This column discusses a rule under English common law that applies in the context of cross-border insolvency proceedings: the so-called immovables rule. Cross-border insolvency occurs when a company or individual enters insolvency or bankruptcy proceedings in one jurisdiction and the has assets and creditors in another jurisdiction (for a previous discussion about cross-border insolvency, see China Business Law Journal, volume 8, issue 8: Cross-border insolvency).
In particular, the column discusses a recent appeal decision of the Supreme Court of the UK in Kireeva v Bedzhamov [2024]. Relevant rules in the Chinese mainland in relation to cross-border insolvency are then identified.
The Kireeva decision
Kireeva involved a bankruptcy order of a Russian court against the respondent, a Russian citizen called Mr Bedzhamov, who had lived in England since 2017. Under the bankruptcy order, the appellant, Ms Kireeva, was appointed by the Russian court as the financial manager for the purpose of realising the assets of the respondent. This position was “equivalent to that of trustee in bankruptcy under English law”.
The respondent’s assets included valuable property in London’s Belgrave Square – property over which Kireeva wanted to take control to protect the interests of Bedzhamov’s bankruptcy estate for the benefit of his creditors. Accordingly, Kireeva issued an application in the High Court seeking recognition of the Russian bankruptcy order and her appointment as Bedzhamov’s bankruptcy trustee. She also sought orders giving her control over the property in London.
In the circumstances, Kireeva could not rely on any statutory basis, such as the regulations in the UK implementing the UNCITRAL Model Law on Cross-Border Insolvency, to obtain recognition and relief from the High Court. As discussed in the previous column, the Model Law provides a legislative template for states to adopt to enable a court in their jurisdiction to grant recognition and assistance to foreign insolvency proceedings.
Because no statutory basis was available, Kireeva had to apply for recognition under common law on the basis of the inherent powers of the courts to grant recognition and relief to cross-border insolvency proceedings.
Kireeva’s application failed in the High Court, the Court of Appeal, and the Supreme Court as a result of the application of the immovables rule. On appeal, the Supreme Court defined this rule as follows:
It is an established principle in many national legal systems, including the common law of England and Wales, that questions as regards rights to and interests in land and other immovable property are governed by the law of the country in which the property is situated (the lex situs) and that jurisdiction to decide those questions belongs to the courts of that country. Where immovable property is situated in country A, neither the law nor the courts of country A will recognise or give effect to any laws or judicial decisions of other countries which purport to govern or decide issues of rights to and interests in that immovable property, save to the extent of any exceptions under the law of country A. In this judgment, we refer to this principle of private international law, as applied to immovable property in England and Wales, as “the immovables rule”.
As a matter of English common law, the immovables rule is based on two fundamental rules:
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- The “jurisdictional rule”, under which a foreign court has no jurisdiction to make orders in respect of land (or immovables) in England and Wales; and
- The “choice of law rule” or the “lex situs rule”, under which rights relating to land (or immovables) are governed exclusively by the law of England and Wales.
In the decision, the Supreme Court unanimously rejected earlier case law authority suggesting that although the immovables rule prevented recognition of a foreign bankruptcy order vesting title to land in a foreign bankruptcy trustee, a court exercising its inherent common law powers could appoint a receiver of rents and profits of land on the application of a foreign bankruptcy trustee.
Instead, the Supreme Court adopted an absolute approach to the rule, deciding that Kireeva had no interest in or right to Bedzhamov’s property as a matter of English law, and that it would not be appropriate to develop the common law to recognise her rights in the circumstances.
Counsel for Kireeva had submitted that English courts had the common law power to appoint a receiver of the property to sell the property and remit the proceeds to Kireeva for distribution in accordance with Russian bankruptcy law. Interestingly, in advancing this submission before the Supreme Court, counsel relied on an academic article that this columnist co-wrote with colleagues at Melbourne Law School in 2017.
In determining whether it would be appropriate for the court to develop the common law so as to enable assistance to be provided, the Supreme Court noted modification of the immovables rule by legislation – including the regulations implementing the UNCITRAL Model Law on Cross-Border Insolvency – and stated that any further modifications “must be a matter for parliament and not for the courts”.
In making its decision, the Supreme Court had regard to public policy factors underpinning the immovables rule. These factors included considerations of territorial sovereignty, practical considerations in terms of convenience and expediency, and questions of “comity of nations”.
Relevantly, the decision of the Supreme Court appeared to have been significantly influenced by the availability of existing statutory pathways for recognition and relief, and the view that it would be inappropriate to exercise the common law power given the extent to which statute covered the field. As the Supreme Court stated in its decision:
The courts have always been slow to develop the common law by entering, or re-entering, a field regulated by legislation, because otherwise there would inevitably be the prospect of the common law shaping powers and duties and provisions inconsistent with those prescribed by parliament.
The Supreme Court acknowledged that the absolute nature of the immovables rule produced a surprising result insofar that the London property was completely excluded from Bedzhamov’s estate as a matter of English law, and was therefore available to Bedzhamov or for execution by individual creditors on a first come, first served basis.
The Supreme Court decision in Kireeva has generated a debate among practitioners and academics as to whether the decision was correct, and also whether the immovables rule should be applied in a similarly absolute way in other common law jurisdictions such as Australia, Singapore and the Hong Kong Special Administrative Region.
It is interesting to note that the decision appears to have been significantly influenced by the existence of alternative statutory pathways, and also by the view that it would be inappropriate to exercise the common law power given the extent to which statute covered the field.
Cross-border insolvency law in the PRC
As noted in the previous column, neither the Hong Kong SAR nor the Chinese mainland has adopted the Model Law. Hong Kong courts grant recognition and assistance to foreign insolvency proceedings based on their common law powers. In terms of cross-boundary arrangements between the Chinese mainland and Hong Kong, special arrangements on mutual assistance in bankruptcy matters were entered into between the two jurisdictions in 2021.
In the Chinese mainland, the second paragraph of article 5 of the Enterprise Bankruptcy Law sets out three requirements that must be satisfied before a PRC court will recognise and enforce a judgment or ruling in a foreign insolvency proceeding.
The first requirement is that recognition and enforcement is in accordance with an international treaty between China and the relevant jurisdiction, or the principle of reciprocity. The second requirement is that recognition and enforcement would not violate the fundamental principles of Chinese law or harm state sovereignty, security or public interest. The third requirement is that recognition and enforcement would be in the interests of creditors within China.
In theory, article 5 provides a basis on which a mainland court may recognise and enforce a judgment or ruling in foreign insolvency proceedings. Article 5, however, is expressed in very general terms and does not provide specific guidance as to how a foreign judgment or ruling should be recognised and enforced.
Although the Chinese mainland is not a common law jurisdiction and does not expressly recognise the immovables rules, the following two rules are relevant:
- The rule that the law of the location where immovable property is situated (the lex situs) is the applicable law in respect of immovable property (see article 36 of); and
- The rule that the people’s courts in the location of immovable property have exclusive jurisdiction over proceedings arising out of disputes in respect of immovable property in that location (see article 34(1) of the Civil Procedure Law).
The above-mentioned rules are likely to have a similar, if not the same, effect as the immovables rule under English Law. It will be interesting to see how Chinese law develops in this respect, particularly if China passes the revised Enterprise Bankruptcy Law, which inserts a new chapter on judicial co-operation in cross-country insolvency.
The above column draws on an academic paper that the columnist co-presented with Debaranjan Goswami – ‘Cross-Border Insolvency in India and the Applicability of the Immovables Rule: Insights from Kireeva’ – at the Restructuring and Insolvency Academic Forum 2025, National University of Singapore, on 6-7 November 2025.
Andrew Godwin previously practised as a foreign lawyer in Shanghai (1996 – 2006) before returning to his alma mater, Melbourne Law School in Australia, to teach and research law. Andrew is currently Joint Associate Director of the Corporate Law and Financial Regulation Research Programme at the Melbourne Centre for Commercial Law and Honorary Associate Director (Commercial law) of the Asian Law Centre. Andrew has acted as a consultant to a broad range of organisations, regulators and governments in Australia and abroad. He served as Special Counsel and Acting General Counsel of the Australian Law Reform Commission between 2020 and 2024.
