Ukraine’s war with pro-Russian rebels may be frozen but the legal battle
between Vladimir Putin and Petro Poroshenko is just heating up.
The $3 billion lawsuit Russia filed against Ukraine in London last week
over a bond default is just a fraction of the $63 billion Ukraine is seeking in
lawsuits and other legal claims from Stockholm to The Hague over Putin’s
annexation of Crimea. Russian gas exporter Gazprom PJSC, meanwhile, is
demanding about $32 billion in unpaid bills, pushing total claims from both sides
to almost $100 billion.
“It’s a new
phase of the standoff,” said Otilia Dhand, a political analyst specializing in
central and eastern Europe at Teneo Intelligence in Brussels.
The
pivot from combat zones to courtrooms will ensure relations between the former
Soviet neighbors remain tense for the foreseeable future, lawyers and officials
from both countries said. Many of the cases may take years to resolve and cost
tens of millions of dollars in legal fees alone.
And
there’s no guarantee that either side will be able to collect if it wins
because that would entail hunting for state assets abroad, a complex, costly
and time-consuming process in its own right, according to Stephen Jagusch, a
partner at Quinn Emanuel Urquhart & Sullivan LLP. Ukraine would have to get
in line behind former owners of Yukos Oil Co., who won a $50 billion award
against Russia in The Hague in 2014 for unlawful confiscation of assets, he
said.
Below
are details of the biggest cases that have been or are due to be filed:
Russia v. Ukraine
Russia
is seeking
repayment of
a $3 billion Eurobond it sold to Ukraine in December 2013, two months before
President Viktor Yanukovych, a Putin ally, was ousted amid bloody protests,
prompting the annexation of Crimea.
Russia
refused to participate in the debt restructuring that Ukraine asked its foreign
bondholders to join last year as the pro-Russian rebellion in the east pushed
the country to the brink of insolvency and forced it to seek emergency funding
from the International Monetary Fund. Private investors led by Franklin
Templeton agreed in August to push back maturities and take a 20 percent
so-called haircut.
Cleary
Gottlieb Steen & Hamilton LLP, based in New York, is representing Russia,
which is seeking full repayment of the $3 billion debt plus $75 million in
interest and legal fees, Russian Finance Minister Anton Siluanov said Feb. 17.
Ukraine is prepared to "vigorously defend its interests” in court, the
Finance Ministry in Kiev said the next day.
The
case could take between 18 and 24 months, according to Nicholas Peacock, a
partner and arbitration specialist at Herbert Smith Freehills LLP in London.
Ukraine v.
Russia
Poroshenko
said on state television last month that Ukraine will file its suit against
Russia for annexing Crimea, a region about the size of Belgium, with the
International Court of Justice in The Hague within weeks. The Justice Ministry
in Kiev has said that Ukraine will seek more than 1 trillion hryvnia ($37
billion) in damages.
International
Court of Justice cases are generally very slow moving and can take years to
complete, according to Peter Griffin, managing director of Slaney Advisors in
London. This court is the ideal venue to decide on the legality of the Crimean
annexation, but there are so many other cases related to Crimea that will
probably be decided first, setting a precedent that may influence the ruling in
The Hague, Griffin said.
“The
large number of cases multiplies the players in the game that can make that
legal determination first,” he said.
Naftogaz v.
Gazprom
Ukrainian
state energy company NAK Naftogaz Ukrainy has filed an arbitration claim
against Russian gas exporter Gazprom for about $26 billion in Stockholm,
claiming it overpaid for supplies and was paid too little for transit. The
first ruling in the case isn’t expected before the middle of the year.
Naftogaz
has also hired lawyers to seek damages from losses in Crimea.
Gazprom v.
Naftogaz
Gazprom
last June filed a $29.2 billion arbitration claim against Naftogaz in Stockholm
for unpaid supplies and failure to import all the gas it agreed to buy. Last
month, the Moscow-based company said Ukraine owes it almost $32 billion in all.
Oschadbank v.
Russia
Ukraine’s
state-run AT Oschadbank filed arbitration claims against Russia in Stockholm
last month over assets lost in Crimea. CEO Andriy Pyshnyi said in August that
he would seek about 15 billion hryvnia and that the case could last four years.
Other
Ukrainian companies v. Russia
Five
arbitration cases have been filed by Ukrainian companies, including oil and gas
provider Ukrnafta PJSC, Privat Bank and Aeroport Belbek LLC, against
Russia in the Hague over losses related to Crimea. New York-based Hughes
Hubbard & Reed LLP is representing the Ukrainian companies, according to
its website.
The
claims argue that Russia breached a 1998 bilateral investment treaty with
Ukraine. Russia has said it won’t take part in legal proceedings because that
agreement can’t serve as a basis for arbitration.
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