Yesterday, the Federal Minister of Economics and Climate Protection (“BMWK”) appointed the Federal Network Agency as trustee for all business shares in GAZPROM Germania GmbH on the basis of the Foreign Trade Act. This has far-reaching consequences not only for Gazprom, but also for the contractual partners of Gazprom companies.
Facts
On 4 April 2022, the Federal Minister of Economics and Climate Protection (“BMWK”) ordered the following on the basis of the Foreign Trade Act:
- “With regard to all voting rights from shares in Gazprom Germania GmbH, the trust administration of the Federal Network Agency until 30 September 2022 shall be ordered in accordance with the following numbers 2. to 4.
- The exercise of the voting rights of the shareholders of GAZPROM Germania GmbH is excluded.
- The voting rights from the shares in GAZPROM Germania GmbH are hereby transferred to the Federal Network Agency. In particular, the Federal Network Agency is entitled to dismiss and reappoint members of the Management Board and to issue instructions to the Management Board.
- The powers of administration and disposal in relation to the assets of GAZPROM Germania GmbH shall be limited and subject to the approval of the Federal Network Agency.”
(BAnZ AT 04.04.2022 B13 of 4 April 2022).
The BMWK justifies the order as follows:
The order was necessary to ensure the public order and security of the Federal Republic of Germany within the meaning of section 4(1) no. 4 of the Foreign Trade Act (“AWG”). GAZPROM Germania GmbH is a company which, as an operator of critical infrastructure, is of outstanding importance for gas supply in Germany. The shares in GAZPROM Germania GmbH had been transferred to a company based in St Petersburg, whose economic and legal owner was unknown.
According to the BMWK’s findings, GAZPROM Export LLC (“GPE”) was the sole shareholder of GAZPROM Germania GmbH until 25 March 2022. GPE, in turn, was a wholly owned subsidiary of the group’s parent company GAZPROM based in Russia.
The shares in GAZPROM Germania GmbH held by GPE in the amount of 100 % were transferred to a company named Gazprom export business services llc (“GPEBS”) with its registered office in St. Petersburg on 25 March 2022.
A register extract from the Russian Commercial Register dated 1 April 2022 shows that 0.1 % of the shares in GPEBS were transferred to the Joint Stock Company Palmary (“Palmary”) as of 31 March 2022. According to GAZPROM Germania GmbH, the remaining 99.9 % of the shares in GPEBS are held by GPEBS itself. Palmary therefore controls 100 % of the voting rights in GPEBS and thus also in GAZPROM Germania GmbH, because the remaining shares are held by GPEBS itself as so-called own shares and therefore have no voting rights. It is unclear who is economically and legally behind Palmary.
On 1 April 2022, GPEBS had adopted a notarised resolution of the shareholders of GAZPROM Germania GmbH notifying, inter alia, the decision to voluntarily liquidate GAZPROM Germania GmbH and instructing the management of GAZPROM Germania GmbH to carry out this voluntary liquidation.
In the opinion of the BMWK, the indirect acquirer of the shares in GAZPROM Germania GmbH (i.e. Palmary) failed to comply with its notification obligation under section 55a (4) sentence 1 of the Foreign Trade Ordinance (Außenwirtschaftsverordnung – „AWV“) and also violated the prohibition on the exercise of voting rights under section 15 (4) sentence 1 no. 1 of the Foreign Trade Act (AWG) by ordering the liquidation of the domestic company GAZPROM Germania GmbH, which would result in the end of GAZPROM Germania GmbH’s legal existence. Therefore, the proper conduct of the investigation procedure under the AWG, and thus the guarantee of public order and safety, was concretely and currently endangered and the order was therefore lawful and proportionate.
The order had been issued in consultation with the Federal Foreign Office, the Federal Ministry of Finance and the Deutsche Bundesbank and was immediately effective and enforceable.
Consequences
1. Capacity to act of GAZPROM Germania GmbH
As a result of the order, the Bundesnetzagentur now has all the powers of a 100 % shareholder in GAZPROM Germania GmbH as trustee of the shares in GAZPROM Germania GmbH held by GPEBS. There are no restrictions. The Federal Network Agency can therefore in particular:
- Recall the management of Gazprom Germania GmbH and all its subsidiaries and appoint a new management (this is already being planned in the BMWK/BNetzA);
- amend the Articles of Association of Gazprom Germania GmbH and its subsidiaries;
- issue instructions to the management of Gazprom Germania GmbH regarding the management of the company;
- take all decisions on transactions requiring approval under the Articles of Association (including large loan agreements, long-term supply contracts, etc.);
- dispose of or acquire participations in companies.
However, the trustee position does not include the right to draw profits from the Gazprom Germania. This lies with the holder of the shares, i.e. the GPE or GPEBS, depending on the viewpoint (see below). However, the Federal Network Agency can also change and limit this right to draw profits by amending the Articles of Association or by adopting a resolution on the annual financial statements.
2. Consequences for existing supply contracts with customers
Existing contracts of gas customers with subsidiaries of GAZPROM Germania GmbH, in particular with Wingas GmbH and astora GmbH, will initially remain unaffected by the change of shareholder and the assumption of trustee administration by the Federal Network Agency. The respective GAZPROM Germania companies, i.e. in particular Wingas GmbH and astora GmbH, remain the contractual partners. As a result of the trusteeship, neither the Federal Republic of Germany nor the Federal Network Agency become contracting parties, nor is the Federal Republic of Germany liable for the performance of the contracts.
However, the contracting parties could have certain rights.
a) Change of Control („CoC“)
If the supply agreements contain so-called change-of-control clauses, the question arises as to whether a CoC case really exists: If the BMWK’s assessment is correct that Palmary would have had to notify the acquisition of 100% of the voting rights in GPEBS pursuant to Section 55a (4) sentence 1 of the Foreign Trade Ordinance the transfer of the business shares would be pendingly ineffective pursuant to Section 15 (3) AWG. The transfer would only become effective if the BMWK released the acquisition or did not prohibit it within the statutory period of two months after notification or if the release was deemed to have been granted after the expiry of this period. As a result, in the opinion of the BMWK, the GAZPROM Group currently continues to be an indirect shareholder of GAZPROM Germania GmbH. This means that there is currently no CoC case, with the consequence that corresponding clauses in the supply contracts cannot be invoked.
b) Material-Adverse-Change („MAC“)
Furthermore, there are so-called material-adverse-change-clauses in many supply contracts. According to these clauses, additional collateral can be demanded if Wingas/GAZPROM’s credit rating deteriorates and the contract can be terminated if this collateral is not provided on time. According to information from Creditreform, GAZPROM Germania GmbH’s credit rating has been temporarily suspended since 1 April 2022. The trusteeship ordered by the Federal Network Agency does not yet directly change this. This would only be the case if the Federal Network Agency were to provide appropriate collateral, for example by injecting liquidity, guarantee declarations or guarantees, for example from the state-owned Kreditanstalt für Wiederaufbau („KfW“). If such MAC clauses are present in supply contracts, it would therefore currently be possible to demand such securities and, if necessary, to terminate the contracts, depending on what rights the contract clauses give.
3. Consequences for GAZPROM Germania/Wingas import contracts
If the import contracts that Wingas GmbH has concluded with GPE also contain CoC clauses or MAC clauses, this could entitle GPE to terminate or provide collateral if necessary. This is because the ineffectiveness of the transfer of the shares from GPE to GPEBS would be ineffective only under German law (see above), but presumably not under Russian law. Whether an invocation of possible CoC or MAC clauses is therefore not possible because GPE itself triggered the triggering event (transfer of the business shares to GPEBS and transfer of the shares in GEPBS to Palmary and GEPBS itself), again depends on Russian law.
It is also possible that GPE could invoke a MAC case under the import agreements with possible termination rights because of the ordered trusteeship of the shares in GAZPROM Germania.
In the event of a termination of the import contracts, this could in turn have an impact on Wingas’ contracts with its customers, for example due to the MAC clauses in such contracts.
(5 April 2022)