In a case concerning whether a property in England fell within the scope of a bankruptcy order made in Russia, the Supreme Court has confirmed that, subject to certain exceptions provided for in legislation, interests in land and other immovable property in England are governed by English law and are not subject to the jurisdiction of foreign courts (known as the ‘immovables rule’).

The case concerned a Russian citizen who had lived in England since 2017 and had acquired a property in London two years earlier. After he was declared bankrupt in Russia, the financial manager – the equivalent of a trustee in bankruptcy – applied to the High Court for recognition at common law of the Russian bankruptcy order and her appointment as the man’s trustee in bankruptcy, and for assistance in realising the London property for the benefit of the man’s creditors.

The Court formally recognised the Russian bankruptcy order and the financial manager’s appointment, but dismissed the application for the courts’ assistance in relation to the London property. The Court held that, by reason of the immovables rule, English law did not recognise the financial manager as having any claim upon any of the man’s immovable property in England. After her appeal against this decision was dismissed by the Court of Appeal in a majority decision, the financial manager made a further appeal to the Supreme Court.

The Court observed that the immovables rule arose from the special nature of land. It reflects territorial sovereignty and is also based on practical considerations. The concepts of movable and immovable property are found in the legal systems of other countries, and many jurisdictions have rules similar to the immovables rule.

The Court noted that both Section 426 of the Insolvency Act 1986 and the Cross-Border Insolvency Regulations 2006 provide statutory exceptions to the immovables rule in cases of foreign insolvencies, though these exceptions did not apply to the present case. The financial manager argued that the courts were also entitled at common law to assist a foreign trustee in bankruptcy to realise a bankrupt’s interests in land in England. Rejecting that argument, the Court found that it followed from the immovables rule that common law did not recognise the London property as falling within the scope of the Russian bankruptcy.

The argument that it was permissible to appoint a receiver over the London property with power of sale, because the proceeds of sale would then constitute movable property, was also rejected. The status of property as movable or immovable is determined as at the time the relevant bankruptcy order is made.

The Court considered whether it was appropriate to develop the common law to enable assistance to be provided. Noting that the immovables rule had been modified by legislation, including the statutory exceptions applicable to bankruptcy, the Court concluded that any further modification of the rule to enable the courts to assist a foreign trustee in bankruptcy must be a matter for Parliament.