Written by Joseph Nasr and Markus Wacket

BERLIN (Reuters). Germany’s decision not to approve Nord Stream 2 raises questions over the fate of Nord Stream 2, a $11 million, 1,230 km gas pipeline that runs under the Baltic Sea. Gazprom is also likely to sue for damages.

This is the next step in Europe’s largest divisive energy project.

ISN’T NORD STREAM 2 DEAD FOR GOOD?

It is possible, however, that the likelihood of the pipeline which was built last year but had been in limbo waiting for certification to come online ever shrinks.

When asked by ARD if Nord Stream 2 would still be available online, Olaf Scholz of Germany’s Chancellor said that it was impossible to predict. At the moment, we are far away from that.

Robert Habeck (Economy Minister), whose Greens party has opposed the project in previous interviews, said to ARD that it may be abandoned completely.

“It’s still possible to impose sanctions on Nord Stream 2,” he stated.

However, some of those supporting the pipeline and the Kremlin say that they still believe the decision to stop certification can be reversed.

WHAT’S THE NEXT STEP FOR THE CERTIFICATION SYSTEM?

On Tuesday, the German Economy Ministry withdrew a report submitted to Germany’s energy regulator last year declaring that there was no threat to energy supply security.

Within three months, the ministry will submit a revised assessment that would include Russia’s recognition and threat of military intervention by Russia.

Germany’s energy regulator will almost certainly deny approval of the project if it declared the pipeline as a threat to energy security.

After Scholz had suspended the project, Tuesday’s regulator stated that Nord Stream 2 could not be certified and therefore its operation would have to be declared illegal.

WILL THE COMPANIES BEHIND PIPELINE SUE

This suspension of certification has raised concerns about possible lawsuits from Nord Stream 2 AG (the subsidiary based in Switzerland that Gazprom set up to manage the pipeline) and its partners seeking damages from Germany.

Habeck claimed that Germany is exempted from any such claims due to the fact that certification is required for operation of the pipeline.

This issue is a contentious one.

Wiegand Laubenstein is a former judge who is now a partner in energy law firm Rosin buedenbender. He stated that the government will be protected from any financial liability if the Economy Ministry makes a negative assessment about Nord Stream 2.

Laubenstein sent an email stating that “the process selected by the government was totally justified, formally sound, and closes out any potential claims for damages,” adding that it would be almost certain to be negative.

Gabriel Lentner is a Danube University Krems legal scholar in Austria. He said that the suits were not likely before the new government assessment.

Lentner stated that “one big question is how Germany will justify suspending the project” and whether the Nord Stream 2 AG contracts are sufficient to support this.

He said: “I believe Nord Stream 2 will probably wait for Economy Ministry’s updated assessment before deciding whether to file a lawsuit seeking damages.” This is temporary suspension while the project certification takes place. It is expensive to start any legal procedure.

What LEGAL AVENUES ARE AVAILABLE FOR NORD STREAM II?

Nord Stream 2 may seek damages from Germany’s government. However, it may also pursue international arbitration pursuant to the Energy Charter Treaty(ECT), which permits companies to sue foreign governments for policies that impact their investments.

The ECT was created originally to help energy businesses as the Soviet Union fell. But, recent analysis has shown that 54 of its signatory states could permit coal plants to continue to produce carbon dioxide for more years than a decade.

Nord Stream 2 AG, which has a signed country status, is based out of Switzerland.

Gazprom already made use of the ECT pact in order to challenge the EU Court of Justice a European Commission gas rule that required gas producers to be separate from the ones that manage the pipeline.

COULD NORDSTREAM2 BE RE-PURPOSED

An agreement was made last year by the former Chancellor Angela Merkel to work with Russia on repurposing Nord Stream 2 in order to transport hydrogen to Germany once Germany stops using gas.

However, this is a long-term endeavor and is not worth the effort if certification is delayed.

Nord Stream 2’s spokesperson wrote an email stating that Nord Stream 2 aims to have the pipeline ready for hydrogen transport in 10 years. Early studies indicate that this is possible.