The High Court held in Beograd Innovation Ltd v Somovidis [2025] EWHC 1182 (Comm) ("Beograd") that there was no principle in English law that a creditor would be bound by the foreign rules of insolvency proceedings, by submitting to the jurisdiction of the foreign court dealing with those proceedings.
The facts
The facts giving rise to this case are, briefly, that:
- The Defendant controlled a network of corporate entities in Russia. This included Morgan LLC ("Morgan"). In October 2015, the Credit Bank of Moscow ("CBM") loaned a substantial sum to Morgan. The Defendant personally guaranteed Morgan's primary liabilities to CBM.
- On 15 December 2016, CBM commenced proceedings in Russia against both Morgan and the Defendant, to recover sums outstanding under the loan facility.
- By the end of 2016, the Defendant had left Russia for England. The Defendant had resided in England since then. The Claimant alleged that the Defendant was the ultimate beneficial owner of two substantial properties in England. This was the subject of dispute between the parties.
- In June 2017, judgment was entered against both Morgan and the Defendant in the Russian proceedings. That judgment was later upheld on appeal. In 2018, CBM commenced bankruptcy proceedings in Russia against the Defendant, and a Receiver was appointed (broadly akin to a Trustee in Bankruptcy). The parties agreed that it was not possible to enforce the judgment in the Russian Courts, outside of the Russian bankruptcy regime.
- Following various assignments, rights against the Defendant were ultimately assigned to Beograd Innovation Ltd ("BIL"), the Claimant in these proceedings. On 13 March 2024, BIL commenced proceedings in England and Wales. BIL sought to recognise and enforce the judgment achieved in the Russian proceedings in England.
- In November 2024, BIL were joined to the Defendant's (Russian) bankruptcy proceedings as a creditor.
The parties' positions
The Defendant's position was that the English Court should refuse to exercise jurisdiction because, as a matter of Russian bankruptcy law, BIL was bound by the 'Exclusive Remedy Principle', contained in Article 213.11 of the Russian Bankruptcy Code. The Defendant's position was that this principle precludes creditors from pursuing or enforcing separate claims against him, after the commencement of insolvency proceedings in Russia.
On the other hand, BIL's position was that this Exclusive Remedy principle was only of effect in Russia. BIL also considered there to be an exception, in that BIL should be entitled to rely on the circumstances of the particular case. BIL considered that they should be able to bring a personal claim outside of the bankruptcy proceedings in Russia, in a foreign jurisdiction, where that claim is pursued in support of the bankruptcy as a mechanism of collecting the bankrupt’s estate, with such action pursued with the agreement of the Receiver.
The court's finding
In HHJ Pelling KC's judgment, he found that the extra-territorial effects of a Russian insolvency are insufficiently well established to enable him to conclude that the proceedings should be stayed. He found that whilst there is a consistent approach across the Russian Courts to prohibit enforcement action in Russia where Russian insolvency proceedings have already been commenced, the position is far less certain as to the commencement of enforcement proceedings outside of Russia.
In Beograd, HHJ Pelling KC was not persuaded that a powerful reason existed to justify departing from permitting claims where the Courts of England and Wales have jurisdiction. Therefore, the Defendant's application that the proceedings in England and Wales be stayed was dismissed.
Practical Considerations
Beograd is a helpful summary of when claims may be brought to enforce a foreign judgment debt in England and Wales, despite the existence of insolvency proceedings in another jurisdiction. Care should be taken when considering whether a foreign judgment can be enforced in England & Wales, particularly when insolvency proceedings exist in another jurisdiction.
