GAIL, ArcelorMittal Nippon Steels settle LNG supply dispute; end litigation

Notably, AMNS and GAIL had both filed litigations against each other at the Delhi High Court

The Delhi High Court was on December 4 informed that Public Sector Undertaking (PSU) GAIL and steel manufacturer ArcelorMittal Nippon Steels (AM/NS India) have settled the dispute pertaining to the Liquified Natural Gas (LNG) supply agreement.

The lawyers for both sides told the court that a settlement had been reached by the last week of November and the terms of the settlement have been recorded in an agreement. The lawyers urged the court to take the settlement agreement on record and dispose off the plea.

The court accordingly recorded the settlement and disposed off the plea.

Notably, AMNS and GAIL had both filed litigations against each other at the Delhi High Court. While AMNS had sought interim relief by seeking directions to GAIL to supply the LNG for November 2023, GAIL had challenged the appointment of an arbitrator by the Delhi International Arbitration Center.

In November 2023, the HC denied any interim relief to AMNS. The HC said, "non-supply of LNG by GAIL would not lead to cessation of the AMNS' manufacturing facilities and in these circumstances, default in the supply of LNG by the GAIL may lead to the steel manufacturer incurring additional expenditure."

The dispute

The two companies had entered into an LNG sale and purchase agreement (LSPA) for the sale and delivery of LNG on a ‘take or pay’ basis between 2021 and 2025. According to the LSPA, GAIL was to supply an annual contracted quantity (ACQ) of LNG of 11.87 TBtu during each contract year. The state-run gas distributor, however, stopped LNG supply to AMNS in October 2023 after disputes arose between the companies amid GAIL’s failure to supply LNG in 2022.

AMNS alleged that GAIL did not supply LNG between August 2022 and December 2022, which the latter had claimed was due to a force majeure. AMNS has challenged the existence of the force, citing that GAIL could still have supplied LNG to them considering they have many suppliers.

AMNS invoked the arbitration clause in the agreement and asked the Delhi International Arbitration Centre (DIAC) to adjudicate the dispute. However, GAIL terminated the agreement and refused to continue supplying LNG to AMNS for its steel plant in Hazira, Gujarat.

In May 2022, Russia’s Gazprom Marketing and Trading Singapore (GMTS) halted supplies of natural gas to GAIL citing the war in Ukraine. As a result, the gas distributor had to cut supplies to clients.