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15 April 2021
On 6 October 2020 the Office of Competition and Consumer Protection (UOKiK) fined Gazprom and five other firms engaged in the construction of the Nord Stream 2 gas pipeline a record €6.5 billion for concluding agreements without the authority's consent.
The UOKiK stated that Gazprom, Engie Energy, Uniper, OMV, Shell and Wintershall had not obtained the UOKiK's necessary approval for a joint venture, but had concluded a number of agreements on the financing and other authorisations for Nord Stream 2, which effectively confirmed their "significant and indispensable role in the entire project".
Further, by agreeing on a pledge on the shares of Nord Stream 2, the financing parties became 'quasi-shareholders' of that company. In the event of its default under the loan agreement, they would be entitled to take over the shares of the company constructing the gas pipeline. The UOKiK stated that the advantages and obligations stemming from participation in the undertaking were clearly defined for all parties involved.
UOKiK President Tomasz Chróstny said that:
[i]n December 2015, when the establishment of the joint venture was first reported, the participants specified their 'intention to concentrate' that has remained a part of their plans ever since… Each subsequent move was only an attempt to alter the form of their participation in the scheme. All entities were aware of the activities undertaken, as exactly the same economic operators had previously financed the establishment of the [Nord Stream 1] gas pipeline, enjoying the same shareholdings.
Less than one year later, after the UOKiK raised serious concerns about the concentration, Gazprom signed agreements concerning the gas pipeline with the five European energy companies.
According to those agreements, half of the total estimated €9.5 billion cost of constructing Nord Stream 2 was to be financed by those five corporations, each contributing €950 million, while the other half was to be covered by Gazprom.
Chróstny said that:
[t]he same entities which had previously applied for the approval based on the competition protection regulations in effect in Poland and failed to receive it became parties to the financing agreements… The level of their financial involvement remained similar, and the terms and conditions of financing were determined in a manner enabling them to take over the shares at a later stage of the project. All participants of the concentration scheme also share the same interest in implementing the project.
The UOKiK found that the conduct was an attempt by the would-be shareholders of Nord Stream 2 to work around the requirement to obtain the necessary approval to establish a company financing the construction of the gas pipeline.
Chróstny noted that:
[i]f the project were solely of a financial nature, then Gazprom could easily obtain financing from the Government of the Russian Federation or from commercial banks… But none of the fellow participants had financial activities as their core activity; they were all competitors of Gazprom…
The fact that a joint venture is financed by participants of the gas market and not by financial institutions proves that all the entities involved share the same economic interests.
When evaluating the gravity of the conduct, the UOKiK found that the parties never gave up their intention to push forward with the project (they just chose another form) and that the companies involved acted knowingly.
The UOKiK held that the completion of the project would be a breach of competition rules, resulting in an increased dependence of gas recipients on Gazprom in the internal market.
According to the UOKiK, such a situation could result in the introduction of territorial restrictions affecting the deliveries of natural gas and a hike in gas prices for Polish end customers. Gazprom's negotiating position as the consortium leader would also be strengthened in both Poland and other EU member states.
The UOKiK stated that the penalty imposed is an unprecedented maximum penalty of 10% of their annual revenues.
The UOKiK also ordered the companies to terminate all financing agreements relating to Nord Stream 2 within 30 days after receiving the decision, which will reinstate the state of competition prior to the concentration.
Chróstny emphasised that:
[t]he launch of [Nord Stream 2] will threaten the continuity of natural gas supplies to Poland… An increase in the price of the product is also highly likely, with the said increase being borne by Polish consumers. It also poses a threat to Europe's energy security.
The UOKiK imposed the following fines:
Gazprom has appealed the fine.
For further information on this topic please contact Pawel Kulak at Schoenherr Attorneys at Law by telephone (+48 22 223 09 00) or email (email@example.com). The Schoenherr Attorneys at Law website can be accessed at www.schoenherr.eu.
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