Abuse of Dominance Claim Rejected in Long-Term Gas Transportation Contracts International Arbitration

The Situation

In this ICC arbitration, an international gas shipper challenged long-term contracts for gas transportation capacity on a gas transit pipeline based on alleged violations of Treaty on the Functioning of the European Union (TFEU) Article 101 (restriction of competition) and Article 102 (abuse of dominance), as well claims of hardship and an unforeseen change of circumstances.

NERA's Role

NERA was retained by the respondent (the pipeline operator) to assess the economic arguments related to the alleged abuse of dominance and the alleged restriction of competition brought forward by the claimant, as well as to estimate the value of the transportation contracts in response to the claimant’s hardship claim. The NERA team analysed the relevant gas transportation market, the terms of the long-term contract, and its implications for the relevant market, the regulatory environment, and the development of gas price spreads on relevant gas transportation routes.

Based on their analyses, the NERA team concluded that the claimant’s dominance finding rests on a too-narrow market definition and that the contract’s terms can neither be considered abusive nor as having the potential to restrict competition. They further showed that while the value of the transportation contracts decreased over time due to narrowing gas price spreads, this decrease does not put the claimant into a position of hardship.

The Result

The arbitral tribunal rejected the gas shipper’s claims in their entirety, the gas transportation contract was upheld, and the claimant was ordered to pay a substantial portion of the respondent’s legal and advisory costs.