The Legal Profile of Russian Eurobonds : Engineered against Speed

This paper provides an overview of the Russian Federation’s default history, the legalcharacteristics of the bonds, and potential issues for litigation should a default materialize. The paper’s mainargument is that although it is not impenetrable, this Eurobond stock is more protective of the debtor than that ofthe usual emerging market country. It achieves this through preservation of all the defenses available under current lawand the presence of broad language in key provisions. For instance, clauses providing for payment in a differentcurrency if “reasons beyond its control” stop the debtor from paying in the denomination currency have drawnattention. The paper analyzes this and other characteristics, providing initial assessments on how theissues could play out. While the bonds’ characteristics could slow progress toward obtaining judgments when comparedto other sovereign debts, they do not prevent them. Collecting on the judgments would be, as usual, the harderpart. Ultimately, litigation over these debts could last a long time; other creditor versus foreign sovereign episodesinvolving less debtor-friendly instruments have lasted 15 years, and resolution and recovery would be highlycontingent on political factors. Finally, the paper provides non-lawyers a general roadmap of debt litigation againstforeign sovereigns in the United States and the United Kingdom.