Court: Ukraine can try to avoid repaying $3B loan to Russia

FILE - Ukrainian President Volodymyr Zelenskyy speaks during his press conference on the occasion of the Russia Ukraine war one year anniversary in Kyiv, Ukraine, Friday, Feb. 24, 2023. The U.K. Supreme Court has ruled that Ukraine can try to avoid repaying $3 billion in loans it said it took under pressure from Russia in 2013 to prevent it from trying to join the European Union. Ukrainian President Volodymyr Zelenskyy tweeted that the ruling was another decisive victory against the aggressor. (AP Photo/Efrem Lukatsky, File) (Efrem Lukatsky, Copyright 2023 The Associated Press. All rights reserved)

LONDON – The U.K. Supreme Court ruled Wednesday that Ukraine can go to trial to avoid repaying $3 billion in loans it said it took under pressure from Russia in 2013 to prevent it from trying to join the European Union.

The court rejected a bid by a British company acting on Russia’s behalf to order Ukraine to repay the loans without facing a trial. Ukraine said it borrowed the money while facing the threat of military force and massive illegal economic and political pressure nearly a decade before Russia invaded its neighbor.

Ukrainian President Volodymyr Zelenskyy tweeted that the ruling was “another decisive victory against the aggressor.”

“The Court has ruled that Ukraine’s defense based on Russia’s threats of aggression will have a full public trial,” he tweeted. “Justice will be ours.”

The case was argued in November 2021, and the court was not asked to consider Russia's invasion of Ukraine three months later.

Ukrainian authorities allege that the corrupt government of pro-Russian Ukrainian President Viktor Yanukovych borrowed the money from Moscow under pressure before he was ousted in protests in February 2014, shortly before Russia illegally annexed Ukraine's Crimea peninsula.

After the 2014 Ukraine revolution, the country’s new government refused to repay the debt in December 2015, saying Moscow wouldn't agree to terms already accepted by other international creditors.

The case came to British courts because London-based Law Debenture Trust Corp. had been appointed by Ukraine to represent the interests of bondholders. The company initially won a judgment ordering repayment of the loans, but Ukraine appealed.

An appeals court overturned the lower court ruling, agreeing that Ukraine could challenge repayment of the loans on the grounds of duress but rejecting several other legal claims.

Both sides appealed to the Supreme Court, which reached a similar conclusion in favor of Ukraine for different reasons.

The Supreme Court rejected several of Ukraine's legal arguments, including that its finance minister didn't have authority to enter into the loan agreement and that Ukraine could decline payment as a countermeasure to Russia's aggressions.

The ruling, however, said a court could consider whether the deal was void because of threats or pressure that are illegitimate under English law.

While the court noted that trade sanctions, embargoes and other economic pressures are "normal aspects of statecraft," economic pressures could provide context to prove that Russia's threats to destroy Ukraine caused it to issue the bonds.

“The success of Ukraine’s defense turns on whether Russia’s threatened use of force imposed what English law regards as illegitimate pressure on Ukraine to enter into the trust deed and related contracts,” the court wrote. "That question can only be determined after trial."

Ukraine said that a month before it entered into the deal, Yanukovych told his Lithuanian counterpart that Russian President Vladimir Putin threatened to have Moscow's banks bankrupt eastern Ukrainian factories if it signed an association agreement with the EU.

Ukrainian Prime Minister Denys Shmyhal said the U.K. court recognized the coercion.

“Now, the Kremlin will have to disclose all information about the actions against Ukraine in open court,” Shmyhal said. “Justice will definitely prevail. Russia will definitely answer for all its illegal actions and crimes.”


Associated Press writer Yuras Karmanau contributed from Tallinn, Estonia.