Contract Law and Ukraine's $3 Billion Debt to Russia

Abstract

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.

Keywords: Ukraine, sovereign debt, contracts