Kremlin threatens legal action if Russia is forced to default on sovereign debt
The Kremlin has threatened to sue Western countries if they try and force Russia to default on its sovereign debt.
In an interview with Russian newspaper Izvestia, Russian finance minister Anton Siluanov said Russia had “taken all necessary steps” to pay its creditors, after the US Treasury blocked the country from paying its bond holders $649m in Russian roubles.
Siluanov said Russia would argue in court that it had met the terms of its repayments, as he claimed Western countries had pursued a “deliberate policy” aimed at forcing Russia to default on its sovereign debt.
“Of course we will sue, because we have taken all the necessary steps to ensure that investors receive their payments,” Siluanov said.
The threats raise the prospect we may see Russia fight its case in English courts, due to the fact the bonds at the centre of the dispute were issued under English law.
The laws allow borrowers to defend themselves by arguing external forces made it impossible for them to fulfil its obligations.
Russia’s bid to pay its bondholders in roubles came after US sanctions blocked the country from using US dollars to pay its debts.
Speaking to City PM Tom Canning, a partner at New York headquartered law firm Milbank explained: “It is possible, as we are talking about English law debt, that Russia may argue that performance of the contract with bondholders has been frustrated, or been rendered impossible, as a result of sanctions.”
The lawyer said Russia could also a “direct tort claim” against its foes “by arguing that Western Governments have conspired to cause Russia to breach its bond obligations”.
However, Canning explained that successfully advancing such a claim “would likely necessitate Russia showing that the West’s actions were unlawful.”