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Fortum has initiated arbitration in Sweden against Vestas Wind Systems. 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.
According to a statement from Vestas, sanctions and export control regulations issued in 2022 prevented the company from delivering, installing, and servicing wind turbines in accordance with its contracts with Russian customer WEDF, which is owned by Fortum. Faced with this difficulty, Vestas 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. These clauses explicitly included sanctions against Russia. After months of negotiation between the parties in an effort to reach an agreement, Vestas terminated the contracts in late June 2022. WEDF was Vestas’ sole customer in Russia. The arbitration case against Vestas Wind Systems A/S is filed in Sweden by a Fortum subsidiary in Ireland, Fortum Finance Ireland DAC.
On the other hand, Fortum released a statement saying that it will defend itself against false claims by former business partner Vestas that it flouted sanctions against Russia in a commercial dispute between the two Nordic companies. Both companies entered the contract before the Russian invasion of Ukraine and before 2022 energy-related sanctions against Russia were in place. The commercial dispute concerns projects to build several wind parks with more than 50 wind turbines in Russia, for which Fortum had already made advance payments to Vestas. Vestas did not deliver on its contractual obligations and yet refused to repay the advance payments and other project-related costs. Fortum engaged in multiple discussions and negotiations with Vestas over several months with the goal of finding a mutually acceptable solution. As the negotiations were not successful, Fortum was left with no other option but to resort to arbitration. Fortum stated that it complies with all applicable laws, including EU sanctions, and has a sanctions compliance programme in place to ensure that. In May 2022, Fortum announced that it had started a controlled exit from the Russian market, with a divestment of its Russian operations as the preferred path. The divestment process has progressed and is ongoing, but it requires approval by the Russian authorities. Fortum will not comment further on contractual details that are under arbitration.
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