Why Gazprom’s $7.6 Billion Polish Fine Is Just the Start
(Bloomberg) - Poland's antitrust watchdog has fined Gazprom PJSC $ 7.6 billion for the Nord Stream 2 pipeline, opening a new front in the bitter political battle over the natural gas project. Wednesday's surprise move raises a number of legal questions about the plan, which is about to end.
What was the fine for?
The antitrust agency said Gazprom and its partners, who were ordered to pay around $ 61.3 million, had not received approval for a joint venture to fund the pipeline. Completion of the project will make European gas customers more dependent on a single supplier, Gazprom, and could raise gas prices for Polish customers, the agency said. In addition, the companies have been instructed to terminate their financing agreements for the pipeline.
What happens next?
The Polish authority gave Gazprom and its partners 30 days to re-establish competition or to appeal the decision. While Gazprom owns the Baltic Sea pipeline project, half of its EUR 9.5 billion (US $ 11.2 billion) cost will be borne by Engie SA, Royal Dutch Shell Plc, Germany's Uniper SE, Wintershall AG and financed by the Austrian OMV AG.
Gazprom has already announced that it will appeal, and a decision will most likely take at least five years based on the current duration of the cartel cases. The courts could decide to speed up the process if the lawyers can convince them of the urgency of the case.
The dispute could move from the local competition tribunal to the Supreme Court, where it could remain stuck for at least three years. A decision by the competition watchdog from 2006 on an exchange fee cartel is currently still being processed by Polish courts.
When does Gazprom have to pay?
The fine does not have to be paid until the appellate court has issued a binding judgment. If Gazprom doesn't pay, judges could order the seizure of assets. European Union rules theoretically allow Polish authorities to turn to other antitrust authorities across Europe to impose fines on their behalf.
Is there a risk of political interference?
Perhaps. A series of controversial judicial reforms in Poland since 2015 have increased political clout in the courts, put the nation on a collision course with the European Commission and sparked a series of lawsuits in the EU courts that have restricted the nation's access to the funds of the Blocks could endanger. Some European courts have refused to hand over suspects to Poland under European arrest warrant proceedings, fearing that their trial would not be fair.
While a particular court and its decisions may not become politicized, the problem of the Polish judiciary has become systematic and politicians have undue influence over courts, says the Association of Polish Judges Iustitia. This in turn removes their confidence in the impartiality and independence of their decisions.
Is the fine and appeal keeping Nord Stream 2 on hold?
No. The Polish decision cannot block the entire pipeline project and its implications could be purely financial for Gazprom, but it creates another hurdle. According to analysts, Poland is not responsible for stopping the almost complete construction of the gas pipeline, as the gas connection does not cross either the country's territorial waters or the country's exclusive economic zone.
How unusual is the penalty?
Very. The Polish fine far exceeds penalties for EU monopoly abuse at large tech companies like Google, and is well above the fines imposed by the EU or other national authorities for violating merger rules. EU antitrust chief Margrethe Vestager specifically told reporters this week that none of her fines have reached the maximum level of 10% of a company's annual turnover since 2014. Altice NV was fined € 124.5 million two years ago for pushing ahead with a takeover prior to EU approval.
Could everything end up in the EU courts?
The odds are bad. The Polish Cartel Office became implicated in the case after Gazprom and its partners asked it and other EU regulators to approve the creation of Nord Stream 2. After Poland questioned the joint venture in 2016, the companies revoked the application and applied for loan funding. The Polish regulator investigated further, saying the move was an attempt to circumvent competition law. As the decision is based on national law and is issued exclusively by the Polish watchdog without the involvement of the European Commission, the local courts have the final say in this case.
A direct challenge to the Polish decision before the courts of the EU in Luxembourg is not possible for the same reasons. However, since Poland is an EU member and is expected to apply the antitrust rules in accordance with the bloc's laws, there is a low probability that a question about the scope of EU law will arise in the course of Polish appeals.
If a Polish court ruled that there could be no answer, it could refer a number of questions to the EU Court of Justice. Such questions would not enter into the dispute and would only focus on legal issues. The argument would also delay any final decision for another two years or so.
(Updates to the process of collecting fines and charts in the third question.)
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