Russian trustee in bankruptcy has no rights over London property

The immovables rule – that rights to and interests in land and other immovable property are governed by the law of the country where the property is situated – prevents a foreign court from making orders in respect of land in England. The Supreme Court has considered this issue dismissing an appeal in Kireeva v Bedzhamov [2024] UKSC 39. The case concerned a property in London owned by the respondent, a Russian citizen who left Russia in 2015. In 2018 a Russian court declared him bankrupt and appointed the appellant as trustee in bankruptcy of his estate. The property formed part of Bedzhamov’s estate and Kireeva was under a duty to take control of and sell it. She also sought to set aside an order allowing Bedzhamov to charge the property in favour of his solicitors. The High Court decided that because of the immovables rule, English law did not recognise Kireeva as having any claim on the property and dismissed the set aside application. That decision was confirmed by a majority of the Court of Appeal. The Supreme Court unanimously dismissed the appeal. A foreign court does not have power to make orders in respect of land in England which is governed exclusively by English law subject to two statutory exceptions: (i) section 426 of the Insolvency Act 1986 applies where the foreign bankruptcy is taking place in a Commonwealth country; and (ii) the Cross Border Insolvency Regulations applies to any bankruptcy taking place in the bankrupt’s “centre of main interests”. Neither of these exceptions applied. Russia did not qualify under section 426 of the 1986 Act and Bedzhamov’s main centre of interest had not been in Russia. The common law could not assist Kireeva since it did not recognise the property as being part of the assets within the scope of Bedzhamov’s bankruptcy in Russia and the statutory exceptions did not apply. The English courts could not assist a foreign trustee in bankruptcy by appointing a receiver with a power of sale over immovable property in England and Wales. Kireeva relied upon the principle of modified universalism and the understanding that a court has a common law power to recognise and grant assistance to foreign insolvency proceedings as far as it can. The Supreme Court decided that this principle is subject to local English law and so its application was limited by the immovables rule. Kireeva’s alternative arguments – that the proceeds of sale of the property would fall within Bedzhamov’s bankruptcy estate and that the court could appoint a receiver of rents and profits – were also rejected. Louise Clark is a property law consultant and mediator