Nord Stream loses €580m insurance battle after UK court rules war exclusion applies
Nord Stream has lost a €580mn lawsuit against insurers led by Lloyd’s of London over explosions that destroyed Russian gas pipelines to Europe, as a judge found they did not need to cover the damage.
As reported by FT, the High Court in London on Monday ruled that a war exclusion applied to the policies, allowing the insurers to avoid what would have been among the industry’s largest-ever payouts for infrastructure damage.
Russia, Ukraine and the US were all identified during the proceedings as potential perpetrators of the 2022 blasts in the Baltic Sea, though the judge, Dame Clare Moulder, did not find which party was responsible.
The ruling nevertheless means western insurers will not have to make a huge payment to a company that is majority owned by Gazprom, Russia’s state-backed gas champion, which Moscow used to inflict a damaging energy crisis on Europe less than five years ago.
In a 96-page judgment following a six-week trial earlier this year, Moulder said she was not required to identify the perpetrator of the blasts to establish whether the insurers were liable.
Under all plausible scenarios examined by the court, she found the war between Russia and Ukraine would be a “significant” cause, so the exclusion should apply.
The judgment is a victory for a group of insurers including Lloyd’s and Arch, which argued that the blasts arose from the war, or must have been ordered by a state, so they were not liable.
Lawyers for Nord Stream had argued that the war exclusion should not apply, in part because the war was a backdrop to, not the cause of, the explosions.
Lawyers for the company also said the blasts could have been executed by non-state saboteurs. However, Moulder found that even if this was the case, their motives would have been driven by the war.
Lloyd’s, Arch and lawyers for Nord Stream all declined to comment after the ruling.
Three of the four pipeline strings of Nord Stream 1 and 2 were destroyed off the coast of Denmark by explosions deep in the Baltic Sea in September 2022.
Gazprom had already stopped natural gas supplies to western Europe through Nord Stream 1 before the blasts, as it sought to trigger an energy crisis on the continent, which has been estimated to have eventually cost European countries in excess of €1tn.
Nord Stream 2, a pipeline the US had long argued would increase Russia’s leverage over western Europe as it was under construction, had been due to start up in early 2022 but was blocked by Germany as Moscow geared up for its invasion.
Nord Stream 1 AG’s pipelines were 51 per cent owned by Gazprom with the rest split between a number of German energy companies. Western energy companies also provided financing for Nord Stream 2, but it remained wholly owned by Gazprom.
No state has ever taken responsibility for the blasts. Two Ukrainian suspects were arrested in Italy and Poland after investigators found traces of explosives on a yacht that German prosecutors alleged was used as a base to plant explosives.
The suspect in Italy was extradited to Germany, but Polish authorities refused to extradite the second man.
Last week, German federal prosecutors filed charges against the first suspect, accusing the Ukrainian national of causing an explosion, destroying structures, being an accomplice to a war crime and disrupting public services.
Theories advanced by expert witnesses in the case included that Ukraine destroyed the pipelines because it wanted to cut revenues to Moscow or that Russia wanted to deny Europe gas.
Possible motives for the US included that the pipelines “provided geopolitical leverage to Russia”, Simon Salzedo KC, for the insurers, said in a written submission.
However, solving the mystery was not required for the judge to find in favour of the insurers.
Moulder said: “If any of the possible perpetrators carried out the sabotage, the war would have been a ‘significant’ cause of their actions and thus the damage was ‘directly or indirectly occasioned by, happening through, or in consequence of war’ within the meaning of [the] exclusion.”
Head of Investigations
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