Court Of Appeal Rules Foreign Receiver Cannot Deal With English Property Due To The "Immoveables Rule"

• Published date: 29 March 2022
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Trials & Appeals & Compensation, Real Estate
• Law Firm: Herbert Smith Freehills
• Author: Mr Andrew Cooke and Peter Thompson

The Court of Appeal has confirmed that the High Court was right to restrict the assistance an English court could give to a Russian trustee in bankruptcy at common law, refusing to allow immoveable property situated in England to be administered by the trustee as part of the foreign bankruptcy proceedings: Kireeva v Bedzhamov [2022] EWCA Civ 35.

The court found that where recognition of foreign bankruptcy proceedings is granted under common law, the English courts cannot exercise their discretion to allow a foreign trustee to dispose of any immoveable property located in England which belongs to the bankrupt. While the courts should seek to co-operate with foreign courts in relation to cross-border insolvencies, any such co-operation must remain within the constraints of domestic law. To sidestep the "immoveables rule" would amount to an unacceptable act of judicial legislation.

The decision helpfully re-iterates the limits of the assistance that a foreign law insolvency office holder may obtain under common law in relation to English property. When faced with such a scenario, it will be necessary to bring bankruptcy or insolvency proceedings in England and Wales or in a jurisdiction in which the officeholder can invoke section 426 of the Insolvency Act 1986 ("IA") or the Cross Border Insolvency Regulations 2006 ("CBIR") to be able to deal with the relevant property (as explained below).

Background

Mr Bedzhamov was declared bankrupt in Moscow and Ms Kireeva was appointed as his receiver (the Russian equivalent of a trustee in bankruptcy). Ms Kireeva applied for recognition in England of both the Russian bankruptcy order against Mr Bedzhamov, and her status as Mr Bedzhamov's receiver. Ms Kireeva further applied for common law relief to administer property owned by Mr Bedzhamov at Belgrave Square, so that it could be pooled alongside his other assets in England.

The routes by which a foreign insolvency office holder would typically seek assistance from the English court, being s.426(4) IA and the CBIR, were unavailable to Ms Kireeva.

• Section 426(4) IA provides that an English court with jurisdiction shall provide assistance to foreign courts located in "any other part of the United Kingdom or any relevant country or territory". However, this is generally limited to Commonwealth jurisdictions and excludes Russia.
• The CBIR provides for the recognition of foreign insolvency proceedings and extensive relief for officeholders in relation to the same. However...