Ukraine and Russia to go head-to-head in public trial over $3bn loan dispute
Ukraine and Russia are set to go head-to-head in a full public trial over a $3bn loan dispute set against the backdrop of a tense sovereignty battle between the two countries.
The Law Debenture Trust, representing Russia, has sued Ukraine for its failure to repay the loan made to Ukraine through Eurobonds in 2013.
Ukraine has defaulted on the payment, saying it was signed by the ousted president Viktor Yanukovych under duress to prevent Ukraine from entering into an association with rival Europe.
Ukraine has said a Russian campaign of economic aggression, including the annexation of Crimea, has made it impossible for Ukraine to repay the loan. It said it was forced to seek an international bailout after conflict with Russia-backed rebels in the east pushed into the brink of bankruptcy.
Russia has said the loan was entered into as a matter of English law and that the political circumstances are non-exceptional and irrelevant to the bond dispute. It said Ukraine was violating international obligations by defaulting on the loan.
Last year a High Court judge ruled that the matter should not proceed to full trial because Ukraine had no real prospect of success and that it was outside the remit of English courts to decide on matters such as international treaties.
Today that decision was unanimously overturned by the Court of Appeal. It found that Ukraine’s claim that it had acted under duress in signing the loan was strong enough to warrant a trial. Ukraine will also win back the costs that the first judge ordered it should pay to Russia.
"In our judgment it is desirable that these further matters pleaded by Ukraine should be in issue for exploration at trial with the benefit of full findings of fact, both as independent aspects of the defence of duress and also as relevant factual background to allow the whole pattern of alleged threatening behaviour by Russia to be assessed in its full context," the appeal judges said.
It also ruled that English courts were “well capable of construing treaty obligations and general obligations of states under international law”.
Lawyer Alex Gerbi, acting for Ukraine, said: “Ukraine has secured a resounding victory before the Court of Appeal in this seminal case. The court has decided that Ukraine’s case that its entry of the contracts for these bonds was procured by Russia’s threats and acts of political and military aggression against Ukraine in breach of international law should be subject to a full public trial. Ukraine welcomes this decision and is confident that it will succeed in putting its case to the Supreme Court in due course.”