High Court rejects Nord Stream’s €580 million insurance claim, citing war exclusion

The High Court of England and Wales has dismissed a €580 million insurance claim brought by Nord Stream AG, the operator of the Nord Stream gas pipelines, over the sabotage of the infrastructure in September 2022.

The ruling rejects the claim brought by Nord Stream AG, in which Russian state energy giant Gazprom holds a majority stake, against a consortium of insurers led by Lloyd’s Insurance Company and Arch Insurance.

According to an analysis by the Financial Times, the decision allows the underwriters to avoid paying out what would have been one of the largest compensation claims in the history of global infrastructure insurance.

In her judgment, High Court Judge Claire Moulder ruled that the destruction of the pipelines was directly linked to the war between Russia and Ukraine. Consequently, she determined that the damage fell under the war exclusion clauses stipulated in the insurance policies.

The court noted that establishing the precise identity of the actor behind the sabotage was not a decisive factor in resolving the insurance dispute.

“It is not necessary to determine who the most likely perpetrator of the sabotage was,” Justice Moulder emphasized in the ruling.

The written judgment examined four potential scenarios regarding who might have been behind the attack. The potential perpetrators identified included Russia, Ukraine, Ukrainian-linked non-state actors, or the US. The court concluded that under all of these scenarios, the war remained the dominant cause of the sabotage.

“Even if any of the potential perpetrators carried out the sabotage, the war must be considered a ‘significant cause’ of this action,” the document stated. The judge emphasized that she was not making a definitive finding regarding the culpability of any specific nation.

The ruling further noted that the fact that neither Moscow, Kyiv, nor Washington had claimed responsibility for the attack did not sever the causal link between the war and the strike.

The reasoned judgment also analyzed the potential motivations each actor might have had for carrying out the operation. If the sabotage was executed by Ukraine or Ukrainian-linked forces, the primary objective would likely have been to reduce Russia’s gas export revenues and weaken the Russian economy during the war.

In the event that Russia was behind the act, the ruling suggested Moscow’s motivation would have been to exert pressure on Germany and the European Union, punish them for shifting their policies following the military invasion, and influence their support for Kyiv.

Under the scenario involving potential US participation, the operation would likewise have been directly related to the Russia-Ukraine war.

The court noted that experts appointed by both parties agreed on the technical aspects of the attack. According to expert reports, the damage that disabled three of the pipeline’s four lines was carried out using hexogen-based shaped charges.

Nord Stream AG’s claim that the damage to the fourth line might have been caused by a dropped anchor was rejected by the court. Agreeing with the insurers’ defense, the court accepted that this damage was also largely the result of the same explosion.

Separately, the German Federal Prosecutor General’s Office issued its first arrest warrant in July as part of its investigation into the pipeline sabotage.

According to investigative authorities, the operation was coordinated by Sergey Kuznetsov, a 50-year-old Ukrainian citizen.

Six other Ukrainian citizens, including professional divers and explosives experts, are also alleged to have participated in the sabotage operation.