LONDON, Oct 10 (Reuters) - Merchant International is pursuing Ukraine's Naftogaz in the English courts over a $21.8 million debt, a source close to the Delaware incorporated firm said, in a case that raised concerns of a possible default at the state-owned energy company.
A Kiev finance ministry official said on Tuesday a London court had frozen part of a $75.8 million eurobond coupon payment by Naftogaz on behalf of an unnamed third party, forcing the cash-strapped state to pay twice to avert default by Naftogaz and any knock-on effect on other sovereign bonds.
Naftogaz, whose bond is fully guaranteed by the Ukrainian government, paid the delayed coupon on Wednesday to ensure it reached bondholders before a 10-day grace period expired a day later.
Analysts say any failure to pay by Oct. 10 would have led to a default that could eventually have triggered cross-default provisions on billions of dollars in sovereign debt.
A source close to Merchant, who emphasised the company was guided only by "commercial considerations", said on Thursday there had been repeated attempts to try and resolve the dispute, including direct appeals to the Ukrainian government.
"There is a valid and enforceable English judgment and the remaining ... debt is $21.8 million. Naftogaz refuses to execute and pay the judgment voluntarily. Merchant wishes to pursue lawful means to protect its rights," the source said.
London law firm Hogan Lovells confirmed that it was acting for Merchant in this dispute but declined to comment on any details. Legal counsel for Naftogaz declined to comment.
The case hinges on a deal struck in Dec. 1997 between Naftogaz's predecessor, Ukrgazprom, and Russian oil and gas company Gazprom, under which Gazprom was to supply Russian national gas to the Ukrainian company, according to court documents.
As part of the deal, Ukrgazprom agreed to pay certain debts of a Gazprom subsidiary, Surgutgazprom, to a Russian company called Severstudstroy. Under a subsequent deal in Dec. 1998, Severstudstroy assigned its contractual rights against Ukrgazprom to Merchant International.
Merchant received no payment and, in Jan. 2002, brought a claim against Naftogaz in the Kiev Commercial Court. However, after a series of legal skirmishes, Merchant was unable to recover the debt in Ukraine because of a 2005 law that suspended the execution of judgments against energy companies.
It began UK proceedings in April 2010. Under English Common Law principles claimants can enforce any foreign money judgment in English courts with a new claim.