Kireeva v Bedzhamov

The Supreme Court applied the long-established immovables rule: rights in immovable property are governed by the law of the place where the property is situated (the lex situs) and courts of that place have exclusive jurisdiction to determine title and rights affecting such property. The court held that, because the property is situated in England, English common law will not recognise or give effect to foreign bankruptcy provisions or foreign court orders that purport to create or transfer rights in that English immovable, save where Parliament has provided otherwise.

The court considered two statutory exceptions to the immovables rule relevant to insolvency: section 426 of the Insolvency Act 1986 and the Cross-Border Insolvency Regulations 2006 (which give effect to the UNCITRAL Model Law). Neither applied to the Russian bankruptcy in this case. In the absence of statutory provision, the court rejected the appellant’s submission that English common law nonetheless permits assistance to a foreign trustee to get in and realise immovable property in England (for example by appointing a receiver with power to sell).

The court concluded that existing authorities relied upon by the appellant (notably In re Kooperman) do not justify a common law exception and that any further modification of the immovables rule to permit the assistance sought should be made by Parliament rather than developed by the courts.

Background and parties: The respondent, a Russian citizen resident in England, owned a leasehold interest in a London property. A Russian court made a bankruptcy order against him and appointed the appellant as financial manager/trustee to realise his assets under Russian law. The appellant sought recognition at common law of the Russian bankruptcy order and, in her applications in the High Court, sought assistance from the English court to take control of and realise the London property and to set aside an order permitting a charge on the property in favour of the respondent’s solicitors.

Nature of the claim / relief sought: The appellant sought common law recognition of the Russian bankruptcy order and an order of assistance enabling her, as foreign trustee, to obtain possession and realise the English property (including by appointment of a receiver with power to sell) and remission of proceeds for distribution under Russian law. She also sought to set aside the order that had permitted the respondent to charge the property in favour of his solicitors.

Procedural posture: The recognition and assistance applications were heard in the Chancery Division (Snowden J). Snowden J recognised the Russian bankruptcy order but refused assistance in relation to the immovable property. The Court of Appeal (majority) upheld Snowden J as to the property. The appellant obtained permission to appeal to the Supreme Court on the assistance point and the related Set Aside Application.

Issues framed:

• whether the immovables rule prevents a foreign bankruptcy trustee from claiming or obtaining English court assistance to realise immovable property situated in England;
• whether statutory gateways (section 426 IA 1986 or the Cross-Border Insolvency Regulations 2006) or the principle of modified universalism provide a basis for assistance; and
• whether the common law should be developed to permit English courts to assist a foreign trustee in realising immovable property in England (including by appointing a receiver with power of sale).

Reasoning and disposition: The court reiterated that the immovables rule is a substantive rule of English law reflecting territorial sovereignty and practical considerations. Section 426 and the Cross-Border Insolvency Regulations provide statutory exceptions to that rule but neither applied in the present case (Russia is not a designated country under section 426 and the respondent did not have his centre of main interests in Russia for the CBIR). The Supreme Court rejected the appellant’s central submission that English common law recognises the foreign trustee’s duty and right under foreign law to get in immovables in England and therefore permits assistance to realise such assets. The court found that the immovables rule precludes recognition at common law of foreign laws or orders purporting to affect English land and that authorities relied upon by the appellant were insufficient or wrongly decided. Having regard to the constitutional and public policy considerations and existing legislative exceptions, the court concluded that any further change to permit assistance of the kind sought would be a matter for Parliament rather than judicial development of the common law. The appeal was dismissed.

Appeal dismissed. The Supreme Court held that the immovables rule is a substantive rule of English law and, in the absence of applicable statutory provision (section 426 IA 1986 or the Cross-Border Insolvency Regulations 2006), the English common law does not permit the courts to assist a foreign trustee in bankruptcy to realise immovable property situated in England (for example by appointing a receiver with power to sell). Any further exception to the immovables rule of the kind sought by the appellant should be made by Parliament.

First instance: Snowden J, Chancery Division, recognition granted but assistance in relation to the Property refused: [2021] EWHC 2281 (Ch). The matter involved further hearing by Falk J on remitted issues: [2022] EWHC 2676 (Ch). Court of Appeal (majority) upheld the refusal of assistance in relation to the Property: [2022] EWCA Civ 35. Appeal to the Supreme Court in [2024] UKSC 39 (this judgment).