Russia takes its war with Ukraine to London’s High Court as battle begins over a soured $3bn bond deal
The UK’s top court yesterday ruled the Ukrainian government should be given the opportunity to face the Kremlin in London’s High Court, in a more than $3bn dispute over a 2013 bond deal.
The Supreme Court’s ruling is set to see the UK’s High Court become the new front for the continuing fight between Russia and Ukraine, in allowing the case to be heard in a fully-fledged public trial.
Ukrainian president Volodymyr Zelensky was quick to hail the Supreme Court’s decision as “another decisive victory against the aggressor” in a post via his official account on Twitter.
However, the Supreme Court’s decision now means Ukraine will be forced to fight its case in the UK’s High Court, after judges had previously blocked the potential for a trial.
The underlying case, which will is set to heard in London’s High Court, will now determine whether Ukraine should be forced to repay $3bn, plus interest, paid to it by Russia in a 2013 bond deal
The 2013 deal saw Russia’s finance ministry purchase $3bn worth of bonds from Ukraine on the basis the Ukrainian government would repay the sum over a two-year period plus five per cent per annum interest.
Ukraine has, however, refused to pay Russia back, in claiming it was pressured by the Kremlin into accepting its $3bn bond payment, as part of the Russian Federation’s wider bid to prevent Ukraine from developing closer links with the European Union.
Yanukovych, Russian, Ukraine and a $3bn bond deal
Notably, the case is set to be heard in London’s High Court due to the fact the bonds were issued by Ukraine under English law, with British firm, Law Debenture, appointed as its trustee.
In fighting its case, the Ukrainian government previously argued the contract should be rendered invalid, in claiming Russia placed “massive, unlawful and illegitimate economic and political pressure” on its former president, Viktor Yanukovych, to accept the $3bn bond deal.
Ukraine claims Russia placed this pressure on its former president to ensure the country signed a deal with the Kremlin, instead of signing an Association Agreement with the EU.
President Yanukovych subsequently refused to sign the EU’s deal, after meeting with Russian president Vladimir Putin just days before he was expected to confirm the agreement at the EU’s November 2013 summit in Lithuania’s capital Vilnius.
The Ukrainian president’s refusal to sign the EU deal in turn gave rise to the Euromaidan protests in Kyiv’s central Maidan Square, which eventually led to Yanukovych being forced out of office.
Russia later invaded the Crimean Peninsula in early 2014. The Ukrainian government also claims the Kremlin has supported separatist elements in eastern Ukraine.
Following its refusal to pay, Law Debenture was directed by the Russian Federation to collect the money from Ukraine in February 2016, after it refused to pay the more than $3bn sum to Russia.
Russia ‘waging financial war against Ukraine’
In refusing to pay, Ukraine argued Russia’s efforts to collect the sum through Britain’s courts formed part of the Kremlin’s “broader strategy” of aggression against it, in order to block it from building closer links to the European Union.
Kyiv has also claimed Russia’s actions since 2013, including its invasion in February 2022, have hindered its ability to repay the $3bn debt.
However, in 2017, Britain’s High Court ordered Ukraine to pay Russia $3.075bn, via a ‘summary judgement’ which blocks the Ukrainian government from arguing its case in court. Ukraine later appealed the High Court’s decision, but failed to overturn it in 2018.
The UK’s Supreme Court has now overturned the Court of Appeals 2018 ruling, in stating Ukraine should allowed to face Russia in Britain’s High Court.
The Supreme Court, however, dismissed Ukraine’s claims it had faced economic pressure from Russia to enter the $3bn bond deal, as it instead said any case should be focused on the threats and use of military force.
The Law Debenture Corporation, a UK investment fund that brought the case forwards, said in a statement that “none of Ukraine’s defences to the claim is arguable except a limited part of its defence of duress.”
The London firm told City A.M. it was directed by the Russian Federation to bring proceedings in the English court and did so in the discharge of our fiduciary duties, which it is legally bound to act in accordance with.
The Law Debenture Corporation added that “all action taken to date has been in the proper discharge of those duties.”