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How a Commercial Bond Dispute in the UK Supreme Court Invokes International Law

Published on December 30, 2019        Author: 

 

While the heads of state for Ukraine, Russia, France and Germany met in Paris on December 9 to discuss terms of peace, across the English Channel in London the UK Supreme Court heard arguments concerning Russia’s suit for repayment on a US$3 billion loan to the government of Ukraine. The deal was made in December 2013 shortly after then President Viktor Yanukovich pulled out of an association agreement with the EU, and months before Russia annexed Crimea and invaded Eastern Ukraine. When the principal and final interest installment came due in December 2015, Ukraine refused to make payment.

The Law Debenture Trust Corporation p.l.c. v. Ukraine is a matter of English law because the notes, issued in the form of Eurobonds tradeable on the Irish stock exchange, were constituted by a trust deed negotiated by the parties to be governed by English law, with English courts having exclusive jurisdiction. Law Debenture is trustee of the notes, whose sole subscriber is the Russian Federation. But beyond being just another commercial bond dispute, this case is a study in how international law is woven into the fabric of national laws. The court’s ruling may have significant consequences in reaffirming faith in the status of public international law, sending a message to all nations seeking the recognition and benefits of a liberal rules-based order.

Of Ukraine’s myriad defenses to the claim, the one which survived summary judgment at the appellate level was the English common law defense of duress. As the Court of Appeal points out at 159, “English law provides that a contract made as a result of illegitimate pressure will not be enforceable.” In this case, Ukraine alleges that Russia applied illegitimate economic and political pressure to Ukraine in 2013, including threats of use of force, to deter the administration from signing an association agreement with the European Union and compel Ukraine to accept Russian financial support instead. Russia argues that Ukraine cannot make out its defense because it has no domestic foothold, and because doing so would require investigation into Russia’s dealings on an international plane, something the English court should not endeavor. Read the rest of this entry…