A Netherlands court has established that there are legal grounds for Western contractors with outstanding contracts in Russia to terminate their commitments and exit the country, thus offering a defence against future compensation claims by former Russian clients.
In a judgement published on 9 June the Rechtbank district court in Amsterdam rejected an appeal from Dutch-registered Saren — acting on behalf of Russian operator Arctic LNG 2 —seeking payment of €39.5 million ($41.2 million) from dredging and maritime infrastructure contractor Royal Boskalis Westminster with reference to guarantees from a Western bank.
Saren is a joint venture founded in 2018 by Servizi Energia Italia, an indirect subsidiary of Italy’s Saipem and RHI Russia, an indirect subsidiary of Turkey’s developer Ronesans Holding.
Saren later obtained a major construction contract from Russia’s Arctic LNG 2.
Arctic LNG 2 is led by Novatek, a Russian independent gas producer with ambitions to become a major supplier of liquefied natural gas.
According to the court’s filing, a Russian subsidiary of Royal Boskalis Westminster, identified as Boskalis Llc, was carrying out a contract covering dredging and bund wall removal in the Belokamenka yard, Murmansk, when Russia invaded Ukraine.
Boskalis was quick to react to the first package of European sanctions against Russia at the end of February, leaving the construction site of the Belokamenka yard on 4 March.
The court has upheld arguments from Royal Westminster Boskalis that it would be in breach of European sanctions against Russia if it had continued, because its two vessels operating in the Belokamenka yard could be regarded as so-called “dual-use” goods that could contribute to the technological reinforcement of Russia’s defence and security sectors.
The EU sanctions cover the export of dual-use items and technology and restrict the export of certain items.
A 27 May sanctions update prohibited outright the supply of goods, technology and services for the liquefaction of natural gas in Russia.
The court also rejected Saren’s argument that Boskalis Llc is exempt from sanctions because it is incorporated in Russia.
It pointed to a European Commission clarification that “EU nationals working for that subsidiary are personally bound by EU sanctions and can be held personally liable for participating in transactions which breach” the regime of sanctions.
Boskalis Llc is headed by Dutch national Alex Klaver, according to company registration filings in St Petersburg.
Finally, the court upheld a provision in EU sanctions regulations stating that claims of damages or losses by Russian companies, individuals or bodies acting on their behalf, shall not be allowed.
Impartiality concern
Western companies may face an uphill struggle in recovering assets that remain inside Russia, especially when they are disputing with state-run or state-backed companies, according to one Moscow based lawyer.
In the Boskalis case, in May, a regional arbitration court in Murmansk slapped an injunction on two specialised vessels that Royal Boskalis Westminster brought to the country for Arctic LNG 2.
The Moscow-based lawyer pointed out that Arctic LNG 2 had no contractual and commercial relations with Boskalis, however, the court had acted on the appeal.
Royal Boskalis Westminster has not provided the estimate of its assets frozen in Russia.
However, the court filing in Amsterdam said that the company has a claim of €14 million against Saren and Arctic LNG 2, “not counting other damages”.
Major European contractors Saipem and Technip Energies have not yet commented on market suggestions that they are exiting the Arctic LNG project.
The pair are involved in the construction of Arctic LNG 2’s concrete gravity-based foundations and LNG topsides at the Belokamenka yard.
Before the prohibition on Russian LNG projects was enacted at the end of May, both companies expressed cautious hopes that they will be able to continue performing on Arctic LNG 2 construction contract without breaching European sanctions.
According to European E-justice web portal, national case law calls for courts of the member states of the European Union to apply and interpret the law of the relevant member states as well as EU law.
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