Law Debunture Trust Corp. Plc. v. Ukraine [

2023] UKSC 11

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Nature of the Case

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Facts

In 2013, D was preparing to sign an Association Agreement with the European Union. Russia successfully applied pressure to D in order to prevent this from happening. Russia also agreed to lend USD 15 billion and USD 3 billion would be the first tranche. By the end of 2013, P and D entered into a Trust Deed governed by English law, which constituted the Notes worth USD 3 billion. Although they are fully tradeable instruments listed on the Irish stock exchange, Russia became the sole subscriber. D paid interest three times in 2014 and 2015, but on 18 December 2015, D suspended payments on the Notes. P sued D and applied for a summary judgment. D claimed in defense that the Notes procured by duress were voidable and had been avoided. Blair J rejected all of D's defenses (including lack of capacity), found there was no compelling reason for a trial, and entered summary judgment against D. Blair J concluded that had he found for D on the capacity argument and had P been required to rely on its alternative argument of ratification and affirmation, this would not have been a suitable issue for summary judgment. The parties were therefore granted general and unconditional permission to appeal, and a stay was imposed on the execution of the summary judgment pending the outcome of any appeals. P and D appealed. The Court of Appeal allowed D's appeal from summary judgment on the grounds that it had an arguable and justiciable defense of duress and that, even if that defense had not been justiciable, the Court would have stayed P's claim. The Court of Appeal found in favor of P, and upheld Blair J's findings, in respect of (i) D's contractual capacity (i) the usual or ostensible authority of the Minister of Finance (iii) the implied terms submitted by D (iv) the doctrine of countermeasures and (v) the fact that there was no other compelling reason for trial. This appeal resulted. D argued in part that the Notes, and the agreements pursuant to which they were issued, were procured by duress and therefore that its purported consent to them was vitiated under English law. The threats and pressure exerted by the Russian Federation were said to have included illegal trade restrictions and threats to D's territorial integrity and independence. Those threats are said to have been intended to deter D from entering into an association agreement with the European Union (the 'Association Agreement') and to induce it to instead accept Russian financial support.