The Court of Appeal of England and Wales today partially approved the complaint of Ukraine demanding the cancellation of the decision of the High Court of London, which in a simplified procedure recognized its debt to Russia in excess of $ 3 billion for Eurobonds of 2013. According to the appeal, the Ukrainian side's argument that the Eurobonds were issued under Russian pressure should be checked and considered in a full-fledged court proceeding. Russia has already stated that it will appeal this decision to the Supreme Court of Great Britain.
The Court of Appeal today announced the decision on the complaint of Ukraine in the dispute over the payment of Russia's debt on Eurobonds issued under President Viktor Yanukovych. On March 29, 2017, the High Court of London granted Russia's request for an expedited procedure for the case, recognizing that the dispute was commercial, not political, and then ordered Ukraine to pay off the debt. In favor of the Russian side, $ 3 billion of the face value of the bonds was awarded, the unpaid coupon income was $ 75 million, as well as interest on these amounts for the delay in the fulfillment of obligations beginning December 21, 2015 and the date of actual payment. Ukraine appealed against the decision of the London court, and its execution was suspended until the verdict of the appeal was pronounced.
As a result, the Court of Appeals of England decided that one of the arguments declared by the Ukrainian side should be considered in a full trial, and not in a simplified procedure for judicial proceedings, as it was done. As Ukraine said in court, Russia threatened it and immediately unfair trade restrictions against it, just before Eurobonds were issued, in the fall of 2013. Ukraine also claims that because of this "pressure" it had to abandon the signing of the already agreed Treaty on Associate Membership with the European Union and that it lost access to international sources of financing, as a result of which it "had no choice but to sell" Eurobonds of Russia. All this, according to the defendant, is a legitimate reason for refusing to fulfill payment obligations. It is this argument, according to the decision of the appeal, that must be considered in a classic court proceeding. (The Law Debenture Trust Corporation plc, a formal plaintiff in a case representing Russia's interests .- "Kommersant") and the Russian Federation in court denied the existence of such pressure and the consequences announced by Ukraine.
The Finance Ministry noted that the appellate court confirmed the legitimacy of Ukraine's refusal to consider the remaining three of the four grounds announced by it in order to avoid the fulfillment of obligations under these eurobonds. The appeal ruled on the need to hold such a trial in order to establish the presence or absence of evidence supporting the fourth argument of Ukraine, which is that the borrower issued Eurobonds allegedly under pressure from the creditor, that is Russia, added to the ministry. They stressed that "while the appellate court did not confirm the validity of the fourth defense argument, but merely stated that this argument, unlike the other three arguments declared by Ukraine, can not be rejected without a comprehensive trial."
The Russian side is confident that the fourth argument of Ukraine should be rejected without a trial, in this connection, the RF Ministry of Finance instructed the trustee of The Law Debenture Trust Corporation plc (formally acting as the plaintiff in the case) to file a complaint with the Supreme Court of Great Britain. According to "Kommersant", both Russia and Ukraine have already applied for permission to such an appeal and received it.
Other arguments of Ukraine, including the violation of internal procedures for the issue of Eurobonds, the lack of authority for this from the Ukrainian Minister of Finance, the existence of certain implicit but not documented conditions that prohibited the creditor from taking actions that might prevent the debtor from paying off the bonds were rejected by the Court of Appeal. The appeal also recognized that in the context of disputes over the performance of financial obligations, English courts are not empowered to rule on the question of Ukraine's right not to make payments on eurobonds as a "legitimate countermeasure" to Russia's actions.
According to Kommersant's information, the interests of the Russian Federation in this litigation are represented by the legal firm Cleary Gottlieb Steen & Hamilton, trusts - Norton Rose Fulbright, Ukraine - Quinn Emanuel Urquhart & Sullivan.
The dispute between Russia and Ukraine on Eurobonds
In December 2013, the Russian Federation purchased Ukrainian Eurobonds with a nominal value of $ 3 billion, due on December 20, 2015. After the expiry of the term, Ukraine did not pay for them, and in February 2016 Russia appealed to the court. Formally, the claim was filed on behalf of the trust (The Law Debenture Trust Corporation plc), representing the interests of the Russian Federation. Ukraine objected to the claim, saying that these eurobonds were issued in violation of internal procedures, and their release allegedly exceeded the country's borrowing limit. In addition, the Ukrainian side insisted that the bonds were issued under duress, conditioned by trade restrictions and a perceived threat to the territorial integrity of Ukraine, in order to force it to refuse to sign an association agreement with the EU. In general, the defendant's position was that the issued Eurobonds are void, and Russia's aggressive actions against Ukraine, in particular in the Crimea, led to human casualties and the economic crisis in the country and justify the failure to fulfill obligations on bonds by the Ukrainian side.
The examination of the case went on in several stages. In March 2017, the English court upheld the RF's motion to review the case on an expedited basis, which instead of a full-scale trial presupposes only the presentation of the positions of the parties, after which the judge makes a decision on the basis of the examination of the documents. To this decision, Ukraine filed an appeal. The court then pointed out that in the final analysis this is a claim for the payment of debt instruments, in which there is no justified defense. With regard to the arguments of the Ukrainian side, the court ruled that the Minister of Finance of Ukraine acting on behalf of the Cabinet of Ministers had the authority to issue Eurobond data, and issues of war and peace, as well as international trade relations, should be considered and regulated by diplomats and politicians, but not by the court.
After that, in May 2017, after additional hearings, the London court named the amount payable in favor of the Russian Federation: $ 3 billion of the face value of the bonds, unpaid coupon income of $ 75 million and interest on these amounts for the delay in fulfilling the obligations beginning December 21, 2015 and date of payment. According to the estimates of the RF Ministry of Finance, interest will increase by $ 673,000 each day. In August 2017, the High Court formally ordered Ukraine to repay its debt on eurobonds and reimburse the court expenses of the trust.