London Court Refuted Political Arguments in Eurobond Dispute

The High Court in London will proceed with the Eurobond case brought by Russia against Ukraine without full trial. Thus, the court granted Russia's request to decide the matter without full blown trial because Kiev has no “justiciable defence”.

In 2013 Ukraine borrowed from Russia $3 billion in the form of Eurobonds governed by English law. Kiev continued payments until the end of 2015 when it defaulted. Later, Kiev offered to restructure the debt on the same conditions as with commercial creditors but Russia insisted on the sovereign nature of the debt.

Ukraine's defence boils down to the argument that the agreement is void since the government did not have the proper authority and because of the "duress" to which Kiev was purportedly subjected as a result of alleged threats by Russia in order to prevent signing the association agreement between Ukraine and the European Union.

According to Bankim Thanki QC, who represents Ukraine, “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”.

According to Mark Howard QC, acting for Russia, the Ukrainian government's assertion that it did not have the authority to issue the Eurobonds contradicts Kiev's earlier position. Ukraine has always treated Eurobonds as valid financial instruments, both in public statements and in documents sent to the International Monetary Fund.

As for the political component, the question of whether Russia's actions were contrary to international law is outside the competence of the English court. 'The threats of the use of force by Russia,' said Justice Blair, 'which are relied upon by Ukraine as vitiating the Eurobond transaction fall within the foreign act of state doctrine as issues upon which the court should refrain from adjudicating'. Accordingly, this dispute should be regarded as a “simple English-law governed debt agreement”.

Ukraine, most likely, will appeal the decision in the hope of bringing the political element back to the case.