Fortum Sues Russia for Billions After Seizure of Assets

Company claims ‘unlawful seizure’ violated investment treaties, seeks compensation.

Finnish energy company Fortum has initiated arbitration proceedings against the Russian Federation, seeking billions of euros in compensation for the unlawful seizure of its assets in the country.

The move follows the Russian government’s alleged violation of investment treaty obligations under agreements with the Netherlands and Sweden. Fortum, with a significant presence in Russia for over 60 years, claims the Russian actions, culminating in Presidential Decree No. 302 of April 25, 2023, resulted in the loss of control and expropriation of its assets.

According to Fortum, the Russian authorities seized control and deprived them of shareholder rights, leading to the dismissal of the CEO of PAO Fortum, the Russian subsidiary. These actions, Fortum argues, constitute a breach of international investment treaty protections.

In July 2023, Fortum sent a notice of dispute to the Russian Federation, initiating the first step towards arbitration. However, the company claims that Russia failed to engage in any constructive settlement discussions. As a result, Fortum is formally seeking compensation for the lost investments, amounting to several billion euros.

The expropriation of Fortum’s Russian assets triggered a full financial deconsolidation and impairment of those assets, as reported in the company’s second quarter 2023 results. Subsequently, the assets were fully separated from Fortum, and the new management appointed by the Russian government renamed PAO Fortum as “Forward Energo.”

Moving Forward: Fortum emphasizes its commitment to protecting its investments and rights, stating they will “continue to take all necessary steps” to achieve this goal. The outcome of the arbitration proceedings and the full financial impact on Fortum remain to be seen.

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