Contractual Implications Of The Proposed Ban On Russian LNG Imports
On 17 June 2025, the European Commission published a legislative proposal for a regulation on phasing out Russian gas and LNG imports. Proposed measures to end Russian gas and LNG imports include:
- a prohibition of Russian gas and LNG imports under new supply contracts concluded after 17 June 2025, that shall apply as of 1 January 2026;
- a prohibition of Russian gas and LNG imports under short-term supply contracts concluded before 17 June 2025, that shall apply as of 17 June 2026;
- a prohibition of Russian gas and LNG imports under long-term supply contracts concluded before 17 June 2025, that shall apply as of 1 January 2028;
- a prohibition to EU LNG terminals to provide services to Russian companies or Russian controlled companies as of 1 January 2026, in the case of contracts for LNG terminal services concluded or amended after 17 June 2025;
- a prohibition to EU LNG terminals to provide services to Russian companies or Russian controlled companies as of 1 January 2028, in the case of long-term contracts for LNG terminal services concluded before 17 June 2025.
The European Commission expects the regulation to be adopted by the European Parliament and Council before the end of 2025, in order to enter into force on 1 January 2026.
More recently, on 19 September 2025, the European Commission announced the 19th package of sanctions which includes, among other measures, a ban on imports of Russian LNG into the EU under long-term supply contracts, that shall apply from 1 January 2027.
Therefore, European importers of Russian LNG will have to find alternative legal or commercial solutions to avoid contractual liability towards Russian suppliers.
Most of Russian LNG delivered to the EU is sourced from the Yamal liquefaction plant located at the port of Sabetta on the Yamal peninsula in the Arctic1. Yamal LNG cargoes are initially loaded on Arc7 ice-class LNG carriers operated by Novatek and then transshipped onto conventional LNG carriers at the Russian port of Murmansk. In the case of LNG cargoes delivered on FOB terms, the conventional LNG carriers are chartered by the European buyers, whilst in the case of LNG cargoes delivered on DES terms, the conventional LNG carriers are chartered by the Russian suppliers.
According to data published by GIIGNL in 2023 Annual Report and by ACER in the 2024 Market Monitoring Report, European buyers of LNG sourced from the Yamal liquefaction plant are the following companies:
- SEFE Marketing&Trading2 which has concluded a MSPA with a validity period from 2018 to 2038 with FOB delivery terms;
- TotalEnergies which has concluded one MSPA with a validity period from 2018 to 2032 with FOB delivery terms and two MSPAs with a validity from 2018 to 2041 with DES terms for delivery to France;
- Gunvor which has concluded a MSPA with a validity period from 2018 to 2038 with FOB delivery terms;
- Shell which has concluded a MSPA with a validity period from 2019 to 2041 with FOB delivery terms;
- Naturgy Energy Group which has concluded a MSPA with a validity period from 2018 until 2038 with DES terms for delivery to Spain;
- Repsol which has concluded a MSPA with a validity period from 2024 until 2038 with DES terms for delivery to Spain.
Challenges For FOB Buyers
In the FOB contracts, the European buyers of Russian LNG cannot declare the upcoming import ban as a force majeure event, as it does not prevent them from taking delivery of LNG cargoes at the port of Murmansk and then reselling them to any destination outside the EU they choose. It is their problem to find alternative markets for Russian LNG.
One challenge for the European LNG buyers is that the re-direction of Yamal LNG to non-EU markets would extend considerably the time spent by the LNG carriers on the laden and ballast voyages which could affect the European LNG buyers` ability to comply with the delivery windows agreed with suppliers in the Annual Delivery Program.
One possible solution could be to arrange cargo swaps with the Chinese buyers of US LNG. The cargo swaps with the Chinese buyers of US LNG would allow the European buyers of Russian LNG to take delivery of US LNG instead of Russian LNG and therefore avoid the need to re-schedule cargo shipments.
Possible Solutions For Ex Ship Buyers
In the case of LNG MSPAs providing for delivery on Ex Ship basis at EU receiving terminals, the European importers should check whether the MSPAs include clauses that allow them to terminate such contracts on the grounds of import ban.
Typically, LNG MSPAs include a clause that allows the affected party to terminate the MSPA and any LNG transaction concluded under it, if the MSPA and/or LNG transaction exposes the affected party to punitive measures in the event of non-compliance with the trade restrictions imposed by authorities. An example of such clause is the Clause 21 of GIIGNL Master LNG Sale and Purchase Agreement Template, 2024 Edition, which provides that:
"21.1 Each Party represents and warrants to the other Party that it:
(a) is knowledgeable about the Trade Controls Laws applicable to this Agreement or any Transaction;
(b) shall in the performance of such Agreement or any Transaction comply with the Trade Control Laws; and
(c) shall not do anything which may cause the other Party to be in breach of (or expose such Party to punitive measures under) any Trade Control Laws3.
21.2 The Buyer represents and warrants that if such activity is prohibited or contrary to any of the Trade Control Laws the LNG Cargo delivered under this Agreement shall not be sold, supplied, exported, re-exported or imported, directly or indirectly into any Restricted Jurisdiction or to any Restricted Party. The Seller represents and warrants that if such activity is prohibited or contrary to any applicable Trade Control Laws, the LNG Cargo delivered under this Agreement shall not be bought, taken, accepted or sourced directly or indirectly from any Restricted Jurisdiction or from any Restricted Party.
21.3 If a Party fails to comply with its obligations under clause 21.1 or 21.2, then the other Party shall have the right to terminate the Agreement and/or any Transaction immediately without incurring any liability by giving written notice to the other Party."
In the case of Ex Ship LNG MSPAs that do not include such a clause, the European importers should check whether the force majeure provisions of such MSPAs allow them to declare the import ban an event of force majeure.
Typically, the Force Majeure clause of Ex Ship LNG MSPAs lists which events can constitute force majeure and which events cannot constitute force majeure. Among the events that may constitute force majeure is commonly listed the requirement to comply with an act of an international, national or other authority that prevents the affected party to perform its contractual obligations. On that basis, the European Commission argues that:
"A legal prohibition of imports of natural gas under a Union trade measure constitutes a sovereign act of the Union beyond the control of gas importers and rendering the performance of natural gas imports from Russia unlawful, with direct legal effect and without any discretion for Member States concerning its application4."
In addition to mentioning such an event, the Force Majeure clause of GIIGNL Master LNG Sale and Purchase Agreement Template mentions as a force majeure event "any circumstances relating to the unloading of the LNG Vessel at the Unloading Port and/or Receiving Facilities or relating to the transportation of the LNG, which affects the ability of the Buyer to receive, unload or use the LNG to be delivered under this Agreement5".
However, the declaration of force majeure by the European buyers could be rejected by the Russian LNG suppliers and contested in arbitration proceedings on the grounds that the prohibition of Russian gas and LNG imports was an anticipated measure that has been under public discussion long before it was adopted. Therefore, it could not qualify as an unforeseen event for buyers.
Besides, the Ex Ship LNG MSPAs do not mention that a force majeure event would entitle the affected party, in this case the buyers, to terminate the contract. If the force majeure event prevents the affected party to perform its contractual obligations for a prolonged period of time, e.g. 24 months, only the non-affected party has the right to terminate the contract.
Accordingly, the European companies importing Russian LNG on Ex Ship delivery terms should take into consideration the available options.
The easy way is to try to reach an agreement with the Russian suppliers over the conditions for diversion of LNG cargoes to non-EU markets.
The hard way is to see whether they can declare the import ban or the impending war between Russia and NATO a force majeure event and then seek the termination of LNG MSPAs in arbitration proceedings. The European importers of Russian LNG could request the arbitral tribunals to find that the import ban and/or the impending war constitute force majeure events and to declare the LNG MSPAs concluded with Russian suppliers terminated on the grounds that the parties to a contract cannot remain bound by the contract when the performance of contractual obligations is legally impossible for an indefinite period of time.
by Vlad Cioarec, International Trade Consultant
This article has been published in Commoditylaw`s Gas Trade Review Edition No.7.
Endnotes:
1. Of a total of 18 bcm delivered in 2023, the LNG from the Yamal liquefaction plant represented 16 bcm. See ACER`s 2024 Market Monitoring Report "Analysis of the European LNG market developments".
2. SEFE Marketing&Trading is a German state-owned company that was created following the nationalization of Gazprom`s German subsidiary in 2022.
3. Clause 1 of GIIGNL Master LNG Sale and Purchase Agreement Template defines "Trade Control Laws" as "any trade or economic sanctions or embargoes, Restricted Party lists, controls on the imports, export, re-export, use, sale, transfer, trade, or otherwise disposal of goods, services or technology, anti-boycott legislation or similar laws or regulations, rules, restrictions, licenses, orders or requirements in force from time to time, including without limitation those of the United Nations, the European Union, the United Kingdom, the United States of America, any LNG Regulating Country or other official government laws, rules or requirements applicable to this Agreement or a Party to this Agreement."
4. See Sub-section 4.4 "Legal considerations on the impact on existing long-term contracts" of the European Commission Staff Working Document "Assessing the impact of measures to phase out Russian gas imports and improve the monitoring of potential energy dependencies and amending Regulation (EU) 2017/1938".
5. See Sub-clause 15.2(f).