International Legal Aspects of Suspending the South Stream Project

EU-Russia energy cooperation is being considerably influenced by international law issues arising in the light of the political tension caused by the EU sanctions and the Russian restrictive measures. Based on the said factors along with such issues as the possibility of application of the EU Third Energy Package to the Nord Stream 2 project, the lack of legal certainty in the regulation of the European part of the Turk Stream, the upcoming negotiations on the Russian-Chinese energy  cooperation,  particular  emphasis should be put on the issues of the South Stream project suspension, the detailed analysis of which is given in the present article. The author maintains the position that the key factors that caused the impossibility to continue the South Stream pipeline construction are the issues related to the adoption and entry into force of the EU’s TEP (including the conformity of TEP with WTO rules and the applicable bilateral intergovernmental agreements) as well as the issues related to the application of the TEP to the South Stream project (particularly, the “unbundling” rules of the TEP which impeded PJSC Gazprom’s activity with respect to the pipeline construction and operation in accordance with the EU legislation and the issues of qualification of the pipeline project in terms of the TEP rules). The author addresses the private law aspects of the South Stream project suspension, in particular, the issue of damages suffered because of the unilateral termination of contracts for the supply of goods and services which are now being claimed in international arbitration. The vivid example of such disputes is the one between the Gazprom subsidiary South Stream Transport B.V. and the Italian company Saipem. Based on the dispute in question the author concludes that not only should the arbitrators take into account the respective contractual provisions but also the circumstances that may be deemed as the grounds for exemption of the contractual liability (namely, the consent of the EU member states to the construction of the South Stream project; the acts of the states involved with respect to the project implementation; the adoption of the legislation impeding the project implementation etc.). The author comes to the conclusion that the problems of the EU-Russia energy cooperation within the frame of other pipeline construction projects to which Russia and EU member states are parties may be solved only through a dialogue in full compliance with international law s.

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