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“The team was recently visible advising on a number of pharmaceutical cases. Sources agree that the team is “moving in the right direction” and are particularly impressed by its work in the pharmaceutical sector”.

 

Loan under Russian Pressure: What has Ukraine Achieved in the Yanukovych’s Debt Case

18.09.2018

Roman Marchenko, Attorney at Law, Senior Partner

Source: European Pravda

Ukraine managed to achieve the revocation of judgment delivered by the London High Court concerning repayment of USD 3 bln of Yanukovych's Debt to the Russian Federation. And although the outcome of dispute with the Russian Federation now appears equivocal, this decision is an unquestionable victory for Kyiv.

Let us recall that bonds for the aforementioned amount were placed in December 2013 – in the midst of political confrontation in the country. Although such placement seemed to be commercial, in fact, it was the Russian Federation which bought these securities from Ukraine. That is why the Kremlin considers this debt to be Ukraine’s government debt to Russia and requires its full repayment.

In February 2016 the RF Ministry of Finance lodged a claim to the London High Court against Ukraine for the repayment of this debt, and won.

To explain the RF’s win, one should understand: it is generally known that under the English law, as a rule, all debts under the bond obligations are collected automatically. At the same time, Ukraine insisted on holding a full hearing of the case instead of the expedited one for the court to hear all arguments of the Ukrainian side, witnesses and experts.

However, the court of first instance (specifically, Judge Blair, the brother of British ex-Prime Minister) ruled that there was no reason to consider this case in a full-scale hearing. As a result, the court decided to consider this case under expedited procedure, and Kyiv did not actually have a chance to succeed, since the obligation to pay debts in Britain is a sacred duty.

However, Ukraine filed a claim with the Court of Appeal in England and succeeded in revoking this judgment and reviewing the case on a go-around.

Now a few words on the essence of the appeal award.

English court considered several arguments of the Ukrainian side as to why such a judgment should be revoked. Yet, Ukraine won an action based on one argument only: the transaction may have been concluded under pressure and, therefore, it is necessary to consider all the arguments with regard to this probability.

Indeed, one of the factors to be taken into account by the court in relation to debts under bond obligations is the party’s pressure exercised when concluding a transaction. This doctrine is well-perfected, of course, as related to individuals and legal entities and their transactions between each other, but not to the states.

But in this particular case the Court of Appeal found the grounds to consider this claim more thoroughly. And in the end, the court of appeal ordered the court of first instance to review the case taking into account the aspect of possible pressure.

In the opinion of the court of appeal, there is no need to hear all other arguments in full.

The Russian Federation now has two options to go with. The first one is to lodge a petition to the Supreme Court of England with a request to revoke the appeal award and uphold the judgment of the court of first instance. The Supreme Court of England considers only a small number of cases, usually when it comes to complex legal issues and, therefore, the Russian Federation’s odds of winning are quite low.

The other option is to put up with the repeat hearing of case in the court of first instance under the full procedure. The RF has already stated that they are nevertheless preparing a petition to the Supreme Court.

Here I’d like to emphasize that the decision of the Court of Appeal is a definite success for the Ukrainian side. Yes, indeed, it is obvious (and even the Court of Appeal noted this in its award) that debts under the bond obligations should be irreproachably paid, but the court has nevertheless noted that the argument on pressure should still be thoroughly considered.

At least Ukraine has secured a postponement – and quite substantial one – we can expect an additional year or two for sure.

Are there any chances for the judgment to be reviewed in favor of Ukraine? It is extremely difficult to answer this question, especially having no access to the relevant documents.

However, in any case, during full-scale consideration of the case Ukraine may try to get other decisions in force against the Russian Federation delivered by other courts (first of all as related to the Crimean issue) and, if the case is lost in England once again, to refuse to pay a three billion dollar debt against set-off of other claims filed against the Russian Federation.

 
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