Kireeva v Bedzhamov [2024] UKSC 39

A Russian trustee in bankruptcy sought English court assistance to realise a London property owned by the bankrupt. The Supreme Court held that the immovables rule prevents English courts at common law from assisting foreign trustees to claim interests in land situated in England, as such property is governed exclusively by English law.

Facts

The Respondent, a Russian citizen residing in England since 2017, owned interests in a property in Belgrave Square, London. Following judgments against him by Russian banks, the Moscow City Arbitrazh Court declared him bankrupt in July 2018 and appointed the Appellant as trustee in bankruptcy. Under Russian law, the London property formed part of the bankruptcy estate. The Appellant sought recognition of the Russian bankruptcy order and assistance from the English court to realise the Property for the benefit of creditors.

Procedural History

Snowden J recognised the Russian bankruptcy order but dismissed the application for assistance regarding the Property, holding that the immovables rule prevented the English court from assisting. The Court of Appeal upheld this decision by majority, with Arnold LJ dissenting.

Issues

The central issue was whether, at common law, the immovables rule prevents a trustee appointed in foreign bankruptcy proceedings from claiming immovable property situated in England and obtaining assistance from the English court to realise such property.

Judgment

The Supreme Court unanimously dismissed the appeal, holding that the immovables rule is a substantive rule of English law that prevents recognition of any foreign law provisions or foreign court orders purporting to affect rights to or interests in land located in England.

The Immovables Rule

Lord Lloyd-Jones and Lord Richards explained the nature and scope of the rule:

“It is an established principle in many national legal systems, including the common law of England and Wales, that questions as regards rights to and interests in land and other immovable property are governed by the law of the country in which the property is situated (the lex situs) and that jurisdiction to decide those questions belongs to the courts of that country.”

The rule reflects territorial sovereignty and has sound practical justifications:

“The sovereign of the country where land is situate has absolute control over the land within his or her dominions: he or she alone can bestow effective rights over it; his or her courts alone are, as a rule, entitled to exercise jurisdiction over such land.”

Rejection of the Appellant’s Arguments

The Court rejected the submission that the immovables rule merely prevented automatic vesting of title while permitting recognition of the trustee’s broader duties and rights:

“The fallacy on which all the submissions of the Appellant are based is that, notwithstanding the immovables rule, the English court may at common law recognise and give effect to the rule of Russian bankruptcy law that all the property of the bankrupt, including interests in land located in England, forms part of the bankrupt estate.”

The Court held that the common law does not recognise the Property as being part of the assets within the Russian bankruptcy, and therefore cannot assist the trustee to realise it.

Modified Universalism

While acknowledging the principle of modified universalism in cross-border insolvency, the Court emphasised its limits:

“In the Board’s opinion, the principle of modified universalism is part of the common law, but it is necessary to bear in mind, first, that it is subject to local law and local public policy and, secondly, that the court can only ever act within the limits of its own statutory and common law powers.”

Judicial Development Inappropriate

The Court declined to develop the common law to permit such assistance, holding this was a matter for Parliament:

“We consider that any further modification of the immovables rule so as to enable courts in this jurisdiction to assist a foreign trustee in bankruptcy by appointing a receiver with a power of sale over immovable property here must be a matter for Parliament and not for the courts. It would not involve an incremental development of the common law but a substantial departure from the existing law and the principles of public policy to which it gives effect.”

Implications

This decision confirms that foreign trustees in bankruptcy cannot claim or realise interests in English land at common law. Assistance is only available through statutory routes: section 426 of the Insolvency Act 1986 (limited to designated countries) or the Cross-Border Insolvency Regulations 2006 (requiring the debtor’s centre of main interests or establishment in the foreign jurisdiction). The decision reinforces the territorial sovereignty principle underlying the immovables rule and emphasises that any further exceptions must come through legislation, not judicial development.

Verdict: Appeal dismissed. The immovables rule prevents the English court at common law from providing assistance to a foreign trustee in bankruptcy to realise immovable property situated in England. Any modification of this rule is a matter for Parliament, not judicial development.

Source: Kireeva v Bedzhamov [2024] UKSC 39