Ukraine secures "significant victory" in English appeal court over $3bn debt to Russia

Ukraine secures
Ukraine wins an appeal on fight with Russia over defaulted $3bn Eurobond
By bne IntelliNews September 17, 2018

Ukraine has secured a "significant victory" in the English Court of Appeal court in its fight to annul a $3bn bond debt owed to Russia, Ukrainian Finance Ministry said in a statement published on September 14.

The bond was issued by ousted president Viktor Yanukovych and bought by Russia, shortly after Ukraine refused an offer to sign the Association Agreement with the EU and threw its lot in with Russia instead. The decision sparked the Euromaidan protests that ended with a change in government. The new government has maintained the bond was forced on the government and has refused to pay it off.

The statement followed an earlier court ruling that Ukraine must pay out on its defaulted $3bn Russian debt. "The decision to reverse summary judgment and permit Ukraine to argue its case before the court of first instance represents a significant victory for Ukraine," the ministry said.

The Eurobond was issued in December 2013 by Ukraine on the Irish exchange and bought by Russia as the first part of a $15bn aid package. The other issues were abandoned following Yanukovych’s ouster during the Euromaidan protests a few months later and Ukraine has since defaulted on the bond payments.

In March 2017, the High Court of London ruled to reject all Ukraine’s defence arguments.

The Russian side demands the immediate repayment of the debt that matured in December 2015. The two-year Eurobond was fully purchased by a Russian state fund and it was the only major debt that the Ukrainian government was not able to restructure in 2015. Ukraine's parliament imposed moratoria on payments on this debt in May 2015 and April 2016.

According to the finance ministry, in a unanimous decision in favour of Ukraine all three judges of the English Court of Appeal agreed that the first instance judge was wrong: to decline to permit Ukraine’s defence of duress to proceed to trial; and to refuse to grant Ukraine a permanent stay of the proceedings if Ukraine’s defence of duress could not be adjudicated by the English Court.

"Ukraine has therefore succeeded in its appeal and the Summary Judgment of Mr Justice Blair is to be set aside," the ministry's statement reads.

Kyiv added that Russia tried "every argument" to avoid being held accountable for its behaviour, but the Court of Appeal has ruled unanimously that Ukraine’s case should go to a full public trial before the English Court. "Ukraine argues that the alleged contracts for the Russian bonds are void and unenforceable because of Russia’s wanton threats and acts of political and military aggression towards Ukraine," according to the statement.

"Ukraine welcomes this important outcome, which reflects the strength of the case that Ukraine has made at this stage in the proceedings," the ministry added.

Meanwhile, Russia's First Deputy Prime Minister and Finance Minister Anton Siluanov told journalists the same day that the court's ruling postpones a decision in the Russian-Ukrainian dispute over $3bn debt.

"We will file in the Supreme Court of England and are confident that English justice will be able to objectively sort this out and come to the corresponding ruling," Interfax news agency quoted Siluanov as saying. "The current ruling postpones the final verdict in the Russian and Ukrainian dispute for a time. We are hopeful that the next venue will make a final, objective decision."