Recently, the Supreme Court of the United Kingdom sent a case against Ukraine regarding $3 billion in Eurobonds for consideration at a full trial. Undoubtedly, this is one of Ukraine’s significant legal victories, but it is also a unique precedent. We turned to Piers Gardner (Barrister, Monckton Chambers, London) for a comment.

However, let us first recall the key points of the case and what paved the way for this decision:

It concerns Ukraine’s issuance of $3 billion in Eurobonds in December 2013 under pressure from Russia (the so-called “Yanukovych’s debt”).

These bonds were placed on the Irish Stock Exchange on December 20, 2013, and redeemed by Russia. The maturity date was December 20, 2015.

In December 2015, the Cabinet of Ministers of Ukraine imposed a moratorium on the payment of $3 billion for Eurobonds.

In February 2016, a lawsuit was registered by Law Debenture Trust Corporation, acting on behalf of the Russian Federation, against Ukraine in the High Court of London for debt recovery, and in May, Ukraine filed documents to defend itself.

The Ukrainian side insists that it was forced to enter into an agreement on the issuance of Eurobonds under pressure, so the issuance of bonds should be considered invalid.

In 2018, the English Court of Appeal allowed Ukraine’s appeal against the High Court of London’s verdict, which obliged Ukraine to repay $3 billion in Eurobonds and pay interest.

AZONES partner Nadia Volkova drew attention to the fact that when analyzing similar cases, it is important to take into account a number of peculiarities:

Given the fact that the number of cases where the violation occurs in the context of an armed conflict, which is the sphere of regulation of international law, will increase, it is critically important to take into account the peculiarities of the law and legislation of those jurisdictions in which these cases are considered, as well as the ratio of national law and international.

Piers Gardner, Monckton Chambers, London commented on the Law Debenture Trust case against Ukraine:

Turning to the question about the Law Debenture Trust v Ukraine case I would say: The judgment of the UKSC establishes an important precedent in English contract law that the threat of the use of force, even by a sovereign State against another sovereign State, where the threat of force would result in loss of life or damage to property, can constitute duress under English law and so can provide the basis for declaring a contract void.

Given that the judgment held that the threat of force could amount to duress, had the invasion occurred at the time when the loan was granted by Russia to Ukraine, the actual use of force could also have amounted to duress.

Importantly, that is an interpretation of English contract law. It is not a determination of international law and is unlikely to be relevant to the analysis which might be applied by other national courts outside the UK.

The reason for this is that the English courts interpret English law and usually public international law is not part of English law. This is the reason why Ukraine’s argument that Russia’s threats amounted to duress because the threats were in breach of public international law was rejected by the SC judgment, not because they were wrong,(or right) but because international law is not English law and so should not be determined by the English courts.

I conclude that, although the Russian invasion of Ukraine was a breach of international law, even if it had occurred at the time when Russian made the loan to Ukraine, the English courts would not have taken account of the fact that the invasion was a breach of international law, but only whether it caused injuries/deaths and damage to property and so amounted to ‘duress’ under English contract law.

It would be very unusual for the English courts to make a determination of public international law and they did not make one in this case. It is important to note in addition that the claimant was an English company which owns the bonds issued by Ukraine, so that this case was not a claim by “Russia” to the repayment of the loan represented by the bonds. That is despite the fact that, if/when that company wins, it would be obliged to pay the proceeds of that win to Russia.