PGNiG commenced negotiations on gas price reduction and change in the price terms with Gazprom Export over six months ago. A formal request was sent to OOO Gazprom Export in April 2011. However, the talks with the Russian partner have not yielded results which would be acceptable to PGNiG. Therefore, like other European companies, PGNiG has decided to exercise its rights under the contract.

The subject matter of the proceedings is a change of the current price terms of gas supplies to Poland under the long-term gas supply contract of September 25th 1996 executed by PGNiG with Gazprom and Gazprom Export. As provided for in the contract, if the parties fail to reach an agreement within six months of the date of the formal commencement of price renegotiations, each party may refer the case to the Arbitration Court in Stockholm.

The proceedings will be conducted in accordance with the UNICITRAL Arbitration Rules. Under the procedure, the party submitting the case for arbitration must notify the other party of the arbitrator's name and the subject matter of the dispute by registered mail. Within 30 days of receipt of the notice, the other party should designate the other arbitrator. The arbitrators are to name the chair of the arbitration court within 30 days of their appointment. The arbitration court's resolutions are adopted by majority vote.

Steps aimed at reducing gas prices under long-term gas supply contracts have also been taken by other leading European companies. PGNiG hopes to reach an agreement enabling it to purchase gas at prices reflecting the conditions prevailing on the European gas market.

The commencement of the arbitration proceedings does not mean the end of commercial negotiations. PGNiG hopes that it will be able to continue them with the Russian partner.

Joanna Zakrzewska

Spokeswoman