Yaroslav Teklyuk is the Director for Legal Affairs at Naftogaz. He is responsible for legal matters, government relations and protection of the company’s interests in court and other institutions. Mr. Teklyuk has 15 years of professional experience in legal practice. He graduated in International Law from the Institute of International Relations at Kyiv National Taras Shevchenko University.
– First of all, I would like to begin by asking you about the emotional part of the arbitration process. We are all humans, and figures are not the only thing we are interested in. Please recall your brightest emotions from that period.
– The brightest emotion was my excitement when we received the separate award in the supply arbitration. It seemed obvious that Gazprom’s most dangerous claim was to make us pay around USD 50 billion under the take-or-pay provision. This principle is not alien for European gas supply contracts. Despite the fact that we were asking the tribunal to rule the take-or-pay provision invalid as it was formulated in the contract, there still was a high chance that arbitral tribunal would not do so, and instead the tribunal would just decrease the amount of Gazprom’s claims. Once we saw the award in our favor, emotions were strong.
– You dealt with the legal side of the arbitration process. Please tell how the work of lawyers was organized: how many of them were involved, how did they cooperate between one another, how external lawyers were selected?
– In total, we had about 15 external advisers at different times. It was I and another two colleagues of mine who were dealing with the arbitration process on the Naftogaz’s side. We engaged the Norwegian company Wikborg Rein as our external legal counsel. They, in turn, engaged a Swedish law counsel and a Ukrainian law counsel (Gernandt & Danielsson and Aequo legal firms) as well as other experts. Wikborg Rein, in particular by Dag Mjaaland and Aadne M. Haga planned work of the legal team. As a client representative, I authorised all procedural documents before submitting them to the tribunal; I also made decisions in regard to approving legal decisions and actions undertaken within the framework of the arbitrations (e.g. selection of arbiters, selection and appointment of the tribunal’s chairman, and a myriad of other decision) Our work was coordinated quite well. Everyone was aware of their own tasks and deadlines.
– In what way does the Stockholm arbitration differ from Ukrainian courts?
– I will tell about our experience. There are several aspects that come to my mind: a) depth of analysis of nuances of legal positions of each party and factual circumstances the parties refer to; b) willingness to render a legal and just award; c) the fact that arbiters place much value on their reputation as arbiters and lawyers, which is why they do their best dealing with cases in a most correct and efficient manner, at the same time making sure that rights of both parties are respected.
It was of the utmost importance to us that arbiters study our legal position in great detail, since it was much more difficult to comprehend than the position of Gazprom, which was mainly based on the provisions of the signed contract. Gazprom basically claimed that nothing can be changed and thus Naftogaz should just comply with the contract that Naftogaz signed.
– In Ukraine many people think that a tribunal’s decision in the Stockholm arbitration depends more on geopolitics and cunningness of hired lawyers than on ability of Naftogaz to correctly define its claims, substantiate them and support with witness statements. What do you think about it? In particular, do you consider that Gazprom lost the case because it hired incompetent lawyers? Or could it be that Naftogaz lost to RosUkrEnergo in the arbitration also in Stockholm because of its external lawyers?
– That’s not true. Decisions in both cases were taken by top-notch lawyers with excellent reputation, who are not influenced by geopolitics. For instance, as an arbitrater Gazprom appointed Johan Munck, a former chairman of the Supreme Court of Sweden. He was the chairman of the tribunal in the arbitration between Naftogaz and RosUkrEnergo. Naftogaz lost it. In a way this might testify to the fact that all that mattered was a well substantiated and convincing legal position of a party and its will to win. Gazprom was represented by high-qualified lawyers. Moreover, at the hearings Gazprom’s interests were represented by well-known Queen’s Counsel who belong to the elite of English barristers. As for RosUkrEnergo, it is common knowledge that Naftogaz itself agreed with RosUkrEnergo’s claims.
– Let me ask a provocative question. A commercial arbitration, like the one that took place in the case of Naftogaz and Gazprom, is a consideration of issues in commercial relationships between parties within explicitly defined legal framework. I looked at our arbitration against Gazprom, first and foremost, from an economic perspective. To me, this arbitration was one of the means of changing the nature of commercial relationships between Naftogaz and Gazprom, so that they would yield fair financial results to the company. To what extent did I bombard the legal team with complicated economic constructs, which I could not have explained any easier, and as a consequence, that led to thousands of pages of reports made by external experts, based on which you had to develop even more pages of pleadings? That being said, I thought it was necessary for me to understand your legal logic, which is why I came up with so many questions. At times I even had arguments with you on some purely legal matters. Were you annoyed by such arguments or was it something that you might call a usual teamwork?
– That was a completely normal workflow. The deeper the company’s management delves into the matter (without delegating all the tasks to external advisers), the better is the result. At the heart of our litigation with Gazprom was economic issues, namely economically unfavorable contracts for Naftogaz and Gazprom’s abuse of its dominant position. We then faced the task of selecting right legal instruments and constructs that would allow us to justify the possibility and necessity to revise contracts. And when you were arguing, it was annoying.
– Had Naftogaz lost the arbitration process and the tribunal obliged it to pay Gazprom both according to the take-or-pay provision and according to the price specified in the contract (without it being revised), the company simply would not have been able to pay. What consequences for Naftogaz and for Ukraine might have followed from such decision?
– In this case Ukraine would have become a debtor of its arch-enemy. There is no point in deluding ourselves – the debt incurred by Naftogaz is effectively Ukraine’s debt. It is my conviction that Russia would have gone to great lengths so as to make Ukraine pay off this debt, if not in money terms, then by forcing us to make some geopolitical concessions. Furthermore, such decision would have made it much more difficult for our European and American partners to counteract Russian aggression, since the Kremlin would have acted as Ukraine’s major creditor.
*The feature series “Naftogaz Against Gazprom” is running in partnership with Yuriy Vitrenko, Executive Director of Naftogaz Group. Opinions expressed in these features do not necessarily reflect the views of Naftogaz Group or the NV editorial team.