Ukraine to get court review of argument regarding pressure from Russia in $3 billion dispute
MOSCOW. March 16 (Interfax) - Ukraine's argument regarding pressure from Russia when making a decision in 2013 to raise debt of $3 billion, issued as Eurobonds, will undergo full-scale consideration in a British court. The corresponding decision, made by the Supreme Court of Great Britain, was published on Wednesday.
The process related to the $3 billion has been dragging on for seven years: the Russian Ministry of Finance filed a lawsuit with the London High Court for debt collection on February 17, 2016, shortly after Ukraine defaulted on the Eurobonds. Russia had acquired the two-year Eurobonds at a rate of 5% in December 2013 with funds from the National Wealth Fund. Kiev offered Moscow debt restructuring on the same terms as commercial creditors, but Russia refused to discuss this option, insisting on the sovereign nature of the debt. The debt was due by January 1, 2016. However, in December 2015, Ukraine imposed a moratorium on servicing this debt and until January 1, 2016, did not make the payment in the total amount of $3.075 billion towards the repayment and service of the Eurobonds owned by Russia.
In March 2017, the court approved an accelerated consideration of the claim, effectively rejecting Ukraine's main objections and agreeing that it had obligations under the Eurobonds. The court held that the transaction was a standard debt transaction, albeit under unusual conditions. With its decision, the court ordered Ukraine to pay Russia the nominal $3 billion value of the Eurobonds, the amount of the outstanding coupon payment of $75 million, and penalty interest accrued of $674,000 for each day of delay. In May of the same year, the London High Court granted Ukraine's request to suspend the implementation of the March 29 decision until the completion of consideration of the appeal in the Court of Appeals.
In September 2018, the English Court of Appeals ruled on the appeal filed by Ukraine against a London High Court decision obliging Ukraine to repay the debt with interest on the Eurobonds. The Court of Appeals upheld the legality of Ukraine's refusal to consider three of the four grounds it claimed to avoid fulfilling obligations under these Eurobonds. At the same time, the court stated that the fourth argument, that the issue of Eurobonds was carried out under pressure from Russia, could not be rejected without a full trial.
The Eurobond trustee, The Law Debenture Trust Corporation, acting on behalf of Russia, has appealed this verdict. Hearings on the appeal about the need for a full trial in relation to one of the aspects of the case took place in the UK Supreme Court in November 2021. An appeal, already filed by Ukraine, was also considered in connection with the rejection by the English Court of Appeals of all but one of its arguments regarding non-enforcement of bond obligations.
According to the operative part of the decision of the Supreme Court published on Wednesday, the issue of illegal pressure can be resolved only after a trial. A causal relationship between Russia's alleged threats to use force and Ukraine's decision to make a deal will need to be considered, the report said. At the same time, the trustee will be obliged to prove that the threats to use force (if any) did not contribute to Ukraine's decision.
"The Supreme Court has concluded that the arguments of the Ukrainian defense line regarding coercion (...) should be examined in full procedure during an open hearing in an English court," Ukrainian media reported, citing a statement by the Ukrainian Ministry of Finance published on its website. The Russian Ministry of Finance has not yet commented on the decision.
It also follows from the Supreme Court report that Ukraine's arguments that it did not have the legal capacity to issue bonds and that the country's finance minister did not have the authority to decide on the placement of bonds, were rejected.