10:29 30.03.2017

High Court in London approves quick hearing of $3 billion Russia bond claim against Ukraine

3 min read
High Court in London approves quick hearing of $3 billion Russia bond claim against Ukraine

The High Court in London on Wednesday issued a summary judgment in a $3 billion eurobond case brought by Russia against Ukraine, the procedure by which the court may decide a claim without a trial, according to the document read out in open court by the judge, a copy of which has been sent to Interfax-Ukraine.

The summary does not provide for the final judgment in the case.

According to the document, some explanations require specification, and there is much material before the court substantiating Ukraine’s case as to Russian pressure and ultimately military action.

The judge rejected all defenses of Ukraine, including Russia's political pressure on Ukraine. Ukraine submitted that wrongful and illegitimate acts alleged against Russia constitute duress under English law, and that the issuance of the eurobonds on December 24, 2013 was voidable as a result, and was avoided by the moratorium suspending payments of December 18, 2015

Ukraine had four main defenses.

The court said that as a matter of international law Ukraine has unlimited capacity to borrow. The court accepts the trustee’s submission that this is not a case of lack of power, and therefore capacity, but of the power not being exercised as the law required. Russia insisted on this asking to issue a summary judgment to speed up the procedure.

Ukraine has made out a strong case that economic pressure applied by Russia by way of trade restrictive measures during 2013 along with threats led to its Government’s decision not to sign the EU Association Agreement.

Ukraine’s contention is that countermeasures is a principle of public international law, and that if it is otherwise obliged to make payment under the bonds, it is entitled, on the facts of this case, not to meet that obligation.

The court said that the question whether the English court is competent to rule on the question of countermeasures in public international law. These were not matters that the court could or should consider.

Ukraine said that the notes were to be the first tranche of financial support from Russia. Ukraine’s case, opposed by the trustee, is that the borrowing resulted from that pressure, and that for this and other reasons, its non-payment of the Notes is justified, and that in any event summary judgment is not appropriate.

The court also rejected these arguments.

Ukraine also submitted that there are compelling reasons to proceed to trial because the claim is in reality a tool of oppression which includes military occupation, destruction of property, the unlawful expropriation of assets, and terrible human cost. Ukraine submits that these matters should be the subject of the full rigors of a public trial, and that the summary judgment process is not something to which Russia should be entitled to benefit given its egregious conduct.

This point was powerfully put by Ukraine in evidence, and the court has given it careful consideration. However, ultimately, this is a claim for repayment of debt instruments to which the court has held that there is no justifiable defense.

Thus, the summary judgment was issued.

Ukraine intends to challenge the decision of the High Court in London. The court permitted to file a counterclaim.

The trustee has sought to emphasize the standard structure of the transaction as an issuance of eurobonds. The court said that it is correct that Ukraine received the funds, and it is not disputed that the structure of the transaction is in standard form. However, the background is extraordinary, and it is not credible to describe this as an “ordinary debt claim”.

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