The investment in St. Petersburg’s Pulkovo Airport has brought only one thing to the Frankfurt airport group Fraport for years: trouble. With reference to possible claims for damages, the company had only “suspended” its stake in the operator consortium, but not completely divested it after Russia invaded Ukraine. The approach was not well received in the Hessian state parliament.
But now Russian President Vladimir Putin has solved the Fraport problem in his own way: He signed a decree that expropriates the foreign investor in the Northern Capital Gateway (NCG) operator consortium. The shares held by NCG would be transferred to a new holding company established by the Russian government. The Russian investors could keep their shares, the foreign ones – i.e. Fraport – could not. According to the decree, this is necessary “in connection with the threat to the national interests and economic security of the Russian Federation.” According to Putin, the move was triggered by “unfriendly actions by some foreign states and international organizations.”
Fraport expressed reservations about Putin’s decree: “We must first verify the information and check what this means in the future for our participation in St. Petersburg, which we have put on hold since the Russian war of aggression,” it said on Friday. Fraport joined the consortium that operates Pulkovo Airport in 2010 and held a 25 percent stake. The contract was supposed to run for 30 years.
After the Russian attack on Ukraine, most Western companies completely withdrew from the country due to economic sanctions. Fraport, on the other hand, argued that the contracts with the Russian authorities did not allow an exit, so the stake would not be formally given up. According to research by SZ, NDR and WDR, there is a force majeure and an illegality clause in the contracts, to which all other agreements also refer, and which regulate an early exit under certain conditions. The airport operator recently emphasized that the “contracts concluded by Fraport do not provide for an exit clause. The legal report from a law firm specializing in international law confirms that there is no special right of termination.”
The state of Hesse and the city of Frankfurt hold the majority in Fraport
For the group, it’s not just about the value of the investment, but also about an outstanding shareholder loan of 163 million euros, which they continue to insist on being repaid – in the event that the war ends and the sanctions are lifted. However, Fraport had already written off the loan and the value of the investment, so Putin’s decision has no further economic consequences.
Fraport boss Stefan Schulte also commented on this in July before the budget committee of the Hessian state parliament – the state has a 31 percent stake in the company and the city of Frankfurt has a further 20 percent. “We are continually examining possible options for action, but we cannot simply give up our dormant minority shareholding due to the existing contracts,” said Schulte. “So should we breach the contract and unilaterally terminate our participation without regard to the consequences and prospects of success? That would mean that we are handing over our assets to the aggressor Russia.” The Fraport boss also referred to liability reasons for the shareholders and said: “We are therefore pursuing the goal of an exit in accordance with the contract.”
The issue has now been settled. The expropriation by the Russian state is probably not in accordance with the contract.