The Russian government has announced announced that it plans to initiate legal proceedings against Ukraine by the end of the month to recover the $3 billion in bond debt now in default. It's not yet clear whether the proceedings will be in English courts or in arbitration. Officials in Ukraine say they expect to win. At first glance, that seems like posturing; after all, Ukraine borrowed $3 billion and didn't pay it back. But as it turns out, Ukraine has some pretty decent arguments, which if successful might excuse (or allow it to defer) the obligation to pay. Some of those arguments involve international law, and I'm a bit skeptical that those will succeed. But as I explain in a short new paper, Ukraine's contract-law arguments might fare somewhat better. Here's the abstract to the paper:
Russia has announced that it will initiate proceedings by the end of January (likely in arbitration) to recover the $3 billion debt owed by Ukraine. The Russia-Ukraine dispute is unique in the annals of sovereign debt litigation. It is a politically and militarily fraught conflict wrapped in a garden-variety, English-law contract dispute. The dispute may settle, and if so its resolution will depend largely on political and economic considerations. Yet the resolution will occur in the shadow of basic contract law, which is surprisingly relevant. Indeed, there are a number of plausible arguments available to Ukraine, which, despite the unusual facts, may excuse (or allow it to defer) its obligations to Russia. It would be understandable for judges and arbitrators to hesitate before weighing in on such a politically-charged dispute, but Russia’s insistence on acting like a private creditor leaves little choice.