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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