PGNiG v Gazprom

The Polish state oil and gas company PGNiG (Polskie Gornictwo Naftowe i Gazownictwo SA) has filed a suit in the Stockholm arbitration against Gazprom.

Poles want to renegotiate the formula for calculating the price of Russian natural gas. The formula has been pegged to international oil prices, which have risen significantly and pushed up the cost of gas imports.

PGNiG refers to the fact that Gazprom gave 15% discount to Latvia and Estonia, and introduced the spot component in the pricing formula for the E.On Ruhrgas, Gaz de France and Eni (effectively, cutting prices by 10%-15%).

If the tribunal rules in PGNiG’s favour, the company would save up to half a billion dollars.

So far, the question is not so much as whether the Polish company is going to win the case but whether the Russian gas leviathan is going to stand trial and risk defeat. Arbitration, in contrast to litigation, is confidential. The fact that there has been a leak to the press indicates that Poles are hoping that Russians would not take chances and settle.