NATO’s strategy against Russia is failing
Not often have such large sums of money meant so little.
The latest $14 billion arbitration 'win' for German firm Uniper against Russian energy giant Gazprom may appear to be a major triumph for the West. But this hollow victory proves little more than the failure of NATO's Russia strategy.
After all, even Uniper’s chief admits the ruling is worthless as Germany's support for Ukraine has landed it on Russia's blacklist, halting all energy partnerships. Besides, a St. Petersburg court has fined Uniper $15 billion for pursuing arbitration, negating any gains.
With Uniper and Gazprom almost entirely state-owned, this empty award isn’t just one company’s setback—it’s a direct blow to Germany's energy security and NATO as a whole.
Meanwhile, Russian oligarchs are scoring significant wins in Western courts, including $16 billion from Luxembourg alone, and billions elsewhere are becoming thawed and reintegrated into Putin’s shadowy economy.
If NATO states don’t reformulate their strategy, Russia will soon reclaim vast resources which they will use to sow chaos in Ukraine.
NATO’s quest for energy security after weaning off Russian oil and gas has meant shifting to more costly energy sources, which won’t be offset by unenforceable arbitration awards. Even Ukraine, in the midst of war, is waging a likely doomed $2.7 billion challenge against Russia’s destruction of the Kakhovka Dam.
The West is being defeated on the legal front and reversing this calls for a fresh strategy that confronts belligerent states and curbs rogue billionaires exploiting our legal system.
Only last week, the G7 bloc agreed to use around $50 billion of frozen assets as a loan for Ukraine, marking a shift from merely freezing assets to actively supporting Ukraine’s war effort with Russian funds.
But NATO countries must also address the elephant in the room: how our legal systems are being abused by oligarchs to undermine our democratic institutions. Bloomberg Law emphasizes this lack of transparency, noting that investors, including sanctioned regimes or oligarchs, can finance multimillion-dollar cases through third party litigators while remaining undetected.
For instance, Britain is currently investigating A1, a litigation funder suspected of receiving oligarch money to challenge Western sanctions.
These unregulated third party litigation funds (TPLF) are transforming courts into marketplaces where wealthy investors fund only profitable cases. Investors often select favourable jurisdictions and arbitration venues discreetly to secure the outcomes they desire.
The impact of Russian meddling is still unfolding, but one must only look to an ongoing legal battle between Malaysia and the Philippines – playing in the courts of NATO countries – to understand how unregulated TPLF can influence major geopolitical changes, alter borders, and ultimately control billions in natural resources.
Backed by roughly $20 million from the finance litigation giant Therium, the supposed Philippine heirs of the defunct Sultanate of Sulu took Malaysia to court for allegedly breaking a 19th Century treaty brokered with British colonialists. The Sulu’s resulting $15 billion claim triggered a series of enforcement actions against Malaysia’s state owned oil and gas company, Petronas – with the Sulu claimants even seizing Petronas assets in Luxembourg.
However, the criminal conviction of the Spanish arbitrator, Dr. Gonzalo Stampa, who defied a Madrid court order to halt proceedings by unlawfully moving the arbitration to Paris, has raised doubts about the entire process. Adding to the controversy is the “unusually high fee” of $2.7 million that Stampa received for his role as arbitrator.
Consequently, in March, Petronas subpoenaed a court in Manhattan to disclose documents to uncover any evidence of “money transfers,” “payments,” or “communications” between Therium and “anyone who may have conspired” with Stampa.
But beyond the courtroom, the case has challenged Malaysia’s sovereignty, inviting countries to revive territorial claims in an already politically tense region – an unnerving window into what Russia could achieve by weaponizing TPLF in NATO jurisdictions.
Hungary, a longstanding NATO member, has grown increasingly vocal about ending sanctions on Russia, with its leader becoming emboldened enough to negotiate an opt-out clause to withhold support for Ukraine.
Similarly, Austria has maintained its economic ties with Russia despite sanctions and repeated petitions from the US to sever them. With the far-right Freedom Party recently topping the latest vote, their calls to scrap sanctions could soon become national policy.
With challenges to sanctions going mainstream, NATO's strategy is faltering, causing a ripple effect on Europe's energy policy. Hungary is already falling under Putin's spell of cheap energy supply, reversing Europe’s trend away from Russian supply, placing its economy hostage to Moscow’s caprice once more.
This is why implementing key legal reforms to ward off the abuse of law to undermine national security is vital. Capping third-party award shares, mandating public disclosure of funding agreements, and addressing potential conflicts of interest are essential to ensure transparency, steering legal proceedings and international arbitration away from the influence of money and back to its true focus: justice.
Sanctions are clearly denuding Russia’s war effort. By remaining steadfast in our defense, we provide Ukraine with a window to rearm and withstand future assaults until Russia relents.
Emir Gürbüz is an expert in international law. He has been a Managing Partner of Legart Law & Consultancy Firm since 2016, currently serves as the Secretary General of Turkish Atlantic Council and board member of Atlantic Treaty Association.
