The London High Court on March 29 denied Ukraine’s request for a full trial in the $3 billion dispute between Ukraine and Russia. Instead, the court will go with a summary judgment that Russia originally required.
Russia filed the case against Ukraine demanding the repayment of the $3 billion Eurobond loan granted by the Russian government to the ousted president Viktor Yanukovych back in 2013.
The London court found that debt repayment case non-justifiable but granted Ukraine the immediate right of appeal and suspended any repayment pending the appeals process, which could take at least a year.
Denying the full trial, the London court cited a 1990 case where it was ruled that “municipal courts can’t have the competence to adjudicate upon or transactions entered into by independent sovereign states between themselves on the plane of international law.”
The judgment summary cound be found here.
Ukraine claimed it was not going to pay the debt received by the Russian-backed ex-president on “unfair terms” to the aggressor country, which a year after making the loan annexed Ukraine’s Crimea peninsula and instigated an ongoing war that has claimed some 10,000 lives after Yanukovych fled for Russia on Feb. 22, 2014.
“The court ruling is not in Ukraine’s favor but bears no immediate implications,” said an analytical report by Dragon Capital Kyiv-based investment bank on March 30.
Russia demands the full payment of the loan that was due in December 2015 and also a 5 percent interest payment that stopped in June 2015. But in May 2015, Ukraine passed a law that banned any payments on the Russian loan until it is restructured.
But even if the court eventually rules in Russia’s favor, Ukraine’s commitments to the International Monetary Fund and to its other creditors would not allow it to immediately pay the loan, according to Oleksandr Parashchiy, head of research at Concorde Capital investment bank.
According to Parashchiy, Ukraine can’t pay the debt to Russia as it would breach its March 2015 agreement on the restructuring of its external debts, which said that the country would be paying its Eurobond debts only in the period from September 2019 to September 2027.
He said Russia was the only major Ukraine creditor which disagreed in taking part in the restructuring of Ukraine’s debts in 2015.
“Ukraine would be breaching its obligations under all the other sovereign Eurobonds if it repays its debt to Russia in full earlier than in 2022,” Parashchiy said.
By that time, Ukraine has a chance to win at least some cases against Russia in the international courts, Parashchiy believes.
Ukraine is now seeking reparations from Russia for the annexation of Crimea and war in Donbas in about a dozen of international courts.
“Our demands and the demands of our citizens all together are much bigger (than the Russian ones),” Sergiy Petukhov, deputy justice minister told the Kyiv Post.
Petukhov said that currently, Ukraine has interstate disputes against Russia in the European Court of Human Rights, some of which were filed as early as in 2014.
Earlier this month, the International Court of Justice, the United Nations’ highest court based in The Hague, also started viewing Ukraine’s motions against Russia for “intervening militarily in Ukraine, financing acts of terrorism, and violating the human rights of millions of Ukraine’s citizens.”
Ukraine is demanding to fine Russia for breaching of the two international conventions. They are the International Convention for the Suppression of the Financing of Terrorism — for supplying the Russian-backed separatists in eastern Ukraine, and the International Convention on the Elimination of All Forms of Racial Discrimination — for persecutions by Russian authorities of the Crimean Tatars, the indigenous people of Crimea who predominantly support Ukraine.
In September, Ukraine also announced arbitration against Russia under the United Nations Convention on the Law of the Sea, claiming that by annexing Crimea Russia also usurped and interfered with Ukraine’s maritime rights in Black and Azov Seas.
Petukhov said Ukraine also initiated the several dispute proceedings in the World Trade Organization against Russia regarding the trade restrictions which it had imposed against Ukraine.
In addition to that, several state and private Ukrainian companies including Naftogaz state-run gas company, state-run Oshchadbank, state-run Privatbank, and some businesses belonging to oligarch Ihor Kolomoisky filed the motions against Russia to investment arbitration, regarding expropriation of their property in Crimea.
Petukhov said that while it will take years for all these cases to be considered by courts, the cases in the European Court of Human Rights and the World Trade Organization disputes are the closest to be. He added that for most of them the sums of the fines from Russia would be calculated only on their final stages.
Trade Representative of Ukraine Nataliya Mykolska told Lb.ua earlier this month that Ukraine to send the third complaint to WTO against Russia. She estimated Ukraine’s losses from Russian aggression in 2016 alone are $1 billion.
London-based senior emerging markets sovereign strategist Timothy Ash said Russia is unlikely to agree on any deal on the debt favorable for Ukraine. So if Ukraine fails to “play for time” in the London court and is ordered to pay the debt, Russia may use a third party to demand the payment.
“We might see Russia getting around these complications by selling these liabilities to third party, ‘private’ interests, who might use different angles to secure early repayment,” he said.
