Russia wins early legal skirmish over eurobond dispute with Ukraine

31 Mar 17

Russia has scored an initial victory in its court case against Ukraine, which has been refusing to service a $3bn eurobond bought by Russia in 2015.


Mass anti-government protests in Kiev, Ukraine January 2014

The dispute centres on a eurobond issued to Russia by Ukraine just before mass anti-government protests in Ukraine reached their peak,


The English High Court decided in favour of Russia largely because Ukraine’s defence arguments concerned international law, which it cannot adjudicate on.

The move is a setback for Ukraine as it tries to stand up to its much bigger neighbour. Relations between the two countries started to sour after Ukraine turned away from Russia towards the west, and descended into full blown conflict at the border following Russia’s annexation of Crimea.

During a hearing in January, Ukraine had argued that Russia had “applied massive, unlawful and illegitimate economic and political pressure” to force its then-government to sign the loan with Russia, constituting duress.

It also said that its refusal to repay the loans were a countermeasure against this and Russia’s military action in Crimea and eastern Ukraine, which also hit the country’s economy and hindered Ukraine’s ability to repay.

Judge William Blair ruled this week that Ukraine’s defence for not repaying the loans was “non-justiciable” and Ukraine’s arguments could not “result in legal consequences through this route”.

However, he said Ukraine’s defence was “compelling” and warranted “careful consideration”.

Where Russia had argued the case centred on a “simple debt claim” following a default, Ukraine said it was “in reality a tool of oppression” used by one state against another, alongside military occupation, destruction of property and illegal expropriation of assets.

The pre-trial hearing revolved around whether to grant Russia a summary judgement – a way of fast-tracking proceedings by asking a court to decide whether Ukraine’s defence would stand up in a full trial, which Ukraine was calling for.

Blair ruled in Russia’s favour, but agreed this was no “ordinary” debt claim.

The $3bn eurobond was the first tranche of what would have been a $20bn bailout signed between Russia and Ukraine’s then-president Viktor Yanukovich.

Russia purportedly pressured the pro-Russian Yanukovich into accepting its bailout rather than a separate offer from Europe.

The deal then fell apart after Yanukovich was ousted by popular revolt in 2014. The administration that replaced his government pivoted back towards the west and pursued markedly less friendly relations with Russia.

After the judgement was published, Ukraine said it would appeal the ruling.

A statement on the Ukrainian ministry of finance’s website explained: “This decision was the first stage. Ukraine will continue defending its case and protecting the state interests consistently using all avenues available under English law.

“It is important for us that the English court recognised the wrongful and egregious acts perpetrated by the aggressor state against Ukraine and its people.”  

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