myORLEN is claiming a contractual penalty for the consequences of the war in Ukraine

The Law Firm’s lawyers provided comprehensive legal services to the Client in the forthcoming court proceedings, in which myORLEN is claiming a contractual penalty amounting to several dozens of millions of PLN. Such a liability could jeopardise the Client’s continued operations.

In the third quarter of 2021, the Law Firm’s Client entered into comprehensive agreements, together with annexes, with myORLEN (then PGNiG) for the supply of gas fuel over a period of two consecutive years. The contracts made the amount payable for the gas fuel received dependent on gas price quotations on the Polish Power Exchange INC. (Towarowa Giełda Energii S.A.) and on price reservations made by the Client.

Military operations on the Russian-Ukrainian and Russian-Belarusian borders, Gazprom’s policy and the economic recovery following the end of the COVID-19 pandemic led to sharp and unprecedented rises in gas prices in the fourth quarter of 2021. Subsequently, the outbreak of war in Ukraine caused gas prices to rise by as much as several thousand per cent in 2022. This situation prevented the Client from taking delivery of gas on the terms set out in the contract with myOrlen, which ultimately led to the imposition of contractual penalties.

The Law Firm’s Client found itself in a difficult situation, as it could not cease operations due to unfavourable economic and geopolitical conditions; in the field of heat generation, it was carrying out public utility tasks aimed at meeting the collective needs of the population on an ongoing and uninterrupted basis. Nor could it offset its rising operating costs by raising prices, as it was restricted in this regard by the tariffs approved by the President of the Energy Regulatory Office.

myORLEN, when calculating the contractual penalty for the uncollected volume of gaseous fuel, decided that all the factual circumstances, including the consequences of the hostilities in Ukraine and the crisis on the gaseous fuel market, were entirely the Client’s responsibility. Furthermore, in calculating the contractual penalty, it relied on flawed provisions which it had itself introduced into the text of the contract.

The Law Firm’s lawyers contested the claim and, in their statement of defence, put forward a number of arguments—both factual and legal—pointing to an incorrect interpretation of the events that occurred after the contract was concluded, the invalidity of the provisions in the comprehensive contracts and annexes regarding the structure of the contractual penalty, the applicable legal mechanisms excluding our Client’s liability, and a gross breach of the contractual balance by myOrlen.

This is now the third legal dispute in which our Law Firm is representing entities on which myOrlen (PGNiG) is imposing contractual penalties for uncollected volumes of gaseous fuel. In the cases handled to date, the court has upheld the arguments put forward by our Law Firm’s lawyers, ruling that the penalty is not due. We have provided further information on previous cases in the following posts:

1) PGNiG (Polish Oil and Gas Company) imposes contractual penalty once again;

2) PGNiG charges penalty for unclaimed gas volume. The court finds – the penalty is not due

3) PGNiG charges a penalty for uncollected gas volume – court rules no penalty is due (Part II)

For this reason, our lawyers are once again hopeful of a satisfactory outcome to the ongoing court proceedings, and we will keep you informed of any developments.