By Karin Strohecker
LONDON (Reuters) - Ukraine has failed to offer a "justiciable" or court-ready defence for not paying back $3 billion lent to it by Russia in 2013, a British court ruled on Wednesday, refusing to send the case to a full trial.
This included a claim that non-payment was a countermeasure against Russian interference with Ukraine's sovereignty.
The case between the two adversarial governments centres on $3 billion lent by Russia in December 2013 to Ukraine under pro-Moscow former President Viktor Yanukovich. The debt was structured in the form of a Eurobond governed by English law.
Moscow wants the bond to be repaid in full but Ukraine, which now has a pro-Western government, says Russia should have participated in a 2015 restructuring of its sovereign Eurobonds
Judge William Blair said in the pre-trial hearing the court had given the case careful consideration but added:
"Ultimately this is a claim for repayment of debt instruments to which the court has held there is no justiciable defence. It would not be right to order the case to go forward to a full trial in such circumstances."
Ukraine said it would appeal the ruling.
Russia had requested the UK court for a summary judgement -- a move often used to speed up procedures -- meaning the court after examining Ukraine's defence arguments would decide if they are likely to stand up in court.
Ukraine had put forward four pillars of defence.
It said its then-government had lacked the capacity to enter into the agreement with Russia, that the debt was incurred under duress, the terms attached to the issue were unfair and finally, that non-payment was a countermeasure against Russian interference in its economy and territory.
Russia annexed Ukraine's Crimea region in 2014.
The judge acknowledged that Ukraine had made a strong case regarding the economic pressure and Russian threats which led to Kiev accepting Russia's financial support in 2013, rather than signing an European Union accession agreement.
But he added that the arguments on duress and countermeasures both concerned international law -- which the court could not consider.
Ukraine's ministry of finance would also have had the usual authority to enter into a deal like that, the judge added.
The judge has written in the past on the concept of "odious debt", a term used to describe debt incurred by a government that does not serve the interest of the country.
Ukraine's Finance Minister Oleksandr Danykyuk said his country had received the judge's permission to appeal and had been granted a stay of execution until at least late-April.
Legal experts expected the court of appeal would hear the case later this year, or possibly in early 2018.
"The bottom line is that litigation will most likely continue and Ukraine will not be forced to pay Russia until 2019, when the rest of the bonds come due anyway," said Evghenia Sleptsova, an economist for Central and Eastern Europe at Oxford Economics.
The first of new Eurobonds issued as part of the debt restructuring seen widely as investor friendly matures on September 2019, the last one in the series in 2027.
(Additional reporting by Natalia Zinets in Kiev and Sujata Rao in London; Editing by Jeremy Gaunt)