‘Immovables rule’ continues to rule

Dismissing the appeal in Kireeva v Bedzhamov [2024] UKSC 39, the court rejected the argument that common law allows a foreign authority to claim local immovables.

The respondent, Georgy Ivanovich Bedzhamov, owns property in Belgravia, London. A bankruptcy order was made against him by a Moscow court. The appellant, Lyubov Kireeva, was appointed trustee of Bedzhamov’s bankruptcy estate. Under Russian law, the London property forms part of the bankruptcy estate. The Supreme Court held, however, that the immovables rule prevents the trustee from claiming the London house and from obtaining assistance from the English court to do so.

Delivering their judgment last week, Lords Lloyd-Jones and Richards commented that the immovables rule ‘produces a surprising result in leaving the bankrupt’s immovable property in this country to be enjoyed by the bankrupt or to be taken in execution by individual creditors on a first come, first served basis, when in a bankruptcy under the laws of both this country and the foreign state (in this case, Russia), immovable property would form part of the bankrupt's estate.

‘That, however, is a policy reason to be considered in the context of any proposal for legislative change.’

Kathleen Garrett, partner at Reed Smith, said: ‘A foreign court has no jurisdiction to make orders on real property/immovables in England when it comes to foreign insolvency procedures.

‘The ruling appears to reflect a move to territorialism by the Supreme Court following its judgments in Rubin v Eurofinance SA and New Cap Reinsurance Corp (in liquidation) v Grant [2012] UKSC 46. This ruling will help to provide legal certainty in respect of rights over English real property/immovables at common law.

‘This will be a particularly significant, and potentially concerning, judgment for common law countries that have not adopted the UNCITRAL Model Law on Cross-border Insolvency and have been relying on recognition of foreign insolvency proceedings under common law. However, where it is difficult to conduct a parallel procedure for creditors, any issues that do materialise will not be easily resolved.’