High Court applies "immovables rule" in rejecting stay on creditor enforcement against immovable property in England

The High Court has held that a defendant, who was resident in England and subject to Russian bankruptcy proceedings, was not entitled to a stay against a claimant seeking to enforce a Russian judgment debt against his immovable property in England: Beograd Innovation Ltd v Somovidis [2025] EWHC 1182 (Comm).

As discussed in our previous blog post (here), in Kireeva v Bedzhamov [2024] UKSC 39 the Supreme Court upheld the primacy of the "immovables rule" principle of private international law, which is established in many legal systems including English common law. This provides as a matter of common law that where immovable property (most commonly land) is situated in England, neither English law nor the English courts will recognise or give effect to any laws or judicial decisions of other countries in relation to rights to and interests in that immovable property.  The common law principle is subject to certain statutory exceptions, including under the Cross-Border Insolvency Regulations 2006 (the "CBIR"), but those statutory exceptions did not apply in Kireeva or Beograd, principally as a result of the debtor in both cases having his residence (and therefore centre of main interests, being the jurisdictional test under the CBIR) in England.

Applying the immovables rule in this case, the judge held that since real property in England which was alleged to belong to the defendant could not be administered by the Russian insolvency practitioner as part of the bankruptcy estate, there was no justification for staying the action of one creditor seeking to enforce against that real property on a first in time basis. A stay would not assist in the collective realisation and distribution of the defendant's assets in his bankruptcy for the benefit of his creditors as a whole. It would instead effectively permit the defendant to continue to enjoy the English property notwithstanding his bankruptcy in Russia and his unsatisfied judgment debts.

The decision in Beograd reinforces the primacy of the immovables rule confirmed in Kireeva, and deals with the practical ramifications for creditors and debtors in terms of how real property in England is to be made available to creditors to satisfy a debtor's liabilities other than via the insolvency process. It now appears clear that where a debtor is subject to foreign insolvency proceedings but has immovables  in England, creditors may have enforcement options in the English courts which are unaffected by the foreign insolvency process.

Background

The defendant, Mr Somovidis, had been resident in England since late 2016.

In December 2023, the claimant (Beograd) was assigned a claim against the defendant, in respect of which the Russian courts had entered judgment against the defendant in June 2017.

The claimant's predecessor in respect of the claim commenced bankruptcy proceedings in Russia against the defendant in December 2018 and, in October 2019, a Russian bankruptcy receiver was appointed over the defendant.

In March 2024, the claimant commenced proceedings in the English High Court to enforce the Russian judgment, which was worth around £14 million.

The defendant applied for an order that the High Court stay the English enforcement proceedings on the basis that there were ongoing bankruptcy proceedings against him in Russia to which the claimant had submitted (and in which the claimant was the main creditor). Effectively, the defendant sought to uphold against the claimant a Russian law moratorium which the defendant alleged (on the basis of expert evidence) applied to prevent the commencement of individual creditors' enforcement actions in Russia or abroad after a Russian bankruptcy order was made.

Decision

The High Court (HHJ Pelling KC) refused to grant the stay sought by the defendant.

The judge noted that a stay should only be granted where the defendant had demonstrated a powerful reason founded on the interests of justice for departing from the usual course of permitting claims over which the court has jurisdiction to be determined on their merits. The court held that no such powerful reason had been established here.

The judge's starting point was that there is no common law principle to the effect that a creditor who submits to the jurisdiction of a foreign court that is administering a debtor’s insolvency becomes bound by the rules governing that insolvency in all jurisdictions, or that the English courts should enforce those foreign rules.

Accordingly, the court did not need to decide, on the basis of the expert evidence before it, whether Russian law imposed, on creditors that had participated in the bankruptcy process, an obligation not to seek to enforce individually outside the bankruptcy process. The High Court had heard conflicting submissions on the extra-territorial effects of Russian insolvency law. The judge found that, if and to the extent that Russian law makes it unlawful for the claimant to seek to enforce against the defendant’s English immovable assets, then either the defendant or the Russian insolvency practitioner could apply to the Russian courts for appropriate relief.

The defendant also sought to argue that, as a matter of English law, the court should give effect to the principle of modified universalism by which the English court seeks to support a collective insolvency process instigated in another jurisdiction. After a detailed review of the authorities, including as to the precise ambit of the principle, the judge concluded that an English stay would not support the collective Russian insolvency process.

The judge recorded that, in Kireeva, the Supreme Court refused to assist a Russian insolvency practitioner at common law by appointing her as a receiver over the bankrupt's immovable property in England. As a result of the Supreme Court decision, it was clear that – as a matter of common law  – the English property would not be available to the collective Russian insolvency process because neither English law nor the English courts would recognise the rights of the Russian insolvency practitioner. A stay would not, therefore, assist the Russian insolvency practitioner or support the collective realisation and distribution of the defendant's insolvency estate.

If the English court were to stay the claimant's enforcement proceedings, the English property would effectively be within a lacuna. It would not be available to the Russian insolvency estate, but nor would a creditor be able to enforce against it in England. That would allow the defendant, who owed £14 million under a judgment debt, to continue his enjoyment of the property notwithstanding that he was bankrupt in Russia and the judgment debt had not been paid. The judge held that this would not be a fair outcome.