Recently, the UK Supreme Court delivered a significant judgment in Kireeva v Bedzhamov [2024] UKSC 17, clarifying the extent to which English common law permits recognition of foreign bankruptcy trustees, particularly in relation to immovable property situated in England. This ruling is highly relevant for jurisdictions like Cyprus, where common law principles are regularly applied and cross-border insolvency issues frequently arise.

Background

Mr Bedzhamov was declared bankrupt by the Moscow Arbitrazh Court in 2018. The Russian court appointed Ms Kireeva as his bankruptcy trustee. By that time, Mr Bedzhamov resided in England and owned property there, including a property in Belgrave Square, London. Ms Kireeva sought recognition at common law of both the Russian bankruptcy and her appointment as trustee, along with orders allowing her to take control of the Belgrave Square property.

Legal Issue

At common law, foreign bankruptcy proceedings may be recognised where the bankrupt was domiciled in the jurisdiction or had submitted to its courts. In such cases, movable property located within the jurisdiction will be considered to have been assigned to the trustee or other representative of creditors if the foreign law so provides. However, English law draws a strict distinction between movable and immovable property. Immovable property situated in England does not automatically vest in a foreign office-holder, even where the foreign law provides for that.

This distinction was central to the case. The Supreme Court was asked to decide whether the “immovables rule” under English law precluded recognition of a Russian trustee’s claim over a London property. The Court considered whether it had the power, under the principle of modified universalism, to provide assistance by appointing a receiver with powers over the property.

Supreme Court’s Decision

The Supreme Court unanimously dismissed the appeal, confirming:

• The immovables rule remains a firm limitation under common law.
• The principle of modified universalism, while recognised, cannot override domestic legal constraints and is subject to local law.
• Common law does not enable English Courts to provide assistance to a foreign trustee in bankruptcy by appointing a receiver with a power of sale over immovable property located in that jurisdiction.
• The position is different in cases where legislation provides for assistance to be given by the court.

Relevance for Cyprus

Cypriot courts typically look to English case law and principles for guidance, particularly in insolvency matters. This judgment confirms the limits of cross-border cooperation at common law in the absence of statutory regimes such as Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast) (see Rubin v Eurofinance SA [2012] UKSC 46, [2013] 1 AC 236).

For Cyprus, which frequently handles foreign insolvency scenarios, the decision reinforces a fundamental principle: under common law, immovable property is governed exclusively by the law of the jurisdiction in which it is located, regardless of any contrary provision in a foreign insolvency regime.

This ruling offers clarity and serves as an important reminder to insolvency practitioners that:

• Common law recognition is subject to territorial limits, particularly with respect to immovable assets.
• Strategic planning is essential when seeking to enforce foreign insolvency orders against assets situated in common law jurisdictions.

For general guidance on insolvency procedures in Cyprus, please see our Guide to Liquidations and Insolvency in Cyprus.