The UK Supreme Court last week ruled that Ukraine can go ahead with a trial at the High Court to dispute Russia’s claim that the country owes it $3bn for defaulting on a Eurobond Ukraine issued in 2013.

Ukraine had appealed to the Court of Appeal after a summary judgment by Mr Justice Blair in 2017 found in favour of Russia. The Supreme Court upheld that appeal last week, allowing the dispute to go to trial.

Appeals on summary judgment are rare; the grant of permission for first Ukraine and then Russia illustrated the importance of the legal issues raised.

Ukraine had disputed the validity of the bonds, principally arguing it was forced to issue them under duress amid threats of Russian aggression prior to Russia’s annexation of Crimea in 2014. That raised the question of whether the law of duress applies to states and the effect and justiciability of Russia's invasion of Crimea and interference in Ukraine's eastern provinces.

Russia's claim was brought by investment trust Law Debenture as trustee under the Eurobonds, acting at Russia's direction, and represented by Norton Rose Fulbright (NRF) and Brick Court Chambers' Mark Howard KC, along with Oliver Jones.

The case raised novel issues concerning public international law, namely non-justiciability, the foreign act of state principle and states' capacity to contract. Justiciability before the UK courts required a domestic foothold to hear allegations.  

The court also heard arguments relating to contractual capacity and apparent authority on the equally novel question of whether Ukraine could enter the transaction.

Fountain Court's head of chambers, Bankim Thanki KC and Simon Atrill, who will take silk this year, acted for Ukraine alongside Ben Jaffey KC of Blackstone Chambers, as instructed by Quinn Emanuel Urquhart & Sullivan, led by London co-managing partner Alex Gerbi.

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By a five-judge majority, the UK Supreme Court dismissed Law Debenture's appeal on the narrow, conclusive basis of Russia's threats of physical duress.

Partially dissenting, Lord Carnwath would have allowed Ukraine to defend the action on a broader basis, including through the deployment of the defence of countermeasures in respect of Russia's subsequent behaviour. He also would have allowed the case to proceed because Russia's subsequent invasion of Ukraine could not realistically be ignored.

However, Ukraine's cross-appeal seeking to affirm the Court of Appeal's decision on other grounds, including capacity and authority, was dismissed.

The trial, which will likely last several weeks, will require Ukraine to show any alleged threats "were a reason (not the reason, or the predominant reason, or the clinching reason)" for its decision to enter into the contracts for the bonds, and that "the onus will be on [Russia] to establish that those threats contributed nothing to Ukraine's decision", according to the judgment.

The court held: "…the alleged economic pressure, and threats of further economic pressure, are relevant as forming part of a combined strategy with the alleged threats of violence, or at least as part of the factual context in which those threats are alleged to have been made. If they accentuated the impact of the threats of violence, that is a factor which strengthens, not weakens, Ukraine's case.”

Gerbi said: "Ukraine greatly welcomes this opportunity to present its case on duress to the English Court on the merits and to have a full public and impartial judicial consideration of that case, with the requirement for full disclosure by Russia in respect of its conduct towards Ukraine."

A spokesman for Ukraine's Ministry of Finance said: "Time will tell whether Russia has the courage to press its claim, now that it will have to make full disclosure regarding its actions towards Ukraine and account for its appalling behaviour at a public trial. The burden will be on Russia to persuade the court that its threats 'contributed nothing' to Ukraine's decision to issue these weaponised bonds."

Sources independent of the dispute said NRF would need to gain a licence from the UK's sanctions regulator to continue representing Law Debenture. They also suggested Russia was highly unlikely to offer or give disclosure.

NRF and Brick Court were approached for comment.