Fortum and Vestas in €200 m contractural dispute

18 April 2023

The state-owned Finnish company, Fortum Oyj, has initiated arbitration in the International Chamber of Commerce in Sweden against Vestas Wind Systems A/S. The arbitration claim, in excess of €200 million, relates to Vestas’ termination of Russian wind project contracts in order to comply with the European Union sanctions arising from Russia’s invasion of Ukraine. From the start of the invasion, the European Union has published a series of such packages, which include comprehensive sanctions aimed at the Russian energy sector.

These sanctions and export controls regulations prevented Vestas from delivering, installing and servicing wind turbines under its contracts with Russian customer WEDF, which is owned by Fortum. Vestas therefore invoked the sanctions-specific clause in each contract between Vestas and WEDF, which gave each party the unambiguous right to terminate the contracts if performance was impacted by international sanctions. After months of negotiation between the parties in an effort to find an agreement, Vestas terminated the contracts in late June 2022.

What it sees as the necessity for its legal action has led Fortum to accuse Vestas of undermining European unity – in effect ‘aiding the enemy’. Questioning whether sanctions apply, it says, can only benefit the interests of Russia and its sympathisers.

Fortum’s claim concerns projects to build several wind parks with more than 50 wind turbines in Russia for which Fortum had already made sizeable advance payments to Vestas. Vestas could not deliver on its contractual obligations, but has declined to repay the advance payments and other project-related costs.

The central commercial point around which this case revolves is, on present information, the status of the upfront payments already borne by Fortum before the invasion; the two companies entered the contract before the Russian invasion of Ukraine, and before the 2022 sanctions against Russia were in place.

For its part Fortum has unequivocally rejected Vestas’ claim – it intends to ‘vigorously defend itself against false claims by its former business partner that it flouted sanctions against Russia’.

Henrik Andersen, president and CEO of Vestas, said: “We strongly believe the arbitration to be without merit, and we are astonished and dismayed a state-owned company from a fellow EU-country would openly question the sanctions against Russia and thereby the unity of EU countries. Member states and companies were aware from the outset that the sanctions would have financial consequences, also outside of Russia.”

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