Ukraine-Russia agreement over $3bn debt is "invalid and unenforceable", Kyiv says

By bne IntelliNews May 29, 2016

The Ukrainian authorities consider the Kyiv-Moscow agreement over the $3bn Eurobond held by Russia as "invalid and unenforceable", according to Ukraine's defence filed on May 27 to the English High Court of Justice.

"The loan agreement is invalid and unenforceable for multiple reasons, including that, as a matter of Ukrainian law, Ukraine lacked the capacity to enter an agreement that violated the borrowing limits then in place and that the agreement was procured through duress exerted by Russia on Ukraine throughout 2013 in order to prevent Ukraine from signing an Association Agreement with the EU," a joint statement of the Ukrainian Ministry of Finance and the Foreign Ministry reads.

In 2015, private creditors voted in favour of the proposed $15bn debt restructuring deal, while Russia refused to support restructuring of the $3bn notes it bought from Ukraine in 2013. The notes were bought by Moscow in 2013 before the ousting of Ukraine's ex-president Viktor Yanukovych the following spring.

Earlier, Moscow announced that the Russian Finance Ministry filed a lawsuit against Ukraine in the High Court in London over Kyiv's failure to repay the Eurobond due in December 2015, plus associated costs.

Ukraine intends to defend this action "vigorously" as part of a broader legal strategy designed to hold Russia to account for its aggression and other unlawful conduct against Ukraine, including the unlawful occupation of the Crimean peninsula, the joint statement reads.

Kyiv-based experts note that if Moscow is able to prove in a London court that the $3bn loan was not private, but official, it could be allowed to demand better restructuring terms, compared with the 20% write-down Ukraine successfully agreed with other private bondholders in 2015.

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