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National debt of Yanukovych: Chance not to return 3 billion to Russia

Author : Halyna Kalachova

21:38, 3 April 2017
National debt of Yanukovych: Chance not to return 3 billion to Russia

Author : Halyna Kalachova

Three billion dollars de facto were received. Ukraine's attempt to prove that it was a bribe to the regime of Yanukovych for changing the political course was rather adventurous from a legal point of view

21:38, 3 April 2017

Read the original article at epravda.com.ua

112 Agency

The High Court of London has made a decision regarding the suit of Russia against Ukraine on the so-called "Yanukovych loan" for 3 billion dollars.

The decision is not in favor of Ukraine - the court rejected all the arguments of the Ukrainian side. Ukraine will continue to litigate; the judge gave permission to appeal.

Let’s try to understand how the decision of the London Court could affect cooperation with the IMF, other international disputes between Ukraine and Russia, and also found out whether Ukraine still has a chance in this litigation.

How it all began

In December 2013, Presidents Vladimir Putin and Viktor Yanukovych agreed on the provision of a $ 15 billion loan to Ukraine by the Russian side.

The loan condition was exchange of funds for sovereign Eurobonds of Ukraine. The first tranche of $ 3 billion was received by Ukraine in late December 2013. The subsequent tranches weren’t received – Revolution of Dignity took place in the country, followed by a change of power.

According to the schedule, Ukraine had to pay the debt in December 2015. It did not happen.

Ukraine included Yanukovych's debt in a program to restructure its obligations to private creditors. But Russia refused to participate in the negotiations, insisting that Yanukovych's debt has the status of sovereign, and not commercial.

In December 2015, Ukraine extended the moratorium on the return of debts to creditors, including Russia.

Then in February 2016, Russia filed a lawsuit against Ukraine.

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We already wrote earlier that Ukraine identified four lines of defense after that.

The first line named “capasity”. It assumes that the registration of the emission occurred in violation of Ukrainian law and for this reason the emission should be canceled.

The second line is denoted by the term "duress". In legal practice, he means the following: if one party has exerted unlawful pressure or action on the other side, this makes it impossible to fulfill the terms of the contract.

The third line, "implied terms", says about something that was not written under the terms of the issue, but was meant "between the lines". In particular, the Ukrainian side has reason to believe that the receipt of this money allowed Naftogaz Ukraine to pay off with Gazprom for the gas supplied.

The fourth line of defense "countermeasures" suggests that, being under pressure, the party can take retaliatory actions. That is, in response to demands to return $ 3 billion, Ukraine has the right to file a bill for damages caused by the war, the annexation of Crimea and the murders of its citizens.

The ambiguity factor

The position of Kyiv after the court decision was announced by Finance Minister Oleksander Danyliuk.

According to him, the Ukrainian side respects the decision of the court, but believes that it does not take into account the facts of Russian economic and military aggression against Ukraine.

So, Ukraine created its own line of defense on the "military factor" and that is why Kyiv insisted on a long procedure for considering the case.

In the end, of course, this tactic turned out to be erroneous. At first the judge decided that this dispute was fairly simple and could be considered in a short procedure.

The official message of the Ministry of Finance says: the judge concluded that the British legal doctrine forbids him to take into account the illegal actions of Russia and the "pressure" on her part as part of the objections from Ukraine.

Consideration of these arguments belongs to the competence of English courts, which make decisions in the field of international politics.

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"For Ukraine, this is a loss. Ideally Kyiv wanted to delay the consideration of the case for years, perhaps in anticipation of geopolitical changes. The court's decision says that the strategy of delaying did not work, but on the other hand, it also says that not everything is so unequivocally, " says Roman Marchenko, a senior partner of Ilyashev & Partners.

According to British law, immediately after the announcement of the verdict, the judge may or may not give the right to the plaintiffs to contest the decision in the Court of Appeal. "Taking into account that the judge himself authorized to challenge his own decision, it is possible that he admits the possibility of different approaches to the verdict," the lawyer said.

Impact on cooperation with the IMF

Last December, the IMF did something good to Ukraine: the creditor changed its rules, allowing debtor countries that defaulted on sovereign debt to cooperate with the Fund. This allowed Ukraine to restructure part of its national debt, sue Russia and stay with the IMF program.

Our interlocutors in the Finance Ministry assure: the court's decision will not affect the cooperation with the creditor.

"I do not think that the judge's verdict turned out to be unexpected for the IMF, they probably figured out the possible scenarios," Roman Marchenko said.

At this point, the solution does not create any legal conflicts to continue cooperation with the IMF, but it can have an impact in the long term.

"The IMF, as a creditor, will want guarantees that Ukraine will fulfill its obligations to the Russian Federation by a court decision," he added.

What's next?

Ukraine took advantage of yet another legal option and filed an application for a temporary suspension of the implementation of the decision. The judge satisfied it.

This move allows to "freeze" the execution of the verdict until the next court session, which will take place in May. It will protect Ukraine from possible attempts by the Russian Federation to recover the debt from foreign assets.

Now the London judge, says Marchenko, took an unpleasant for Ukraine, but quite logical decision.

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“Three billion dollars de facto were received. Ukraine's attempt to prove that it was a bribe to the regime of Yanukovych for changing the political course was, from a legal point of view, rather adventurous. That money was used to repay the state debt, social payments," Marchenko said.

That is, the funds were not stolen, and the Ukrainian side acknowledges this. The credit was received by the legitimate Ukrainian government, two presidents agreed on it.

The government assured that not everything is as bad as it might seem at first glance. The appeal will prolong the process for another year and a half. The experts also do not exclude that there will be several appeals in this process.

The British judicial system is of three levels: the High Court of Justice, the Court of Appeal and the Supreme Court of the United Kingdom. Given that the dispute is large and complex, the case in a few years can reach the Supreme Court.

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