PJSC VTB Bank v Laptev

Where a contract debt is governed by foreign law, a foreign insolvency regime may affect both procedure and the creditor’s substantive entitlement to enforce. If that regime makes proof in the foreign bankruptcy the creditor’s sole remedy during the proceedings, the foreign law governs whether the debt is payable for an English bankruptcy petition. Comity prevents an inconsistent individual remedy, even where the creditor says it will act for all creditors.

For jurisdiction based on a place of residence, the question is factual. Legal ownership is relevant but not essential. Access, financial responsibility, family arrangements and the ability to secure occupation may suffice. Limited physical occupation is relevant but not decisive.

The petitioner sought an English bankruptcy order against a Russian citizen for approximately £25 million due under Russian-law guarantees. The respondent was already bankrupt in Russia, and the petitioner had proved its claim there.

The respondent argued that the debt was no longer payable to the petitioner, that he had no place of residence in England and Wales during the relevant three-year period, and that the court should decline to exercise its discretion. The central issues were which law governed the petitioner’s entitlement to present the petition, the effect of the Russian insolvency prohibition on foreign proceedings, and, alternatively, whether the residence and discretionary requirements were satisfied.

Petition dismissed.

1. The court held that the question whether the Bank remained entitled to petition had to be determined by Russian law. Although procedure is ordinarily governed by the lex fori, Rome I Regulation (EC 593/2008) extended the lex causae to contractual remedies. The Russian-law prohibition on individual enforcement was both procedural and substantive.
2. Under Articles 63 and 213.11 of the Russian Insolvency Law, a creditor whose claim had been proved in pending Russian insolvency proceedings could not pursue the same claim outside those proceedings, including by presenting a foreign bankruptcy petition. The Debt remained due in principle, but was not currently payable to the Bank in a manner satisfying section 267(2)(b) of the Insolvency Act 1986. Comity therefore required dismissal.
3. Alternatively, if English law governed, the court would have declined to grant permission under section 285(3)(b) of the Insolvency Act 1986. The Russian insolvency administrator could seek recognition and assistance under the Cross-Border Insolvency Regulations 2006, providing a collective remedy for creditors.
4. Although unnecessary to the result, the court found that the respondent had places of residence in England under section 265(2)(b)(i) of the Insolvency Act 1986. The concept was factual rather than dependent solely on legal entitlement. Applying the principles in Reynold Porter Chamberlain LLP v Khan [2017] BPIR 722, Skjevesland and Re Brauch, legal ownership, funding, access, family arrangements and the ability to secure occupation were relevant. Limited physical occupation was not decisive.
5. If jurisdiction had existed, the court would have made a bankruptcy order, given the value of the respondent’s English assets, his unreliable evidence and inadequate disclosure.

First-instance decision. The judgment records a Russian bankruptcy order and the subsequent English petition, but no prior English appellate decision is stated.