Insights | January 14, 2020

Roschier Energy Lectures: The opening of the Finnish gas market and gas disputes

The Finnish natural gas markets opened for competition on 1 January 2020. In early January, Roschier's Laura Huomo and Eva Storskrubb teamed up with professor Kim Talus from the University of Helsinki for the Roschier Energy Lectures, to discuss the new situation and what it will entail.

The completion of the construction of the Balticconnector Pipeline facilitated the market opening. The new market is governed by the Finnish Natural Gas Markets Act, which follows the provisions of the European Gas Regulation and no longer provides any derogations from EU regulation. Finland also need to now comply with all the network codes. Further, we now have a new market model and new rules and roles for participants to adhere to and assume in this market, as Energy Counsel Laura Huomo presented in her opening speech at the Roschier Energy Lectures 2020 in Helsinki and Vaasa held on 8 and 9 January.

New market place with new challenges

Are you ready to operate in the newly-opened market? How does the market function in terms of the new roles the participants have assumed and will assume in the future? These are questions that cannot be answered at this point, but we need to patiently observe the market and the way it develops. What we can do in the meantime is learn from the experiences in the markets in Europe that are already open, on which market structures have been stable for a while now.

One particular aspect of the market is price-review disputes regarding long-term gas supply agreements. In recent years, there has been a notable increase in arbitrations involving European gas markets due to regulatory and other market developments. Unlike traditional commercial arbitrations, which usually arise from allegations that one party has breached the contract, price-review arbitrations revolve around two main issues:

(i) whether the contractual requirements for price adjustments have been satisfied; and

(ii) if so, what the relevant adjustment should be.

The specific nature of these disputes and relevant strategic considerations were discussed by Dispute Resolution Counsel Eva Storskrubb in her speech. Thereafter, Professor Kim Talus presented some insights into certain current disputes that have a bearing on disputes against the EU and before the EU courts.

Do you need assistance with the agreements related to the new market? What Roschier can do for you is to aid your entry into the market and review the contracts you are negotiating in terms of both the pricing structure and for the sake of completeness. Have you entered into all the agreements required to fully utilize the market structure and the whole network? We can also assist with pre-dispute strategic considerations in addition to assistance should a dispute arise.