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Ukraine Beset By Debts To Russia Backed Up By English Law

11/04/2017 13:18 BST | Updated 11/04/2017 13:18 BST

Two weeks ago the High Court in London ruled there is no 'justiciable defence' on Ukraine's part for the non-payment of a $3bn debt to Russia. Once again, Ukraine, beset by economic, military and political problems, is left in the unenviable position of being caught between Russian aggression and English legal sophistry.

Ukraine's predicament regarding the debt goes back to beginnings of its ongoing conflict with Russia in 2013. Ukrainian president Yanukovych engineered a deal with Vladimir Putin which saw Russia agreeing a loan of $3bn. The country's economy was faltering and Putin's loan offered the chance of at least some stability. However, the deal also kept Ukraine firmly within the compass of Russian influence. The aid package was expressed in the form of a Eurobond which came under English legal governance.

Subsequent events, including the bloody Euromaidan uprising, Russia's annexation of Ukraine and the ongoing conflict in the Donbass rendered Ukraine unable to repay the debt. President Yanukovych was ousted fled to Russia in 2014 and is wanted in Ukraine for high treason. Ukraine now argues that the loan was part of a political manoeuvre intended to keep the country tied to Russia. With all this in mind the current Ukrainian government argues that it has no intention of repaying the debt to Russia (it defaulted in 2015).

This year Russia instigated a lawsuit in London, arguing that the High Court should decide the claim without a trial, since, in Russia's opinion Ukraine was unable to defend its stance at a full trial. For its part Ukraine contends that the original deal was signed under 'unlawful, and illegitimate economic and political pressure' from Russia in 2013. Ukraine pressed for a full trial, as it argues that Russia's aggression and assault on the country's sovereignty has had a direct impact on its economy. In short Ukraine asserts that the case is not simply one of reneging on a debt. Instead, it wished to challenge the conditions under which the loan was made and show its actions regarding the debt against the current political situation.

However, English law is nothing if it is not punctilious. Last week Mr Justice Blair ruled Russia's favour, saying 'Ultimately this is a claim for repayment of debt instruments to which the court has held there is no justiciable defence. It would not be right to order the case to go forward to a full trial in such circumstances.'

Ukraine suspected this outcome and is set to appeal the decision. It is pressing its view that the debt is 'voidable' as it was made under 'duress.'

While one could, arguably, applaud the unbiased qualities of the English judiciary in this case, the decision also seems invidious, given the state of British/Russian relations and Ukraine's predicament. Surely Ukraine should be allowed, at least, to offer her defence in a full trial. Last week's ruling certainly calls into question the judge's knowledge of the situation in Ukraine, for he did not take the geopolitical situation into account.

Ukraine is not a rich or stable country by any means. Being forced to repay the $3bn would throw the fragile Ukrainian economy into chaos, as this is approximately ten percent of the county's entire budget. Another major point of consideration is that Ukraine has to offer same terms to the other lenders with whom it has restructured its significant debts of almost $18 billion. If Ukraine will have to return a figure of around $20 billion this would be over 5th of the country's GDP. The Ukrainian economy could not sustain this.

For centuries English law has often shown itself to be flexible rather than implacably fixed - this is its much vaunted boast. Beleaguered Ukraine is calling for a moral nuance to be applied to its case.

By Mohammad Zahoor