gazprom.

The lawyer said that the negotiations that are now carried out by the presidents of Ukraine and Russia over the price of Russian gas are the direct evidence of interference of state authorities into activities of independent entities. “If the president of Ukraine independently settles the matter of gas contracts revision, he exceeds his authority with the consequences that are similar to those present in the Yulia Tymoshenko case.” Besides, Batryn reminds that the Pechersk District Court headed by Rodion Kirieiev acknowledged that signing and execution of provisions of the gas contracts led to serious consequences for the country, harmed its interests, and posed a threat to the national security of Ukraine. Batryn indicates in his lawsuit that from the date the Pechersk Court’s verdict in the Tymoshenko case entered into force, the government unlawfully did not settle the matter on gas contracts revision, termination, or application to the court with a request to declare them invalid.

But is it possible for Naftohaz to win the lawsuit against Gazprom? We have already cited Firtrash’s prediction on 80 percent chance of success in this matter. On the same day when Azarov met Sherman and tried to convince her that gas contracts with Russia had no legal grounds for taking the matter to court, experienced Ukrainian lawyers supported Batryn and stated that Ukraine could win the case at the Stockholm Institute of Arbitration. “We have every reason to think that if the Cabinet of Ministers orders Naftohaz to apply to the Stockholm Institute of Arbitration and raise the question of declaring the gas contract, which is onerous for Ukraine, invalid, the court will decide in favor of Naftohaz,” said Oleh Bereziuk, president of the NGO Ukrainian Law Society.

When giving substantiation to his claim, Batryn asked: “I, as a citizen of Ukraine, have a question about difference in the views of the president of Ukraine and the head of the Cabinet of Ministers. If in 2011 the president publicly and officially stated that the claim was ready, why, a year and a half later, does the Cabinet of Ministers officially states that they are not going to revise the gas contracts?”

Volodymyr Vasylenko, Doctor of Law and professor at the National University “Kyiv Mohyla Academy,” judge of the International Criminal Tribunal for the former Yugoslavia, also believes that Batryn’s stand is perfect from the legal point of view. He notes that “it is the state’s duty to ensure proper conditions of activity of business entities for them to satisfy the needs of society and citizens. Therefore, if an entity’s or any citizen’s actions harm the state, the state may terminate acts adopted by an entity or a citizen.”

However, during a private conversation with The Day, Batryn assured that he understood all the difficulties associated with the termination of the contract and the subsequent new negotiations. According to him, the real goal of the lawsuit is the desire to stir up the government’s activity in the gas sector. And when The Day asked Vasylenko if he, as a world-renowned lawyer, would agree to represent Ukraine’s interest at the Stockholm Institute of Arbitration, he gave a positive answer without hesitation.


Valerii BOROVYK, chairman, board of directors of New Energy of Ukraine Alliance:

“There is a strong argument in the very contract between Gazprom and Naftohaz. It looks as follows: should market gas prices in Europe change, the parties can start negotiations, and if they do not reach an agreement, either party can apply to the Stockholm Institute of Arbitration. Considering this provision, each one out of 15 European companies that buy gas from Russia obtained the revision of gas prices: some got it through arbitration, and some even during the pre-arbitration process.

Gazprom has lowered the basic gas price in the contract, reduced the amount of purchased gas, and increased the possibility of purchasing gas according to spot contracts. There already are precedents of European countries that took advantage of this. But even without them, law firms that consulted the previous government before the arrival of the incumbent one, stated that there were grounds to go to court. Why were these law firms withdrawn? Why were the lawsuits not initiated? Why, despite European companies’ successful experience, Ukraine does not use this right? There can be only one answer: there are backstage negotiations going on.

Today Ukraine certainly has all the grounds (and this was stated many times by experts and lawyers) for applying to the Stockholm Institute of Arbitration with a request to review the provisions of the gas contract: base rate, volume of purchases, and price formation formulas. This has not been done yet. Why? This question must be addressed to the president of Ukraine.

Interviewed by Natalia BILOUSOVA, The Day

By Vitalii KNIAZHANSKY, The Day