Key measures and dates

The package presents proposals for phasing out pipeline gas and liquefied natural gas (LNG), in addition to those relating to the phase-out of Russian oil imports by the end of 2027. Some of the key measures introduced are as follows:

• Article 3 – Russian gas imports to be prohibited from 1 January 2026 unless an exception in Article 4 applies
• Article 4(1) – Imports under short-term contracts concluded before 17 June 2025 and not amended after, to be stopped by 17 June 2026
• Article 4(2) – Short-term contracts for pipeline gas delivered to land-locked countries and linked to long-term contracts for delivery at the virtual trading point of that country concluded before 17 June 2025 and not amended after, to be allowed until the end of 2027
• Article 4(3) – Imports under long-term contracts concluded before 17 June 2025 and not amended after, to be stopped by the end of 2027
• Notably, as above, a contract will not benefit from the wind-down period if amended after 17 June 2025 (such date discussed below)
• EU countries to ensure that they diversify effectively, such that the import of Russian oil has stopped completely by the end of 2027
  • Plans for the phase-out of Russian oil and oil products to be submitted to the EC by 1 March 2026

The Regulation also includes safeguards to clear European LNG terminal capacity currently occupied by natural persons or legal entities established in Russia. Such safeguards include a ban on pre-existing long-term terminal service provision from 2028, as well as a ban on new long-term LNG terminal services to such Russian persons.

There will also be strict reporting obligations applied to imports of Russian LNG and natural gas, with such disclosures requiring details of relevant contract terms. Regarding nuclear fuel, it was confirmed on Monday that this would not be mentioned in the package, despite European reliance on such fuel remaining part of the broader roadmap.

Legal framework

Notably, the EC draws on Articles 207 and 194(2) of TFEU, as opposed to sanctions instruments, to apply internal market and trade powers in achieving its security and energy objectives. Acknowledging the legal and regulatory challenges faced by parties wishing to exit existing Russian gas supply contracts (see our previous alert for more detail on this), Recital 18 proposes that the Regulation “creates a clear legal prohibition to import Russian natural gas, constituting a sovereign act of the Union beyond the control of gas importers and rendering the performance of natural gas imports from Russia unlawful, with direct legal effect and without any discretion for Member States concerning its application”. The absence of any discretion by member states in applying the prohibition will be relevant to companies looking to invoke force majeure, supervening illegality or hardship clauses in order to get out of existing contracts.

Notable elements

Role of customs authorities

Under the proposed regulation, customs authorities will act as gatekeepers. While the origin of natural gas must already be declared at the time of import today, the EC recognises the need for enhanced data disclosure in view of the risk that Russian suppliers may attempt to circumvent the new rules. To strengthen enforcement, customs authorities must receive additional information for each import, which includes the date of conclusion and duration of the gas supply contract, the contracted quantities, the EORI number of EU established parties, the country of production and producer of the gas, the country of further processing of the gas, the point of first loading (for LNG) and any modification of the gas supply contract. Customs authorities and other enforcement authorities would be empowered to request detailed contractual documentation from importers, including full supply contracts (though price information can be excluded).

The burden of proof rests with the importer to demonstrate compliance. If the customs authorities find the supportive evidence insufficient or inconclusive, they may reject the import. Given the likelihood that the authorities will adopt a cautious, risk-averse approach in view of the strong oversight by the EC, importers must proactively prepare robust documentation to substantiate the declared origin and/or the contractual background surrounding the imported product. This is essential to avoid extended delays at the border, or worse, outright refusal to import the natural gas.

Keeping in mind that the authorities will adopt a cautious and risk-averse approach, we also foresee there to be potential inconsistent approaches by different customs authorities based on the current draft of the proposed legislation because there are ambiguous provisions (for example, the definition of ‘long-term supply contract, discussed below). It remains to be seen whether the legislation text is clarified and the EC (or equivalent) issues harmonised statements as to the implementation of these restrictions to mitigate such issues.

Distinction between long- and short-term contracts

The Regulation defines a ‘long-term supply contract’ as “a contract for the supply of natural gas, excluding a natural gas derivative, exceeding one year”. The corresponding definition of a ‘short-term supply contract’ is “a contract for the supply of natural gas, excluding a natural gas derivative, not exceeding one year”. At first glance, this seems relatively straightforward. However, we expect further amendments to the draft legislation or guidance from the EC to be desirable. This is because it is not clear whether the duration refers to the contractual term or the delivery period of a contract. If it relates to the former, then a pre-existing forward contract for a three-month delivery window (for example) could be considered a ‘long-term supply contract’ if entered into more than a year ago. This is clearly not what is intended by the EU authorities, such that further consideration will be required.

Definition of ‘amend’

As alluded to in our previous client alert, the transition period hinges on the concept of whether a contract is a pre-existing contract that is not amended after the cut-off date. The draft legislation does not discuss the concept of ‘amending’ a contract, and further consideration will be required as to the legal definition of this, in the context of internal market and trade regulations. Based on the policy objectives, reference to the EU FAQs on this issue may prove illustrative.

Gas arriving via Russia

Gas arriving in the EU via Russia through interconnection points (in Finland, Estonia, Latvia, Lithuania, Poland, Germany, Hungary and Bulgaria) will be considered Russian gas. The same applies to gas arriving through interconnection points with Serbia. For technical reasons, Serbia can only export gas of Russian origin towards the EU. This will not be the case where such gas has ‘clear and unambiguous equivocal evidence’ demonstrating its non-Russian origin, which will likely result in a detailed assessment by the customs authorities upon entry.

Existing contracts

The draft legislation proposes 17 June 2025 as the cut-off date for existing contracts. However, it is not clear whether the relevant cut-off date will be the date the legislation is passed or a date in the future, such as the date on which the legislation is implemented.

Sanctions provisions

There may be questions around whether the new prohibition falls within the scope of certain sanctions provisions. As such, it would be prudent to check the drafting of these clauses across contracts to ascertain whether the Regulation will be covered.

Final thoughts

Member states have generally provided their support for the Regulation to the EC. During this week’s Transport, Telecommunications and Energy Council, Austria, Sweden and France expressed support but noted concerns around replacing one dependency with another – highlighting over-reliance on U.S. LNG. Hungary and Slovakia have since withheld their support of the proposal, noting concerns around oil price volatility and timing of the initiative. As mentioned in our previous alert, such withheld support will not prevent adoption of the legislation – a distinction from the process typically followed when adopting sanctions measures.

The Regulation will follow the ordinary legislative procedure, requiring a qualified majority in the Council and co-decision with the European Parliament, with adoption anticipated by the end of the year.

Client Alert 2025-158