Case Digest No. 1 · Cross-border insolvency
Foreign bankruptcy and English immovables
Kireeva v Bedzhamov [2024] UKSC 39
The Supreme Court held that the common-law immovables rule prevents a foreign bankruptcy from affecting title to English land. Modified universalism remains subject to local law and public policy.
Supreme Court
[2024] UKSC 39
January 2025
Decision at a glance
The question, answer and consequence.
- Legal question
- The central issue was foreign bankruptcy and English immovables.
- Court's answer
- The Supreme Court held that the common-law immovables rule prevents a foreign bankruptcy from affecting title to English land. Modified universalism remains subject to local law and public policy.
- Practical consequence
- The decision fixes the territorial limit of foreign bankruptcy law where English land is concerned. It is a necessary starting point when an office-holder, creditor or asset-recovery team is assessing whether a foreign insolvency can reach immovable property in England.
Factual background
The case concerned real property in London (“the Property”) owned by the Respondent, against whom a bankruptcy order was made by a Russian court. The Appellant was appointed as the Russian equivalent of a trustee in bankruptcy, for the purpose of realising the Respondent’s assets for the benefit of the Respondent’s creditor. A worldwide freezing order was made against the Respondents applying to all of his assets, including, expressly, the Property. Pursuant to a variation of the freezing order by the English courts, the Respondent charged his interest in the Property to his then solicitors to secure accrued and future legal costs. The Appellant subsequently sought, from the English courts, recognition of the Russian bankruptcy order and her appointment as the Respondent’s bankruptcy trustee in order to take control of the Property. The Appellant also issued an application to set aside the variation of the freezing order.
Issue
The central issue was foreign bankruptcy and English immovables.
Procedural history and reasoning
CHANCERY DIVISION [2021] EWHC 2281 (Ch) Snowden J Formally recognised the Russian bankruptcy order and Appellant’s appointment by the Russian court. Dismissed the application insofar as it sought assistance in relation to the Property and any other immovable assets in England, as well as the Appellant’s Set Aside Application. SUPREME COURT JUDGMENT Lord Lloyd-Jones and Lord Richards (with whom Lord Reed, Lord Briggs and Lady Rose agreed) ROLE OF IMMOVABLES RULE The Supreme Court recognised the continued importance of the immovable rule in English law and its protection from foreign interference: “…at common law no recognition will be given to any provision of foreign law or any order of a foreign court which purports to affect rights to or interests in land located in England” (para 69). As a result, the Supreme Court confirmed that the English courts could not assist the Appellant as trustee in the Russian bankruptcy to realise the Respondent’s interest in the Property in England.
RE KOOPERMAN [1928] WN 101 The Supreme Court noted the Appellant’s reliance on the order made in the case of In re Kooperman [1928] WN 101 (para 70). Given that the application in that case was unopposed and the judge failed to give a reasonable judgment, the Supreme Court found that “Kooperman is not an authority on which any weight can be placed” (para 73) and, as such, provided no support for the Appellant’s case. MODIFIED UNIVERSALISM The principle of modified universalism, as discussed in the case of Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings Plc [2006] UKPC 26, was summarised in Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36 as follows (para 15): “…namely that the court has a common law power to assist foreign winding up proceedings so far as it properly can” In the face of the Appellant’s reliance on the principle, the Supreme Court emphasised the qualification that “common law powers are subject to local law and local public policy” (para 88).
As such, it would be contrary to English law, and to the principle of modified universalism, for the court to allow the Appellant’s application for assistance as regards the Property. FIRST APPEAL COURT OF APPEAL [2022] EWCA Civ 35 Majority (Newey and Stuart- Smith LJJ, Arnold J dissenting) Upheld the decision of Snowden J as regards the Property and the Set Aside Application. Immovables rule had the effect that a foreign bankruptcy law “will not be recognised as having conferred any interest in or right to such property on the office-holder and, absent statutory intervention, the office-holder will not be entitled to have an order vesting in him” (para 100). Gave the Appellant permission to appeal as regards her application for assistance in relation to the Property and as regards the Set Aside Application.
Decision and key points
The Supreme Court held that the common-law immovables rule prevents a foreign bankruptcy from affecting title to English land. Modified universalism remains subject to local law and public policy.
- The “immovables rule”, that English real property does not fall under the jurisdiction of a foreign court, is here to stay.
- In re Kooperman [1928] WN 101 was wrongly decided.
- Modified universalism is subject to local law and local public policy.
Why this decision matters
The decision fixes the territorial limit of foreign bankruptcy law where English land is concerned. It is a necessary starting point when an office-holder, creditor or asset-recovery team is assessing whether a foreign insolvency can reach immovable property in England.
Particularly relevant to: Cross-border office-holders, creditors, property litigators and overseas counsel.
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