Vestas has argued that “sanctions-specific” clauses give both parties the right to terminate contracts. Credit: Trygve Finkelsen via Shutterstock.

Finnish state-owned Fortum Oyj on Wednesday began International Chamber of Commerce (ICC) arbitration proceedings against Danish wind energy giant Vestas.

The dispute comes after Fortum made payments to Vestas for Russian projects which have since been terminated, a move Vestas said was to comply with Russian sanctions.

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The Finnish company said in a statement it has made “sizeable advance payments” for more than 50 wind turbines to Vestas before EU sanctions were introduced against Russia after its invasion of Ukraine.

“Vestas did not deliver on its contractual obligations and yet refused to repay the advance payments and other project-related costs,” it said.

Vestas said in its own statement that Fortum is seeking more than $218m (€200m) in compensation for lost contracts, after sanctions prevented the company from delivering, installing, and servicing new turbines at four wind power plants at Fortum’s Russian subsidiary WEDF.

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CEO Henrik Andersen said: “We strongly believe the arbitration to be without merit,” adding that EU “Member states and companies were aware from the outset that the sanctions would have financial consequences”.

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The Danish company cited “sanctions-specific” clauses in its contracts with WEDF, which allegedly give both parties the right to terminate contracts. It added that such clauses explicitly included sanctions against Russia.

“In essence, Vestas assumed the risk and costs of producing components before receiving full payment for them and Fortum assumed the risk and cost of making advance payment before receiving the components,” it said.

Fortum said it “was left with no other option” than arbitration proceedings after months of failed discussions with Vestas.

“We are at a loss to understand why our long-standing business partner Vestas would suddenly question our adherence to EU sanctions in this case,” Fortum general counsel Nora Steiner-Forsberg said in the statement. “We believe ICC arbitration is a fair way to settle this commercial dispute.”

“Fortum will vigorously defend itself against false claims by former business partner Vestas that it flouted sanctions against Russia in a commercial dispute between the two Nordic companies,” the statement added.