TEGOS represented Latvian leading public utility provider, in high-value litigation against SIA Elektro bizness concerning recovery of payments for the supplied natural gas.
Core of the dispute
The dispute arose under a gas supply agreement, where the counterparty added several supply points based on lease arrangements for connection points, without holding ownership or usage rights over the underlying gasified properties – a mandatory prerequisite under Latvian law.
Following the discovery of these deficiencies, our client terminated supply. Gas deliveries nevertheless continued temporarily due to interim court measures, resulting in a substantial claim for payment for gas received without legal basis.
The case addressed key issues, including the distinction between connection points and gasified objects, the supplier’s right to terminate supply, and the application of unjust enrichment principles and valuation methodology.
The judgement
In its judgment, the Riga City Court upheld the client’s claim in full. The court confirmed that rights to a connection point do not constitute a sufficient legal basis for gas supply and that termination was lawful once the absence of rights to the gasified objects became apparent.
The court further held that gas supplied after termination constituted unjust enrichment, recoverable at the market (exchange) price, as no contractual relationship existed during the relevant period. It also clarified that interim measures do not create or restore contractual rights.
The defendant was ordered to pay more than EUR 6.7 million, including principal, interest, and costs.
Significance of the matter
This case is a landmark precedent in Latvia’s energy and commercial law, clarifying that:
- Legal entitlement to a gasified object is a fundamental requirement for supply contracts
- Suppliers have strong termination rights where such entitlement is absent
- Continued supply due to regulatory or procedural constraints does not eliminate restitution claims
- Unjust enrichment principles prevail once contractual basis falls away
The judgment also provides important guidance on market-based valuation of unlawfully obtained energy supply and limits the misuse of formal arrangements (e.g., simulated lease structures) in regulated sectors.
TEGOS involvement
The work of the team was led by TEGOS partner and head of Energy practice group, Agnese Hartpenga, assisted by of counsel Gundars Madelis, senior associate Elīza Siliņa and legal assistant Elēna Sidorčika.
