After seven years of hard-fought litigation in the English courts, we are delighted to have assisted Ukraine in achieving its landmark victory in the Supreme Court of the United Kingdom, announced on March 15, defeating the motion for summary judgment brought by Law Debenture on behalf of the Russian Federation.
The case concerns USD 3 billion Eurobonds issued by Ukraine in December 2013, the sole subscriber to which was the Russian Federation. Effectively a sovereign-to-sovereign bilateral loan made through the mechanism of a Eurobonds issuance, this USD 3 billion formed part of a package of terms agreed between (then) President Yanukovych of Ukraine and President Putin of Russia following Russia’s extensive and ultimately successful campaign illegitimately to pressurize Ukraine into abandoning its long-planned Association Agreement with the European Union. However, that decision led to the ‘Revolution of Dignity’ in Ukraine, the collapse of the Yanukovych administration and the appointment of a new pro-European government in Kyiv, in turn prompting Russia to invade and occupy Crimea in early 2014.
On their face, these Eurobonds were due to be repaid by Ukraine in December 2015. However, Ukraine’s government imposed a moratorium on repayment. Consequently, Russia directed Law Debenture – the company acting as the trustee under the bonds structure – to commence proceedings against Ukraine seeking to recover the alleged debt. As the bonds contracts are governed by English law and subject to English court jurisdiction, Russia’s trustee brought its claim before the English High Court, commencing the proceedings in early 2016. Ukraine instructed a team from Quinn Emanuel’s London office led by partner Alex Gerbi to defend the proceedings.
Taking the position that this was a simple debt claim, Russia instructed the trustee to petition the Court to grant ‘summary judgment’ against Ukraine, a shortened process for obtaining judgment without the Court holding a full trial of the claim. Ukraine sought to resist that motion on a number of legal grounds, including a defense of ‘duress’ in English contract law based on Russia’s illegitimate pressure which Ukraine claimed had unlawfully procured its entry of the contracts for the bonds.
In 2017, the English High Court found against Ukraine, holding that, despite Russia’s “deeply troubling” conduct, the trustee was entitled to summary judgment. However, in September 2018, the English Court of Appeal unanimously overturned the High Court, setting aside the summary judgment and holding that Ukraine’s duress defense should go to a full public trial. The case then moved to the Supreme Court, which heard the final appeal over two separate oral hearings which took place in December 2019 and November 2021.
Finally, on March 15, 2023, the Supreme Court gave its much-anticipated judgment. In a major victory for Ukraine, the Court held unanimously that the trustee is not entitled to summary judgment, with the result that there will be a full public trial before the English High Court of Ukraine’s defense of duress relating to Russia’s alleged threatened use of force against Ukraine. Setting a high bar for the trustee at trial, the Supreme Court held that Ukraine need show only that the alleged threats made by Russia “were a reason (not the reason, or the predominant reason, or the clinching reason)” for Ukraine’s decision to issue the bonds, and that “[t]he onus will be on the Trustee to establish that those threats contributed nothing to Ukraine’s decision.”
Further, the Supreme Court explained that it had not been asked to consider events post-dating the hearing of the appeal, which was concluded before Russia’s egregious illegal invasion of Ukraine began in February 2022, but one of the Supreme Court Justices said that those subsequent events cannot realistically be ignored.
Alex Gerbi, leading the case for Ukraine, commented: “Ukraine greatly welcomes this opportunity to present its case on Russia’s unlawful duress to the English Court on the merits, and to have a full public and impartial judicial consideration of that case.”
This Judgment has received legal industry and public attention around the world, and has opened up the next chapter in this battle between the two sovereign states as the case moves back to the English High Court for a full public trial. It is certain to be one of the most keenly watched cases internationally over the coming years.