London High Court throws out Ukraine’s bond case against Russia

By bne IntelliNews March 29, 2017

The High Court in London on March 29 ruled that it would not be right for a $3bn Eurobond case brought by Russia against Ukraine to go to full trial since Kyiv has no “justifiable defence” for its failure to redeem the notes in December 2015.

Ukraine had still sought a full trial on the grounds that Russia’s annexation of the Crimean peninsula in 2014 had economically impaired its ability to pay debts.

The London judge, Mr Justice Blair, brother of the former UK premier, ruled that the case cannot be brought in the English courts as it would require them to decide on “transactions entered into between states on the plane of international law” as well as international treaties which are not part of domestic law.

“This is a claim for repayment of debt instruments to which the court has held that there is no justifiable defence. It would not be right to order the case to go forward to a full trial in such circumstances,” Blair said.

Ukrainian Finance Minister Oleksandr Danylyuk said the ruling will be appealed: “Today’s decision is the first stage. Ukraine has received the judge’s permission for an appeal. At the next session that will take place no sooner than the end of April, the Ukrainian side will continue safeguarding its position and defending state interests," he said in comments reported by Russia’s TASS news agency.

Kyiv’s appeal will further prolongs a two-year dispute with Russia, which has refused to any restructuring of the bond under the terms of the $17.5bn credit deal Kyiv struck with the International Monetary Fund in March 2015.

Under the loan terms, Ukraine persuaded its private creditors to agree to a $15bn debt restructuring deal, while Russia said the Eurobond it bought was sovereign and had to be repaid in full.

Ukrainian authorities consider the original purchase agreement “invalid and unenforceable”, arguing that the bond was purchased under the regime of former president Viktor Yanukovych in 2013. Authorities in Kyiv previously described the $3bn paid for the notes as an effective bribe by Moscow to the Yanukovych administration for not signing an association agreement between Ukraine and the EU.

In the initial hearings of the case in London in January, lawyers representing Ukraine said this was not a straightforward debt claim by Russia, but “in reality a tool of oppression wielded by one sovereign state against another”.

“The claim arises from, and is itself part of, a broader strategy of unlawful and illegitimate economic, political and military aggression by Russia against Ukraine,” barrister Bankim Thanki claimed on behalf of Kyiv.

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