Insolvency proceedings and the immovables rule: when universalism is not universal


Universalism, a central concept in insolvency law, provides that one set of insolvency proceedings should apply worldwide so that all creditors, wherever situated, can prove for their debt in that insolvency. This avoids the commencement of parallel proceedings in several jurisdictions, which in turn makes restructuring more difficult (see Insolvency Law Handbook by Vernon Dennis, 4th Edition (The Law Society, 2017) p. 409).

The approach in English law

The statutory provisions which underpin universalism in England are The Cross-Border Insolvency Regulations 2006, and section 426 of the Insolvency Act 1986 which provides that the courts "having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory". These useful tools enable the English court to both recognise foreign insolvency proceedings and to assist insolvency office holders in foreign proceedings.

Similarly, at common law, the English courts have historically been mindful of the principle of cooperation with the courts in the country where principal insolvency proceedings are unfolding, and have largely adopted the principal of modified universalism. In short, this means that while insolvency proceedings should have universal application, the English courts will not automatically offer assistance, and will instead retain the ability to assess the fairness of the foreign proceedings.

The nature and application of modified universalism was developed further by the decision in Rubin and another v Eurofinance SA and others [2012] UKSC 46. In this case the Supreme Court held that the principle of universalism cannot be used to justify a court granting an order that disregards established provisions of English law, in an effort to assist a foreign insolvency process. Modified universalism cannot therefore work contrary to the powers and jurisdiction of the English courts, rather it can only operate within that framework. 

The immovables rule

An established and particular caveat to modified universalism is the immovables rule. This, in broad terms, provides that the English courts will not recognise a foreign court as having jurisdiction to make orders in respect of land in England. This is because rights relating to land in England are governed by English law exclusively (see Rule 132 of Dicey, Morris & Collins on the Conflict of Laws). They cannot, and should not, be curtailed by the application of modified universalism. This is a choice of law rule: English law applies to any issue concerning rights to immovables in England, to the exclusion of any other law.

The immovables rule came to the fore in the recent case of Kireeva v Bedzhamov Vneshprombank LLC v Bedzhamov Basel Properties Ltd v Kireeva [2022] EWCA Civ 35. In this case the Court of Appeal considered whether a Russian trustee in bankruptcy should be recognised by the English court, and if so, whether the court has power to give assistance to the trustee in bankruptcy, in respect of immovable property situated in England.

By way of brief summary, VTB 24 Bank made a loan to Mr Bedzhamov's sister, who subsequently failed to meet her obligations in respect of the loan. In reliance on a personal guarantee, the bank then brought a claim against Mr Bedzhamov. Although Mr Bedzhamov denied signing the document, the District Court of Moscow rejected that contention and gave judgment in the bank's favour.

Later, and while domiciled in England, Mr Bedzhamov was declared bankrupt (on the bank's petition) in Russia and a lady named Ms Kireeva was appointed as receiver. Separate proceedings were then brought in England and a worldwide freezing order was granted against Mr Bedzhamov, restraining him from disposing of assets up to the value of £1.34 billion.

Ms Kireeva applied in England for the recognition at common law of the Russian bankruptcy order and of herself as Mr Bedzhamov's trustee in bankruptcy. Ms Kireeva also sought orders for Mr Bedzhamov's movable and immovable property in England, including a property at Belgrave Square, to be entrusted to her. The High Court recognised the Russian bankruptcy proceedings, but found that Mr Bedzhamov's immovable property did not vest in the trustee in bankruptcy, in accordance with the immovables rule.

Both parties appealed the decision. Ms Kireeva argued that the immovables rule did not prevent the court from granting comparable relief, such as the appointment of a receiver or that the property should vest the in the trustee in bankruptcy under the Trustee Act 1925. Ms Kireeva also sought to argue that section 426 of the 1986 Act and common law recognition can be equated.

The Court of Appeal's decision in Kireeva v Bedzhamov

Ms Kireeva's appeal was dismissed. The Court of Appeal held that the judge at first instance had been correct in the finding that there is no common law power to vest English immovable property in a foreign receiver.

Further, the analogy with section 426 of the of the 1986 Act was wrong because section 426 provides specific statutory powers in relation to insolvencies arising from territories where there is some element of underlying community of law (essentially nations with Commonwealth associations).

The court emphasised the limits of modified universalism in insolvency proceedings. Modified universalism does not mean that the courts have the same powers as might be available under statute in relation to a UK domestic insolvency. Further, any developments in common law that relate to land situated in England must still be subject to the immovables rule.

In concluding, Lord Justice Newey said:

The immovables rule means not just that immovable property in this jurisdiction does not vest automatically in a foreign office-holder, but that .. "immoveable property is exclusively subject to the laws of the Government within whose territory it is situate". Far, therefore, from a foreign bankruptcy giving the office-holder "complete dominion" over an immovable, it 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 an order vesting it in him.


It is notable however that this was a majority decision only. Lord Justice Arnold's view was that it would not have been inconsistent with the immovables rule for the court to have used common law powers to appoint a receiver to the property. This view may pave the way for further judicial consideration on the topic.

 The decision in Kireeva v Bedzhamov is of particular interest not only as it serves to reassert the absolute nature of the immovables rule, but also as a reminder of the limits of modified universalism.

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