Beograd Innovation Limited v Dimitrios Konstantinosovich Somovidis

An English court with jurisdiction to determine an enforcement claim should ordinarily decide it on the merits. An indefinite stay requires a powerful reason founded on the interests of justice, and the justification must be especially compelling where the stay would leave English immovable assets effectively judgment proof.

The common-law doctrine applicable to foreign insolvencies is modified universalism. It assists collective administration of assets, subject to justice, public policy and the limits of English law. It does not require an English court to give effect to foreign insolvency rules so as to bring English land within the foreign bankruptcy estate where the immovables rule prevents that result. A creditor’s submission to a foreign insolvency process does not, without more, bind it to all rules governing that insolvency.

The claimant sought recognition and enforcement in England of a Russian judgment against the defendant. The defendant had been declared bankrupt in Russia after leaving Russia and becoming resident in England. The claimant had been joined as a creditor in the Russian bankruptcy proceedings.

The defendant applied for an indefinite stay or for the court to decline jurisdiction. He relied on an alleged Russian exclusive-remedy principle, under which creditors had to pursue claims within the Russian bankruptcy. The claimant argued that English law governed the stay application and that the Russian process could not reach the defendant’s English immovable assets.

The central issues were whether submission to a foreign insolvency bound a creditor to the foreign insolvency rules, whether modified universalism applied, and whether the uncertainty of Russian law justified an indefinite stay.

1. Application dismissed. The defendant had not shown a powerful reason, founded on the interests of justice, for depriving the claimant of access to the only court able to enforce the judgment against English immovable property. The more extreme the stay, the more exceptional and compelling the justification had to be. This followed the approach in Athena Capital Fund SICAV-FIS SCA and others v Secretariat of State for the Holy See [2022] EWCA Civ 1051.
2. The defendant’s proposed rule was mistaken. English common law recognises modified universalism as the relevant principle. It permits assistance to foreign insolvency proceedings so far as consistent with justice, UK public policy and the limits of the court’s statutory and common-law powers.
3. Modified universalism did not apply to the defendant’s English immovable assets. Under Kireeva v Bedzhamov [2024] UKSC 39, the immovables rule is substantive English law. The English court could not recognise a foreign bankruptcy rule or order purporting to affect interests in English land. The Russian receiver therefore had no common-law interest in or right to those assets.
4. There was no separate rule that a creditor submitting to a foreign insolvency became bound by all rules governing that insolvency. Submission was not a precondition to assistance, and modified universalism did not require the English court to give effect to the foreign insolvency law merely because a party had submitted to it.
5. Red October was materially different. It did not establish that submission to a foreign insolvency automatically precluded English proceedings. The question remained fact-sensitive, and this was an appropriate case for proceedings in England because the Russian process could not provide access to the English immovable assets.
6. The court did not need finally to determine Russian law. In any event, the defendant had not shown with sufficient certainty that the claimant’s English enforcement proceedings were unlawful under Russian law. For an indefinite stay, the defendant had to show a much better argument on the material, not merely a plausible case.
7. Any issue concerning the effect of recoveries on the Russian bankruptcy could be addressed by undertaking, agreement or proceedings involving the Russian office-holder at the appropriate stage. The court declined to decide the proposed undertaking issue finally at this stage.