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Monday, January 23, 2017

Lawyers open new front in Putin’s war with Ukraine

The conflict between Russia and Ukraine, which has cost almost 10,000 lives since 2014, resumed this week far from the battlefields of Crimea.

The two states lined up in the Admiralty and Commercial court in London, where a new front was opened by City lawyers equipped with laptops and fat files of documents rather than soldiers or militiamen.

The rival units were commanded by two of London’s leading commercial silks, Mark Howard, QC, and Bankim Thanki, QC, in the first skirmish of a dispute over a $3 billion loan that Ukraine refuses to repay to President Putin’s regime.


The decision on who wins the legal fight will be made by Mr Justice Blair, elder brother of the former Labour prime minister.

Russia has been fond recently of expressing scorn for Britain, via the Twitter feed of its London embassy, but when it comes to sorting out complex financial problems it turns to the English courts. London is an international centre for the legal settlement of intricate financial disputes such as this one between Kiev and Moscow and the stream of business has made fortunes for City law firms.

The hearing in court 19 at the Rolls Building — a sterile forum reminiscent of an open-plan office rather than a traditional courtroom — afforded a rare glimpse into the world of such transactions. Typically, complex international financial cases are settled behind closed doors after arbitration.

The loan at the centre of this case dates from December 2013, months before the revolution in Ukraine that swept Viktor Yanukovych, the president backed by Moscow, from power. It took the unusual form of a eurobond governed by English law and the case falls for trial in London.

Mr Howard, backed by the City law firm Norton Rose Fulbright, was ostensibly representing the Law Debenture Trust Corporation, the trustee of the bond.

Mr Thanki, acting for the Ukrainian government and backed by a troop of lawyers from Quinn Emmanuel Urquhart & Sullivan, insisted that the true identity of his opponent was the Russian Federation.

The corporation was “acting at the direction, on behalf and for the sole benefit” of Russia which had coerced Ukraine into accepting the loan by forcing it to abandon an association agreement with the European Union and plunging the country into financial crisis.

Mr Thanki said Moscow’s claim “arises from, and is itself part of, a broader strategy of unlawful and illegitimate economic, political and military aggression by Russia against Ukraine which has had, and continues to have, devastating consequences for the country, its people and economy”.

Russia’s campaign of aggression had continued after Mr Yanukovych’s overthrow, with the invasion of the Crimean peninsula which intensified the economic problems and left Ukraine unable to pay back $3 billion.

Russia was now “hiding behind the trustee” and, Mr Thanki said, its demand for repayment of the loan was “not merely a matter of moral outrage — it is also based on a flawed factual and legal analysis”. Ukraine said it was entitled to default on the loan as a “countermeasure” against the annexation of Crimea, which was “an internationally wrongful act”.

Mr Thanki conceded that this was a “novel” defence but added: “That novelty is merely a reflection of the fact that the present situation — of a sovereign state, by proxy, suing another in the High Court — is itself novel.”

Russia says that Ukraine’s arguments are “contrived” and issues of international law have no place in the English commercial court. It wants the court to order Ukraine to repay the $3 billion, plus interest, without proceeding to a full trial.

In written submissions, Mr Howard said: “It is appropriate for the court to grasp the nettle now and determine these issues. If it does not, the court risks being dragged into the determination of issues of international law and politics that have nothing to do with the trustee, nothing to do with English law and which do not fall within the competence of the English courts.”

He said that Ukraine’s defence was “a bare-faced attempt to shoehorn into an ordinary debt claim wide-ranging and contentious issues of international law that do not fall within the purview of the English courts and have nothing to do with the trustee”.

The judge reserved his ruling at the end of a three-day hearing. Whatever he decides, there will be further proceedings. This was merely the first round of battle.


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