By Dennis Hranitzky, Richard East, Liesl Fichardt, Epaminontas Triantafilou, Yasseen Gailani, and Rupert Goodway (Quinn Emmanuel Urquhart & Sullivan, LLP)
The article summarizes the likelihood and implications of a sovereign bond default by the Russian Federation. It first discusses the economic sanctions imposed on the Russian Federation, their impact on Russia’s ability to access gold and foreign currency reserves and the consequences of sanctions on Russia’s ability to satisfy its obligations under the approximately $40 billion in UK law bonds. Noting that a payment default will likely lead to litigation arbitration, the article analyzes key provisions of the bonds, noting that atypical of sovereign bonds, they include no choice of law or venue provisions or waiver of sovereign immunity. The article explores anticipated litigation hurdles in both the US and the UK, with a focus on sovereign immunity and forum non conveniens defenses that may be available to Russia, including the particular difficulties that may be faced by litigants in enforcing a judgment from a US or UK court in the absence of a sovereign immunity waiver. The analysis of sovereign immunity necessarily includes consideration of the commercial activity exception and the article analyzes the US and UK interpretation of this exception. The availability of judgment enforcement discovery is also addressed, noting that broad written and sworn deposition discovery of both the debtor and third parties is the norm in the US and also potentially available in the UK. The article concludes with a recommendation that holders of Russian bonds organize themselves and seek advice on their options prior to the occurrence of a default.
The full article is available here.