Reuters International

A Ukrainian national flag flies over the parliament building (Verkhovna Rada) in central Kiev, Ukraine, March 5, 2016. REUTERS/Valentyn Ogirenko

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KIEV (Reuters) - Ukraine filed its defence on Friday with a British court over a $3 billion (2 billion pounds) debt to Russia, arguing that the original loan agreement with its neighbour and former ally was invalid, the Foreign Ministry and Finance Ministry said in a statement.

The lawsuit has become yet another bone of contention between the two countries, whose relations are at an all-time low following Russia's annexation of Ukraine's Crimea peninsula and a costly pro-Russian separatist conflict in eastern Ukraine.

Russia filed a lawsuit against Ukraine in February at London's High Court demanding repayment of the $3 billion Eurobond, which matured on Dec. 20.

"Ukraine's defence explains that the loan agreement is invalid and unenforceable for multiple reasons," the statement said.

"As a matter of Ukrainian law, Ukraine lacked the capacity to enter an agreement that violated the borrowing limits then in place and ... the agreement was procured through duress exerted by Russia on Ukraine throughout 2013 in order to prevent Ukraine from signing an Association Agreement with the EU," it said.

The Eurobond in question was issued by the government of former president Viktor Yanukovich just two months before he fled to Russia in February 2014 amid bloody street protests.

The unrest began when Yanukovich sought to halt Ukraine's move towards European integration in favour of closer economic ties with Russia.

Originally, Ukraine had until March 19 to file its defence. It was granted an extension until April 16 and then sought one more until Friday.

(Reporting by Alessandra Prentice; Editing by Hugh Lawson)

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