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Ukrainian Eurobonds and Russia’s Compliance with International Law: Matters Suitable for Summary Judgment in the English Courts?

Published on October 9, 2018        Author: 
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In mid-September the Court of Appeal of England and Wales handed down its judgment in Ukraine v The Law Debenture Trust Corporation P.L.C. (‘Ukraine v Law Debenture’), in which it decided Ukraine’s appeal against an order for summary judgment for the payment by Ukraine of just over USD 3 billion. The application for summary judgment followed Ukraine’s decision to stop making payments under notes it issued in 2013, which are held exclusively by Russia. Law Debenture Trust Corporation plc (‘Law Debenture’), a trustee acting at the direction of Russia, made the application on the basis of the trust deed by which the notes were constituted, which is governed by English law and which empowers the Russian Ministry of Finance to direct Law Debenture to take enforcement proceedings against Ukraine. The domestic nature of the claim notwithstanding, Ukraine argued, inter alia, that Russia violated international law and that this provided grounds to refuse payment under the notes. It is on the Court of Appeal’s approach to these arguments that this post focuses.

Ukraine’s arguments and international law

It is in relation to two of Ukraine’s arguments – a defence of duress; and entitlement to refuse payment on the basis that it was taking a countermeasure against Russia – that Russia’s compliance with international law was called into question. The significance of Russia’s compliance with international law to the latter argument is clear. The relevance of international law to the former argument resulted from Ukraine’s claim that the issuance of notes ‘was procured by unlawful and illegitimate threats made, and pressure exerted, by Russia, such as to vitiate the consent of Ukraine…’ (Ukraine v Law Debenture para 17). More specifically, Ukraine alleged that Russia made threats which violated, inter alia, the prohibition on the threat of force and relied also on the imposition of and threat of allegedly unlawful restrictive trade measures as further evidence of duress (ibid para 166).

According to Blair J, neither the defence of duress nor the countermeasure-based argument could be considered on their merits, since the foreign act of state doctrine renders them both non-justiciable. ‘Ukraine’s case to the contrary has no real prospect of success’ (see here, paras 295, 308 and 365). While the Court of Appeal also dismissed Ukraine’s countermeasure-based argument, it did so for a different reason: the absence of a domestic legal basis which permits or requires an English court to ‘examin[e] it or pronounc[e] upon [its] merits’ (ibid para 189). In relation to the defence of duress, however, which has a domestic legal basis and to which, in the court’s view, Russia’s compliance with international law is relevant, the court held Ukraine to have ‘a good arguable case’ that the foreign act of state doctrine is inapplicable (Ukraine v Law Debenture, para 181). Read the rest of this entry…