Ukrainian state-owned company Ukrkhimtransamiak won an international arbitration dispute against Russian chemical producer Togliattiazot, The CEE Legal Matters news outlet reported on Sept. 19.
Togliattiazot produces a range of chemicals, including ammonia. Some of these are piped to Ukraine and loaded onto ships via Ukrhimtransamiak’s pipeline infrastructure. The Ukrainian company charges the Russian producer for both transport and loading.
Ukrhimtransamiak wanted to increase its loading fee by one dollar per ton. Togliattiazot demanded a reduction in the transit fee from $34 to Hr 18,5 per ton. The ensuing dispute lasted two years in the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry in Kyiv.
“The international arbitration issued the decision in our favor, that is it declined the request of Togliattiazot, and supported out claim,” said Ukrhimtransamiak director Valentyn Shlichta. Now his company will be able to earn two million dollars more per year, he added.
“Please note that this decision has not yet entered into force. Togliattiazot will appeal against it,” said Dmitriy Masalitin, spokesman for the Russian chemical producer.
The two companies have been cooperating since 1979, when an ammonia plant in the Russian industrial city of Togliatti was connected with the Black Sea port of Odesa by a pipeline. The Togliatti-Odesa “ammonia pipeline has no market equivalent and remains the major means of transportation of ammonia produced and exported by Togliattiazot,” according to a statement of Ukrhimtransamiak’s lawyers at Integrites law firm.
By participating in the arbitration, the Russian company recognized the jurisdiction of the Kyiv-based international arbitration court.
The decision “has been issued, in accordance with Ukraine’s law on international arbitration – it is final,” said Olena Perepelynska, who represented Ukrkhimtransamiak. “By law [Togliattiazot] has the procedural opportunity to appeal to a (national Ukrainian) court and reverse it on procedural grounds.”
According to Perepelynska, the dispute arose in 2017 when the Ukrainian company tried to renegotiate the price, as was its usual practice. The Russian producer argued against the price increase, invoking numerous conventions and international agreements, but this argument went nowhere.
Schlichta said that his company prefers to resolve contentious issues “at a negotiating table and not in court.” However, his company is prepared to challenge Togliattiazot’s appeal in court.
“This victory strengthens our position, and I am sure that we will resolve all these issues at the negotiating table,” said Schlichta.
Ukrhimtransamiak has already started charging Togliattiazot the new transit and loading prices.
The initiative to build an ammonia plant and pipeline came from American businessmen Armand Hammer in the 1970s. Hammer made a fortune on U.S.-USSR economic cooperation thanks to his exclusive ties with the Soviet elite. The ammonia started to be produced in Togliatti in 1979 and the first shipments to Odesa by pipes took place the same year.
The pipeline became fully operational in 1981. Since then the end product could get transported from Togliatti to Odesa for entering global markets through the sea port.
Togliattiazot is one of the major players on the global ammonia market, according to a report published by Thomson Reuters on Aug. 6. Currently the company is building its own terminal at the Russian Taman peninsula on the Black Sea, but the completion is years away.
The global ammonia market is expected to grow 5 percent per year until 2024.
