To fulfill Kobolyev's dream: how to turn a victory in the Stockholm arbitration into real money in the account

The matter of Andriy Kobolyev’s life in Naftogaz is to win arbitration. Recently it became known that his term as the Head of the NJSC was extended for another year, so, there is a chance still. decided to find out what must happen for Kobolev’s dream to come true. And to turn money won in the arbitration into real one in the account of Naftogaz.

“Our team has been working hard for 5 years on the Stockholm arbitration process... I want to complete this process. And I believe that the victory that we have achieved, and these tools that we have now given to the Ukrainian side regarding Gazprom, cost many billions of dollars... and convert them into a worthless defeat, as it was already done several times, I think absolutely wrong for both the country and for myself”, said Kobolyev during a press conference regarding the announcement by the Cabinet of Ministers of the tender to find candidates for his position.

The tender was announced on March 6, 2019, and it was supposed to start on March 23 – the day after the Kobolyev’s contract had to end. Now, apparently, the tender is canceled – an order to extend the authorities of Andriy Kobolyev until March 22, 2020 has appeared on the website of the Cabinet of Ministers.

Thus, Andriy Kobolyev still has time to implement his plans to "complete the Stockholm process". wondered: what must happen in order for the Stockholm process to receive a concrete result - to get what, by a court decision, Gazprom owes Naftogaz.


February 28, 2019 was the first anniversary of the decision of the Stockholm arbitration in favor of Naftogaz in a dispute with Gazprom. During this year, everyone has already managed to remember that NJSC won in court $4.6 billion, but according to the results of reciprocal claims, the Russian company must pay to NJSC $2.56 billion (plus penalty). The other 2 billion were paid by offsetting. In Naftogaz, the offsetting is explained as the fact that “Ukraine actually took the money by gas”, and at Gazprom, that Ukraine was nevertheless owes for gas supplies in 2013–2014.

Naftogaz has been working all this time to get an opportunity to recover this $2.56 billion from Gazprom. First of all, the lawyers of NJSC worked to find the assets of Gazprom in Europe, and in order to convince the courts in those jurisdictions where these assets should be (Great Britain, the Netherlands, Switzerland), to impose arrests on them. Gazprom, in turn, made efforts to hide assets and prove that there are no shares in the territory of the relevant jurisdictions. There were cases when it succeeded.

The plan of Naftogaz, supported by the decisions of several European courts, is generally to arrest the assets of Gazprom, to forcibly sell them at auction and get money.

Forget the image of the auction, in which the crowd shouts out numbers, an important uncle in a tuxedo knocks with a hammer, and as a result something is sold (the latest printer from the Gazprom office, for example). And let’s find out what the process of asset seizure will actually be, and how these assets will be turned into money.

What assets are being arrested?

The assets that can be arrested are shares (in some form – both documentary and electronic). But not only:

“Assets, in addition to shares (corporate rights), are still considered a lot: cash that the debtor must receive as, for example, dividends or payments for goods, works, and services. Also, these are goods supplied with prepayment by the debtor, intangible assets, etc.”, said Yuri Vitrenko, commercial director of NJSC Naftogaz of Ukraine, in a comment to Kosatka.Media.

Looking at the claims with which Naftogaz applied to the European courts and the jurisdiction in which it applied, the Ukrainian side is interested in arresting the shares of the companies gas pipelines operators: Nord Stream 1 and Nord Stream 2, Turkish Stream, Blue Stream.

It is quite understandable – Naftogaz is almost on the verge of losing gas transit, and with it an annual income of $3 billion. Manipulations with hide-and-seek assets themselves complicate the work of Gazprom in the construction of gas pipelines. And even if the shares will be frozen, and then Gazprom will win the appeal, court proceedings may delay the process of putting “streams” into operation, and make the Ukrainian GTS indispensable for a while.

Operation “Find and Prove”

The corporate rights to the two Nord Streams were expected to be found in Switzerland. But they did not find it: as it turned out, the operators’ shares were issued in documentary form (on paper), and in the companies-operators of the streams assured that there were no law enforcement officers in the country.

After that, Gazprom stated that “the court of the canton of Zug overturned its decree on May 29, 2018, imposing interim measures in Switzerland on Gazprom shares in Nord Stream AG and Nord Stream 2 AG and on Gazprom’s claims to these companies”. Naftogaz says that there was no cancellation of court decree:

“There was no cancellation of decree in Switzerland. Just in Switzerland there are no shares that we were looking for. And as they are not there physically, there is nothing to arrest. The decree to arrest Gazprom’s assets, if there are any shares, will be carried out”, said Andriy Kobolyev in response to a question from

At the same time, it is known that Naftogaz had previously found part of the shares of Nord Stream in the UK, and a London court ordered Gazprom’s subsidiary not to do anything with these shares – not to change its location or owner.

The shares of the Turkish Stream operator, South Stream Transport, were expected to be found in the Netherlands, but Gazprom transferred them to its Russian subsidiary. 100% of the shares of the stream operator were transferred from direct ownership of Gazprom to its subsidiary Gazprom Transgaz Krasnodar. According to Naftogaz’s lawyers, it happened a day before the Amsterdam court decided to arrest Gazprom’s assets in the country. As a result, NJSC has not yet been able to arrest other assets of Gazprom in the Netherlands, in addition to its stake in Blue Stream, because it has not proved that it truly knows who the new owners of other companies are, and the owner of South Stream Transport is in Russian jurisdiction.

Also, for better search of assets, NJSC appealed to the US courts in order to force financial institutions that work with Gazprom companies in Europe to issue the location of their clients' shares. In December 2018, the US federal court in New York met Naftogaz’s claims to receive information from three American financial institutions – GLAS Americ, Deutsche Bank Trust Company Americas and Bank of New York. They manage the assets of companies in which Gazprom has a share, and they have information on where their shares are located. If the court will oblige them to specify the location of the owners or shares, the process of arrest and recovery will be significantly accelerated.

“The United States is the most important jurisdiction. It requires the greatest amount of time, but it can have the most effective consequences”, Andriy Kobolyev, the Head of the Board of the NJSC, commented on appeals to the American court on his Facebook page. At the same time, he states that the interests of Naftogaz are not limited to streams operators, and the company will be satisfied with any arrests of any property for which money can be received:

“We are looking for any assets. This is all that is material, all that can be realized with the aim of repaying the debt to us”, said Kobolyev.

The choice of "possessions" of Gazprom in Europe is really quite large.

What assets does Gazprom have in Europe?

Earlier, the official site of Gazprom posted a list of 161 subsidiaries and affiliates, including companies in bankruptcy and liquidation, "dormant" companies and "technical" structures. In September 2018, all information about the subsidiaries was removed from the site. Now the companies can be found in quarterly financial report, in which only the “largest” associates and joint ventures appear. The latest data provided on the site is for the 3rd quarter of 2018.

Whereas in 2017 the list of subsidiaries specified in the annual financial statements was longer.

Gazprom Group owns many facilities in Europe and conducts quite diverse activities – from the sale, transportation and storage of produced gas in the Russian Federation to gas production in the EU, and oil refining. A couple of examples of Gazprom’s subsidiaries and joint ventures:

  • Wintershall Noordzee (the Netherlands), a joint venture with Gazprom Group, produces gas in Europe, and in 2017 began industrial development of the Ravn oil field in the Danish sector of the North Sea. In general, in Europe Gazprom produces gas in 7 countries.

  • Gazprom Marketing & Trading Retail sells gas in the UK, France, Ireland and the Netherlands.
  • WINGAS GmbH, a subsidiary of GAZPROM Germania, is a supplier at the markets of Germany, the Netherlands, Belgium, Austria, the Czech Republic and several other markets. It sells gas to utilities, industrial and electricity companies.
  • GAZPROM Germania, which is responsible for gas exports to Germany, will soon integrate all of its subsidiaries into itself and will be operationally merged with Gazprom Export. The company is registered in Germany, operates and participates in the design of 10 gas storages. It is also a sponsor of the German football club Schalke (which we note, without hinting at anything, was Hitler's favorite football club).
  • Gazprom NGV Europe is a subsidiary incorporated in Germany and sells gas engine fuel at gas stations (AGNKS) in Europe.
  • There is an oil refinery in the territory of Serbia, the Pancevo Oil Refinery, a 51% stake in the Serbian company that owns it (NIS), is owned by Gazprom Neft.


By “defrosting” we will mean the sale of seized property at auctions, by the results of which NJSC will be able to receive compensation in the form of money in the account.

The Head of the NJSC Naftogaz of Ukraine, Andriy Kobolyev, previously stated that the company had initiated legal proceedings for the arrest of Gazprom’s assets “in about six jurisdictions”. But according to the last comment received from Kobolyev, recently “in addition to the three other jurisdictions”, proceedings began in Luxembourg:

“Luxembourg’s jurisdiction emerged, where the court made similar decisions – that all assets that are within Luxembourg and belong to Gazprom, subject to the so-called encumbrance, or arrest. We are still working in three jurisdictions... Cancellation of arrests and removal of encumbrances have not yet occurred. And as there is no final decision on the start of their sale”, the Head of the NJSC said.

Operation “Appeal”

Everyone understands that Gazprom is not ready to part with either its money or any other assets and will avoid forced sale in all possible ways. In addition to the tactics of "playing hide and seek assets" or "wait until the elections, what if they manage to come to an agreement", , the main move of Gazprom is an appeal.

“It's hard for me to imagine that Gazprom will even agree to start the process of selling property. So far, their expectations, their main argument and element of tactics was that they appealed. They hoped to stop the main decision by appeal in Sweden, but they lost this element irrevocably. The Swedish Court of Appeal made a decision that a enforced penalty is possible... and they left preliminary decisions in this aspect in full force”, Andriy Kobolyev reported earlier.

But despite the fact that Gazprom "irrevocably" lost the appeal against the basic decision of the Stockholm arbitration, it still has chances in local jurisdictions, lawyers say:

"In each case, Gazprom may deny the possibility of executing the decision of the Stockholm arbitration in the local courts of a particular state ( where the NJSC appeals — ed.), but for this it needs to substantiate its position with the relevant norms of the New York Convention on the Recognition and Enforcement of Foreign Arbitration Decisions of 1958. After the decision of the Stockholm arbitration is recognized in a particular state by a local court, Gazprom may also try to evade following the decision at the enforcement stage, thereby significantly delaying the possibility of Naftogaz getting its financial satisfaction”, said Oksana Karel, senior lawyer, the Head of the International Arbitration and Arbitration Disputes Group at Arzinger.

An appeal is possible for each court decision in favor of NJSC Naftogaz, the expert notes:

“A lot will depend on the legal system of a particular jurisdiction, where Naftogaz will try to execute the decision of the Stockholm arbitration. In fact, Gazprom can appeal each decision on arrest its property or the decision to recognize and enforce the decision of the Stockholm arbitration on the territory of a particular state”.

Also, lawyers point out that “according to a general rule”, a court decision on seizure of property is still not enough to hold sales auctions:

“Holding an auction of this type will be preceded by the receipt of a local court decision on recognition and execution of a Stockholm arbitration court by Naftogaz... After that, enforcement proceedings will be opened against Gazprom, during which it will be possible to hold an auction for the sale of Gazprom property”, said a senior lawyer of Arzinger.

So, the tactics are as follows: a court decision based on a decision of the Stockholm Arbitration Court is an appeal, the decision on arrest is an appeal, and the decision to start an auction is an appeal. Such a “rebalancing of relations” (according to Miller) may delay the whole process for a year.

Auction, what is it?

The auction is conducted by a bailiff after it is decided by a court decision. For this purpose, a bailiff company is specially selected by the court. Bailiff on the basis of a warrant seizes property in an amount sufficient to cover debt and court costs. For his work, he, of course, takes a percentage of the sale.

According to the judicial system of the Netherlands, for example, a local auctioneer pre-evaluates the property not to sell more than is required to pay the debt. And we know that the assets for which Naftogaz is aiming are far in excess of the amount of Gazprom’s debt.

Bailiff assumes the entire organization of the auction – sets the starting price, and also regulates the issue of transferring money to Naftogaz. The money at the end of the auction receives a bailiff, after which these funds lie on a frozen account in the administration of the court. Further, the court decides to transfer this or that amount to the security of the company, which requires debt.

“The starting price does not really matter. If they put a low price, a million participants will come running and the price will quickly increase during the auction process. If they put too high a price, no one will come to the auction, and will not buy anything. The main thing is to sell, they are interested in this”, one of the representatives of Naftogaz told us during a conversation with

At the same time, he said, everyone can participate in the auction, including Naftogaz. Theoretically, NJSC could buy Gazprom gas in storage, or buy shares and become a shareholder in Nord Stream 2. Of course, if they are not slaughtered in the price, but of course they will be slaughtered.

In addition, there are many nuances regarding the sale of shares. For example, if we are talking about corporate rights, then other members of the company have the right of their priority redemption.

How much time will it take?

The process of arbitration auctions itself is long, especially if asset hiding is involved. Lawyers at Arzinger report that “it’s very difficult and premature to talk about a timeframe or a specific procedure.” At the same time, some employees in NJSC voiced the forecast of the “two years”, arguing that Gazprom itself under current conditions will not be able to function normally in Europe:

“This gotcha game cannot last forever, because no one wants to work with them. It has already lasts for about a year, well, it may take another two years... But Gazprom, in fact, also cannot function normally in Europe – if constantly, as soon as he gets gas to Europe, there is a risk that someone will come and arrest him. In Europe, Gazprom has 80% of its revenue from gas, which it sells... Therefore, they, sooner or later must go back down. But it is hard to admit defeat for them. And they are waiting for the elections, and they hope that someone will be able to merge the whole thing for a pittance”.

The extension of Andriy Kobolyev's contract took place before the elections. But in order to realize his ambition to complete the process of the Stockholm arbitration and to achieve real payments from Gazprom, the current Head of NJSC Naftogaz will need a job longer than the year on which the Cabinet of Ministers agreed.

Tags: Gazprom, gas, Kobolyev, Stockholm arbitration, Top management

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