The judicial panel stated on Monday that such a recognition and enforcement of arbitral decision in Lithuania would be contrary to the public policy. This, according to the court, is one of the grounds for refusing to recognize a foreign arbitral award specified in the New York Convention of 1958.
In the Court of Appeals' opinion, the arbitration tribunal had resolved the issue that fell within the remit of Vilnius Regional Court. Two processes – arbitration and court – pertaining to the same matter and the same grounds could not take place simultaneously, the court said.
“The Lithuanian state went to Vilnius Regional Court before Gazprom addressed the arbitration tribunal. The circumstances studied lead to the conclusion that the arbitration tribunal did not have to start hearing the issue that had already been raised and heard at Vilnius Regional Court. When hearing this issue, the arbitration tribunal did not comply with the provisions of the New York Convention, which provides grounds for refusal to recognize the decision concerned,” the court’s statement reads.
The court’s decision may be challenged at the Lithuanian Supreme Court within 30 days.
In March 2011, the Lithuanian government filed a suit with Vilnius Regional Court asking it to open a probe into the activities of Lietuvos Dujos (Lithuanian Gas), the Lithuanian gas imports and transportation company controlled by Gazprom and Germany’s E.ON Ruhrgas International.
In August 2011, Gazprom filed a counter-suit against Lithuania with the Stockholm Arbitration Tribunal and asked to oblige the Energy Ministry to terminate the hearing of that case at Vilnius Regional Court.
Gazprom said immediately after the arbitration tribunal's ruling in July that it had satisfied most of its claims and protected the rights of the company as a shareholder of Lietuvos Dujos. The Russians also pointed to the arbitration tribunal's position that disputes over the terms of natural gas supply and transit, as well as over other commercial relations between Gazprom and Lietuvos Dujos, had to be heard by arbitrators rather than by Lithuanian courts.
However, Gazprom failed to have the Lithuanian government obliged to abandon the probe into Lietuvos Dujos' activities, as the Stockholm Arbitration Tribunal decided that the Lithuanian state had the right to launch such an investigation and had not violated the shareholders' agreement.
In early October, Lithuania filed a suit of 5 billion litas (EUR 1.45b) against Gazprom, but it is thought that the dispute might end in an agreement if the Russian supplier consented to negotiate over lower gas prices. Russia has made it clear to Lithuania that it will not change its pricing policy until 2015.
The European Commission is currently carrying out an investigation into Gazprom‘s operations in Central and Eastern European. Among other things, it suspects that the supplier could have imposed unfair prices on its customers by linking the cost of gas to oil prices.
Lithuania, which currently pays the highest price for Gazprom‘s natural gas in the EU, thinks that the Russian supplier applies discriminatory prices to the country, which is the first Baltic state that is implementing the EU's third energy package and aims to unbundle the assets of Lietuvos Dujos, in which Gazprom holds a significant stake, by the end of 2014.