BL-2017-000665 - [2025] EWHC 2909 (Ch)

In reaching the conclusion I have on compound interest, I have determined that an award of simple interest does not fully compensate the Bank for the harm which it sustained in consequence of the Defendants’ unlawful acts. It follows that it is not necessary to consider in any detail the submissions that were made on the right to simple interest. However, given the sums in issue, it is appropriate to give a brief description of the conclusions that I would have reached if I had determined that compounding was inappropriate. There are two possibilities.

The first possibility is that simple interest is payable in circumstances in which the Bank has (contrary to my findings) failed to demonstrate that the element of compounding is justified, but the Bank can prove that simple interest is required to give it full compensation for the harm it has sustained by the Defendants’ unlawful acts. In that context, and consistently with the approach I have explained above, the right analysis is that simple interest should be paid at a rate reflecting the weighted average of all of the Bank’s US$-denominated borrowing, subject to a minimum rate of 3% per annum. In the evidence this is described as Case 5. It would lead to an award of simple interest totalling US$914,043,573 as opposed to the greater liability for US$1,190,083,824 (described as Case 2), which is calculated on the same basis but compounding with monthly rests.

The analysis is slightly more complicated if simple interest is claimed under Ukrainian or English statutory provisions. Statutory interest is payable under Ukrainian law as a matter of right pursuant to Article 625 where a debtor is in default of all types of monetary obligation:

“Upon the creditor’s claim, a debtor that delayed execution of the monetary obligation shall have to pay the debt amount taking into account the established rate of inflation for the whole term of delay as well as three per cent annual interest of the delayed amount, unless another interest is established by the agreement or by the law.”

If, contrary to my conclusion on compound interest, the Bank were to be thrown back on to a claim to interest other than by proof of its entitlement to full compensation, its right to do so derives from Article 625. It also relies on the English court’s discretionary power under section 35A of the Senior Courts Act 1981 (“section 35A”). The exercise of this English law power is available because, as Moore-Bick LJ explained in Maher v Groupama Grand Est [2010] 1 WLR 1564 (“Maher”) at [25] to [37], the power to award interest under section 35A creates a remedy rather than a substantive right and is therefore governed by English law as the lex fori, even though the law of Ukraine is the lex causae. The consequence of this, and the way in which the power ought to be exercised, was succinctly explained by Leggatt J in AS Latvijas Krajbanka (in liquidation) v Antonov [2016] EWHC 1679 (Comm) (“Antonov”) at [7], saying (when applying the decision of the Court of Appeal in Maher):

“The Court of Appeal considered that this discretionary remedy is available whether a substantive right to recover interest exists or not, although the factors to be taken into account in exercising the court’s discretion might well include any relevant provisions of the applicable foreign law relating to the recovery of interest.”

Turning to the position under Ukrainian law, it was common ground that interest payable under Article 625 is simple interest and it is payable at a statutory rate of 3%, which is not subject to indexation for inflation where, as in the present case, the obligation is denominated in a foreign currency (US$). However, there was a dispute as to whether, in relation to a tortious obligation, it is payable from the time of the infliction of harm or from the time at which a court holds the defendant accountable. Mr Morrison drew attention to what he said was the important distinction between an obligation arising out of the tortious act and the obligation to pay a defined amount, the latter of which he said was the moment from which interest was payable.

It was Mr Beketov’s evidence that, where another source of interest is not “established by … the law” (which would only be the case if I am wrong in my finding that full compensation requires the payment of interest), statutory interest is payable from the time of infliction of harm. In my judgment this evidence is supported by the resolution of the Grand Chamber dated 2 August 2023 in case No. 904/6790/21, Intermet LLC v Person 1, which analysed the previous resolution of the Grand Chamber dated 19 June 2019 in case No. 703/2718/16-ts, Person 1 v Head Office of the Pension Fund of Ukraine as follows at [45]:

“42 … The obligation is not one that arose from a court decision. This is an obligation to compensate for damage, in which the court decision determines the specific amount of damage and states that there is an obligation between the parties. Since compensation for damages is also possible in monetary form, in this case a monetary obligation arose between the parties, as one party is obliged to pay a certain specified amount of money to the claimant.

43.

In other words, the Grand Chamber of the Supreme Court has already expressed its legal position that the monetary obligation to compensate for damage arises between the parties from the infliction of damage, and not from a court decision. The provisions of part 2 of Article 625 of the Civil Code of Ukraine should be applied taking into account the above opinion of the Grand Chamber of the Supreme Court.”

Mr Beketov’s evidence is also supported by a further recent resolution of the Supreme Court dated 13 February 2025 in case No. 922/1920/24, Yuri Mytsa v. PJSC Kharkivenergozbut (as well as another resolution dated 26 February 2025 in case No. 905/55/24, JSC DTEK Dniproenergo v. LLC DTEK Skhidenergo (aka Donbasenergo) although this case may be distinguishable on its facts). By contrast, Mr Morrison relied on Mr Marchukov’s evidence on the significance of the resolution of the Supreme Court dated 23 April 2025 in case No. 694/1482/21, Person 1 v Private Joint-Stock Company Insurance Company Ukrainian Insurance Group (aka Traffic Accident), which is consistent with a conclusion that Article 625 interest was payable only from the date of judgment.

However, Mr Beketov explained that Traffic Accident did not refer to the Intermet case and, while Mr Marchukov identified similarities between Traffic Accident and the current case, the view he actually expressed was somewhat tentative in that he simply said that “I am not able to confirm that” the Supreme Court “has now settled in favour of” an approach that simple 3% annual interest under Article 625 in the context of tortious liability begins to accrue on or immediately after the infliction of harm. I accept Mr Beketov’s evidence on this point for the reasons he gives.

In light of this conclusion, the only outstanding issue is the rate at which I would have awarded simple interest if I were to have been wrong on the award of compound or simple interest assessed as full compensation. In the light of the manner in which Leggatt J explained the position in Antonov, the 3% recoverable under Ukrainian law is to be taken into account as a relevant provision of the applicable foreign law when exercising the court’s discretion under section 35A. If I were simply to award 3%, described in the evidence as Case 6, there would be an award of pre-judgment interest against the Individual Defendants totalling US$612,195,688.

The alternative rates sought by the Bank were, in order of preference, as follows (the quantum was agreed by the experts):

In this context, the basic position is that the court is concerned with the rate at which and the terms on which a claimant with the general characteristics of the Bank would have borrowed in the relevant currency: Fiona Trustv Privalov [2011] EWHC 664 (Comm) at [15] and [16] and Carrasco v Johnson [2018] EWCA Civ 87 at [17(3)]. I accept that the court will normally avoid an analysis of the rates at which the successful claimant could have borrowed, but I also accept that the size of the Bank was such that it is hard to find evidence of the rate at which a bank ‘with the attributes of the Bank’ would have borrowed except for the actual rates at which the Bank did in fact borrow. I also take into account the fact that it has been necessary to consider in some detail the rates at which the Bank did in fact borrow during the relevant period in order to deal fully with the Bank’s claim to interest as full compensation.

Having regard to all of these considerations, the rate I would have awarded had it been necessary to consider the exercise of my powers under section 35A would have been in accordance with Case 5 (i.e., the rates of the weighted average of all of the Bank’s US$-denominated borrowing, subject to a minimum rate of 3% per annum, leading to an award of simple interest against each of the Individual Defendants totalling US$914,043,573). However, in the light of my previous conclusions, I consider that the Bank’s entitlement to full compensation means that it can enter judgment for interest in accordance with Case 2, i.e., interest with monthly rests at a rate computed by reference to the weighted average with a 3% floor. As I have already explained, so far as the Individual Defendants are concerned, the amount calculated by Mr Thompson and not disputed by the Defendants’ expert is US$1,190,083,824.