Beograd Innovation Limited v Dimitrios Konstantinosovich Somovidis [2025] EWHC 1182 (Comm)

[2025] EWHC 1182 (Comm)Case No CL-2024-000152
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate Date: 27/05/25
Before
HIS HONOUR JUDGE PELLING KCSITTING AS A JUDGE OF THE HIGH COURT
Between
BEOGRAD INNOVATION LIMITEDClaimantDIMITRIOS KONSTANTINOSOVICH SOMOVIDISDefendant
Alexander Milner KC and Joseph Leech (instructed by Steptoe International (UK) LLP) for Claimant and RespondentJames Sheehan KC and Oliver Goldstein (instructed by Withers LLP) for Defendant and ApplicantHearing Hearing dates: 14-15 April 2025
Approved JudgmentThis judgment was handed down remotely at 9.30am on 27 May 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................HIS HONOUR JUDGE PELLING KC SITTING AS A JUDGE OF THE HIGH COURT

HH Judge Pelling KC:

[1]By this claim, the claimant seeks recognition and enforcement of a judgment obtained against the defendant from the Russian courts. The defendant has been resident in England since late 2016 and was served with these proceedings in England. However, the defendant has applied by an Application Notice dated 9 September 2024 for an order that this court declines to exercise the jurisdiction it undoubtedly has in respect of this claim and/or stays these proceedings permanently on the ground that there are bankruptcy proceedings in Russia against the defendant instituted by one of the claimant’s predecessors as the defendant’s creditor in respect of the liability the subject of the Russian judgment that the claimant is seeking to have recognised and enforced. If granted, the effect of such an order will be to make the defendant judgment proof in relation to his immovable assets in this jurisdiction, since it is a rule of the common law that the English court is prevented from granting relief to assist a foreign trustee in her duty under foreign law to get in and realise the bankrupt’s interests in land located in England – see Kireeva v. Bedzhamov [2024] UKSC 39; [2024] 3 WLR 1010 – and it is not suggested that either s.426(4) of the Insolvency Act 1986 or the Cross Border Insolvency Regulations 2006 are of any application in this case.

Factual Background

[2]The primary historical facts relevant to this dispute are largely agreed. The defendant controlled a network of corporate entities in Russia of which Morgan LLC (“Morgan”) formed part. In October 2015, the Credit Bank of Moscow (“CBM”) loaned Morgan Ꝑ3 billion and on 21 October 2015, the defendant personally guaranteed Morgan’s primary liabilities to CBM.[3]On 15 December 2016, CBM commenced proceedings in Russia against both Morgan and the defendant to recover the sum then outstanding under the loan facility of Ꝑ1.675 billion (“Collection Proceedings”).[4]By the end of 2016, the defendant had left Russia for England, where he has resided ever since. It is not suggested that the defendant remains domiciled in Russia or that he retained domicile thereat any time material to these proceedings.[5]The claimant alleges that since arriving in England the defendant has become the ultimate beneficial owner of two substantial properties in England, one of which is the family home of the defendant, his wife and children. There is a very serious dispute between the parties as to whether the defendant is the beneficial owner of these properties or whether they were purchased by the defendant’s father-in-law.[6]On 23 June 2017, judgment was entered against both Morgan and the defendant in the Russian proceedings and on 14 March 2018, that judgment was upheld on appeal.[7]In December 2018, CBM commenced bankruptcy proceedings in Russia against the defendant (“bankruptcy proceedings”). It is common ground that the defendant did not take any steps in, or submit to, the bankruptcy proceedings at any stage until after the commencement of this claim.[8]On 22 October 2019, the defendant was declared bankrupt in the bankruptcy proceedings and a receiver was appointed. A receiver is broadly the equivalent of a trustee in bankruptcy under English insolvency law. The bankruptcy is a Russian Court supervised process conducted according to principles set out in Federal Law No. 127-FZ dated 26 October 2002 (“Bankruptcy Code”). It is common ground that the Collection Proceedings judgment is unenforceable against the defendant in Russia outside the Russian bankruptcy proceedings. There is a dispute between the parties as to whether the rule that makes it unenforceable has any extra-territorial effect. The claimant maintains that even if it does, that is immaterial to the outcome of this application, which it contends is to be determined applying exclusively English law principles.[9]On 14 April 2021, CBM assigned its rights against the defendant to Yurenergo Consult LLC (“YCL”), who then joined into the bankruptcy proceedings in substitution for CBM. On 8 December 2023, YCL assigned its rights against the defendant to the claimant in these proceedings.[10]On 13 March 2024, the claimant commenced these proceedings by which it seeks to enforce the judgment that had been obtained against the defendant in the Collection Proceedings. On 2 July 2024, these proceedings were served on the defendant at his residence in England. It is not suggested that there was anything other than effective service. In those circumstances, it is not suggested that these proceedings are capable of being stayed on forum non conveniens grounds and that would in any event be unarguable since the claim is for the enforcement in England of the judgment in the Collection Proceedings. It is not in dispute therefore that the claimant has established this court’s jurisdiction over the defendant for its claim. This is significant when considering the starting point for this application, an issue to which I refer in more detail below. By agreement between the parties, the time for the defendant to issue this application was extended to 9 September 2024 and it was issued on that date.[11]In November 2024 the claimant was joined to the bankruptcy proceedings as a creditor. The claimant submits, and I accept for the purposes of this application, that the claimant is the only real creditor in the bankruptcy proceedings. Apparently Morgan is also a nominal creditor in the bankruptcy proceedings but that is immaterial since Morgan is one of the claimant’s debtors by reason of the judgment in the Collection Proceedings.

The Parties’ Cases

[12]The defendant submits that this court should refuse to exercise the jurisdiction it otherwise has over him because as a matter of Russian bankruptcy law, the claimant is bound by a principle referred to by the parties’ Russian law experts as the “Exclusive Remedy Principle”, contained in Article 213.11 of the Bankruptcy Code, which precludes creditors from pursuing or enforcing separate claims against the debtor after the commencement of insolvency proceedings. The claimant’s Russian law expert considers that this general principle is of effect only in Russia and in any event is subject to an exception that the claimant is entitled to rely on in the circumstances of this case by which a creditor (here the claimant) is able to bring a personal claim outside the bankruptcy in a foreign jurisdiction where the claim is pursued in support of the bankruptcy as a means of collecting the bankrupt’s estate and is commenced or continued with the agreement of the receiver. That is an issue of Russian law which is hotly contested by the parties and their respective Russian law experts. The claimant maintains however that it is not necessary to resolve that issue because as a matter of English law the application is to be resolved applying conventional English law principles and that applying those principles the application is “heretical and misguided” even if the defendant was correct about the effect of the Russian exclusive remedy point.

Discussion

[13]Since it is accepted that this court has jurisdiction over the defendant in respect of this claim by reason of the valid service on him of the Claim Form, the effect of this application, if granted, would be to exclude the claimant from the access to which it would otherwise be entitled to the only court with jurisdiction to enable it to enforce the judgment in the Collection Proceedings in circumstances where such proceedings would not be available to the receiver applying Kireeva v. Bedzhamov (ibid).[14]Although, ultimately, a court has power to control its own business, an indefinite stay impacts on the ECHR Art. 6 and common law rights of the party otherwise entitled to access to the courts against whom the stay is sought. In my judgment the most recent statement of principle in this area is the one that I should follow. It is to be found in Athena Capital Fund SICAV-FIS SCA and others v Secretariat of State for the Holy See [2022] EWCA Civ 1051; [2022] 1 WLR4570 (“Athena”), where at [59] Males LJ (with whom Birss and Peter Jackson LJJ agreed) stated:
“… the usual function of a court is to decide cases and not to decline to do so, and access to justice is a fundamental principle under both the common law and article 6 ECHR. The court will therefore need a powerful reason to depart from its usual course and such cases will by their nature be exceptional. In my judgment all of the guidance in the cases which I have cited is valuable and instructive, but the single test remains whether in the particular circumstances it is in the interests of justice for a case management stay to be granted.”
Whilst the jurisdiction to grant a stay conferred by s. 49(3) of the Senior Courts Act 1981 and/or CPR rr. 1.2(a) and 3.1(2)(f) is unqualified, whether as an exercise of discretion the stay sought ought to be granted is an acutely fact and context sensitive question, where the more extreme the stay sought the more exceptional and compelling must be the reasons for the stay sought before the single interest of justice test identified in Athenacan be held satisfied. Stays at the more extreme end of this spectrum include even a temporary stay sought pending resolution of some foreign proceedings notwithstanding an exclusive jurisdiction agreement in favour of the English courts – see Mazur Media Ltd v Mazur Media GmbH [2004] EWHC 1566 (Ch); [2004] 1 WLR 2966 per Lawrence Collins J (as he then was) at [70] where it was held that exceptionally strong grounds would be required before a stay could be granted - whereas temporary stays sought in order to give parties the opportunity to settle including by NDR, are at the other end of the scale and are frequently granted, often by consent. A temporary stay on case management grounds is conceptually different from an indefinite stay in favour of insolvency proceedings in another jurisdiction – see WWRT Limited v. Tyshchenko [2021] EWHC 939 (Ch); [2021] Bus LR 972 per Bacon J at [61] - and the onus that rests on the defendant inevitably is a heavy one, particularly if the effect of such a stay would be to render the defendant judgment proof in relation to his assets located within England and Wales.[15]At the heart of the defendant's case is the proposition that as a matter of English law, a creditor who submits to the jurisdiction of a foreign court administering a debtor’s insolvency becomes bound by the rules governing that insolvency, and the English court will take steps to uphold those rules, including by staying proceedings before it which are inconsistent with those rules. It is this proposition that the claimant disputes and which lies at the heart of the dispute on this application. If the defendant is correct as a matter of law then I will have to attempt to determine the Russian law issues between the parties, whereas if the claimant is correct then these issues do not arise. If in principle the defendant is correct both as to the position in English law and in Russian law then I would be bound to stay these proceedings notwithstanding that the effect of the principle in Kireeva v. Bedzhamov (ibid) would be to preclude the defendant’s receiver from commencing proceedings in England and thus the defendant by moving to England would have rendered himself judgment proof in respect of his immovable property located in England and Wales.[16]In these circumstances, it is convenient that I turn first to the defendant’s submission that by submitting to the jurisdiction of the Russian Bankruptcy court, as a matter of English law the claimant has become bound by the rules governing that insolvency. In my judgment the proposition for which the defendant contends is mistaken. My detailed reasons for reaching these conclusions are as follows.[17]Firstly, the principle that is adopted by English law in support of foreign bankruptcy proceedings is (and is only) that referred to in the more recently decided cases as the modified universalism principle. It has been applied by the courts of England for at least the last 100 years. It was stated by Lord Dunedin in Galbraith v Grimshaw [1910] AC 508 at 518, as being that “… if the Court finds that there is already pending a process of universal distribution of a bankrupt’s effects that it should not allow steps to be taken in its territory which would interfere with that process of universal distribution”. It was restated almost 100 years later by Lord Hoffmann in Re HIH Casualty and General insurance Limited and others [2008] UKHL 21; [2008] 1 WLR 852 as being that “… English courts should, so far as is consistent with justice and UK public policy, co-operate with the courts in the country of the principal liquidation to ensure that all the company’s assets are distributed to its creditors under a single system of distribution.” It is a common law mechanism by which the English courts can and will assist foreign winding up proceedings so far as they properly can – see Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36; [2015] AC 1675 per Lord Sumption at [15]. As Lord Sumption added at [19], in giving effect to the principle of modified universalism, “… the court can only ever act within the limits of its own statutory and common law powers.” It is generally a principle relied on by insolvency office holders. It is a principle designed to ensure that the collective remedy of insolvency is made available to all creditors everywhere by reference to all the assets of the insolvent individual or company.[18]I accept that where that principle applies, it could in appropriate circumstances justify a court in England and Wales staying enforcement proceedings before it in favour of foreign insolvency proceedings. However it is important to note the qualifications that judges stating and restating the principle have included within those statements. Lord Dunedin’s statement made clear that the principle was one concerning the “… universal distribution of a bankrupt’s effects…” and Lord Hoffmann was clear that the principle was one that had to be applied only in a manner that was consistent with justice and UK public policy. There is nothing in these formulations that suggests the principle is one that should be applied by a court so as to render part of a bankrupt’s estate immune from distribution. Thus in Re African Farms Limited [1906] TS 373, it was held at 383 that “… the Court should interfere to prevent a local creditor taking or continuing legal proceedings against a company in liquidation elsewhere with knowledge of the facts. Otherwise the recognition of such foreign liquidation would be a mere empty form. The net proceeds of the sale should therefore be handed to the liquidator as the only person entitled to administer the assets of the company.” The importance of this case to the issues that arise in the present case is limited for the reasons identified by Lord Collins in Singularis Holdings Ltd v PricewaterhouseCoopers (ibid) at [55] to [56]. That said, the key point in that case was that as a matter of local law, the proceeds of sale could be handed to the English liquidator. As I have explained and develop in more detail below, that is not so in this case in relation to immovable property in England and Wales.[19]The ultimate rationale for the true rule of English law is to achieve a universal distribution of the assets on, as far as possible, a common basis. If as a matter of substantive English law, a foreign receiver is not permitted to take control and distribute the proceeds of sale of immovable property in England, then the principle of modified universalism is of no application. To apply it so as to achieve such a result would not be consistent with justice and UK public policy, part of which is the strong policy of ensuring that judgments (including foreign judgments) are enforced. If English law did not prohibit a foreign trustee from seeking an order from an English court vesting the immovable property of someone made bankrupt abroad then no doubt the English Court would readily stay proceedings such as this, leaving it to the office holder to decide whether to commence proceedings in England and Wales in respect of the bankrupt’s immovable assets. This is the position that has consistently been adopted in respect of moveable assets – see by way of example Bergerem v Marsh (1921) 91 LJ KB 80 (Bailhache J).[20]CCIC Finance Limited v. Guangdong International Trust & Investment Corporation [2005] 2 HKC 589 provides another illustration of the point. In that case the claimant sought an order making the equivalent of a third party debt order (a garnishee order) absolute and the judgment debtor opposed that application and sought a stay on the basis that it was in an insolvency process. A key point was that the claimant claimed to have been excluded from the liquidation by the liquidation committee’s outright rejection of its claim. Notwithstanding that, the deputy judge refused to make the garnishee order absolute, primarily because “… the GITIC liquidation is being pursued on the basis of a universal collection and distribution of assets and the creditors world-wide are to be paid pari passu with each other subject only to ranking. To have granted the application would have offended the principle of equality in that one of the creditors, CCIC, would have achieved an unfair preference ahead of those others ranking at the same level.” In that case “… a universal collection … of assets…” was what could be and was being achieved.[21]However as I explain in detail below that is not the position in relation to immovable assets at common law. Where that rule applies (as it does in this case) the choices lie between permitting a creditor to enforce its judgment if it can against any immovable assets belonging to the judgment debtor located in England and Wales, or treating the judgment debtor as judgment proof to the extent of their immovable assets in England. The modified universalism principle is not engaged.[22]Notwithstanding this, the defendant submits that it is no answer to the defendant’s reliance on the Russian bankruptcy proceedings for the claimant to assert that the principle should only apply to prevent it enforcing against movable property. This depends on how the analysis of the Supreme Court in Kireeva v Bedzhamov (ibid) is to be approached.[23]That case was concerned with Russian insolvency proceedings where the debtor was domiciled in England. The receiver applied to the English court for recognition at common law of the Russian bankruptcy and of her appointment as the debtor’s trustee and for an order vesting a London property held by the debtor in her possession and control as his trustee. There, as here, it was not suggested that either s.426 of the Insolvency Act 1986 or the Cross Border Insolvency Regulations 2006 applied. The judge granted the recognition sought, with the consequence that the debtor’s movable property in England automatically vested in the trustee, but refused the application for the vesting order, holding that the court had no common law power to provide assistance to the trustee to gain possession of, or to realise, immovable property located in England.[24]That conclusion was upheld by the Supreme Court by Lords Richards and Lloyd-Jones with whom all other members of the court agreed. In reaching that conclusion, Lords Richards and Lloyd-Jones stated that:
“… the fallacy on which all the submissions of the appellant are based is that, notwithstanding the immovables rule, the English court may at common law recognise and give effect to the rule of Russian bankruptcy law that all the property of the bankrupt, including interests in land located in England, forms part of the bankrupt estate. This is fundamentally at odds with the immovables rule which is a substantive rule of English law. The rule is not concerned solely with the vesting of title, but has the effect, as earlier explained, that at common law no recognition will be given to any provision of foreign law or any order of a foreign court which purports to affect rights to or interests in land located in England. It follows that the common law does not recognise the Property as being part of the assets that are within the scope of the respondent’s bankruptcy in Russia. As a matter of English law, his interests in the Property are unaffected by the Russian bankruptcy order. Therefore, subject to any statutory provision to contrary effect, it is not open to an English court to take steps to deprive the respondent of his interests in the Property in favour of the appellant as trustee in the Russian bankruptcy” [Emphasis supplied]
The Supreme Court went on to set out the rationale for this conclusion and recognise the consequence of its conclusions in these terms:
“110 It may be said, with some justification, that the application of the immovables rule in the case of a foreign bankruptcy produces a surprising result in leaving the bankrupts 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 bankrupts estate. That, however, is a policy reason to be considered in the context of any proposal for legislative change. Further, by reason of the CBIR, this result is avoided where the bankruptcy order is sought and made in the debtor’s centre of main interests. In the present case, it was open to the respondent’s creditors to apply for a bankruptcy order in this country, where he had his centre of main interests and his domicile for bankruptcy purposes, rather than in Russia. 111 Under the immovables rule, as a matter of English common law, the trustee in bankruptcy has no interest in or right to the bankrupt’s immovable property in this jurisdiction. It is for Parliament and not the courts to determine whether and, if so, under what conditions there should be further development beyond those already made by legislation. ” [Emphasis supplied]
The key point that emerges from this analysis is that “ … the common law does not recognise the Property as being part of the assets that are within the scope of the respondent’s bankruptcy in Russia…”. It is for that reason that the foreign trustee in bankruptcy “… has no interest in or right to the bankrupt’s immovable property in this jurisdiction…”. That is the position as I have said at common law. As I have also said but repeat, it is not suggested that either s.426(4) of the Insolvency Act 1986 or the Cross Border Insolvency Regulations 2006 are of any application in this case. It follows that whilst it may be the case that as a matter of Russian law the claimant would be precluded from seeking to enforce its judgment other than in the insolvency proceedings in Russia, that is not English law, which does not recognise immovable assets as being part of the assets that are within the scope of the defendant’s bankruptcy in Russia. That being so, in my judgment it is not in the interests of justice for the English court to stay these proceedings.[25]As I have explained earlier, the Russian bankruptcy proceedings were commenced two years after the defendant had moved to England. It is not suggested that he remained domiciled in Russia at that point or resumed Russian domicile at any time thereafter. Whilst the English court may come to the assistance of an office holder where the bankrupt has submitted to the jurisdiction of the foreign bankruptcy court, in my judgment this issue is immaterial for two distinct reasons. First, the stay being sought by the defendant would not assist the Russian office holder for the reasons that I have explained. Secondly, the evidence does not suggest that the defendant has submitted to the jurisdiction of the Russian court in any meaningful sense but in any event it does not provide an answer to the analysis of the Supreme Court in Kireeva v Bedzhamov (ibid). The decision in Re Davidson’s Settlement Trusts (1873) LR 15 Eq 383 does not assist the defendant because it was concerned with moveable not immoveable assets. Lord Hoffmann’s analysis in Cambridge Gas Transportation Corp v. Official Committee of Unsecured Creditors of Navigator Holdings plc and others [2006] UKPC 26; [2007] 1 AC 508 at [15] does not assist because his dictum that the English court has a discretion to assist the foreign trustee by enabling him to obtain title to or otherwise deal with immovable property belonging to a foreign bankrupt was rejected by the Supreme Court in Kireeva v Bedzhamov (ibid).[26]I accept that the defendant has at least realistically arguably submitted to the jurisdiction of the Russian bankruptcy court. It is true to say that he took no steps at all in relation to the Russian bankruptcy proceedings until after these proceedings had been served on him and the steps that he has taken consist of asking for copies of the Russian court’s decision of 5 November 2024 substituting the claimant as creditor in the Russian bankruptcy and filing an appeal against that decision. The general test of whether a party has submitted involves deciding whether the party concerned has taken some step which is only necessary or only useful if an objection to jurisdiction has been waived, or never entertained at all – see Williams & Glyn’s Bank plc v Astro Dinamico Cia Naviera SA [1984] 1 WLR 438 followed in Rubin v. Eurofinance SA [2012] UKSC 46; [2013] 1 AC 236 per Lord Collins at [159] – [163]. Whilst I accept the submission that requesting copies of a decision is not a submission, it is difficult to see how appealing an order substituting one creditor for another could not satisfy the test. However, for the reasons I have given earlier, in my judgment this goes nowhere.[27]The final question that arises is whether the claimant has submitted to the jurisdiction of the Russian court in relation to the defendant’s Russian bankruptcy and if so whether that has any impact on the outcome of this application.[28]The first of these issues is of potential importance because the defendant submits that it is a principle of English law that a creditor who submits to the jurisdiction of a foreign court administering a debtor’s insolvency becomes bound by the rules governing that insolvency. The defendant submits that since, as a matter of Russian law, the claimant is prohibited from bringing any claims outside the bankruptcy, it therefore follows that this court should stay this claim permanently in the exercise of its discretion.[29]In my judgment there is no rule to that effect. The principle that applies is the modified universalism principle considered already and no other. It is subject to the constraints noted above. It is a principle that exists to assist in ensuring that all the assets of a bankrupt are available in a single bankruptcy being conducted by the courts of the domicile of the bankrupt or to which the bankrupt has submitted. It does not enable a party in the position of the defendant to ring fence part of his global estate. The ability of the English court to grant a stay in aid of foreign insolvency proceedings does not depend on the respondent to an application for a stay having submitted to the foreign insolvency process. CCIC Finance Limited v. Guangdong International Trust & Investment Corporation (ibid) provides a good example of the point. There, a stay of the third party debt order procedure was granted notwithstanding that the claimant claimed to have been excluded from the liquidation by the liquidation committee’s outright rejection of its claim. None of the cases referred to above that address the modified universalism principle suggest that the applicability of the principle depends on the respondent having submitted to the foreign bankruptcy procedure. Such a principle would significantly undermine the ideal of a single universally applicable insolvency regime since the principle is likely to be of most value where a party has not submitted to the foreign bankruptcy process.[30]Equally none of the authorities suggest that the modified universalism principle requires an English court to give effect to the law applicable to a foreign insolvency procedure because, for example, a company or individual over which it has in personam jurisdiction has submitted to that procedure. Rather the scope of the principle is as summarised in Rubin and another v Eurofinance SA and others [2012] UKSC 46; [2013] 1 AC 236 by Lord Collins at [31] as being:
“The common law assistance cases have been concerned with such matters as the vesting of English assets in a foreign office-holder, or the staying of local proceedings, or orders for examination in support of the foreign proceedings, or orders for the remittal of assets to a foreign liquidation ….”
As Millett LJ put it in Credit Suisse Fides Trust v Cuoghi [1998] QB 818 at 827, “It is becoming widely accepted that comity between the courts of different countries requires mutual respect for the territorial integrity of each other’s jurisdiction, but that this should not inhibit a court in one jurisdiction from rendering whatever assistance it properly can to a court in another in respect of assets located or persons resident within the territory of the former.” – a summary approved by Lord Collins in Rubin v. Euro finance SA (ibid) at [30].[31]Following the delivery to the parties of this judgment in draft, the defendant drew my attention to my apparent failure to refer in the judgment to the decision of the Court of Appeal in Erste Group v JSC VMZ Red October [2015] EWCA Civ 379; [2015]1 CLC 706 (“Red October”). This omission was not accidental. The issue that arose in that case was entirely different to the issue that arises in this case. This case is concerned exclusively with whether the claimant is entitled to commence proceedings in England to enforce a judgment it has obtained in Russia against the defendant who is domiciled and resident in England. The defendant maintains it was not so entitled because the claimant had submitted to the jurisdiction of the Russian insolvency court. The question which arises is in this case is the fact sensitive one identified by Gloster LJ at [64] of her judgment in Red October namely whether on the facts of this case it is reasonable for an English court to allow a creditor who had submitted in a foreign insolvency to pursue private proceedings against the defendant in this jurisdiction. Red October is not authority for the proposition that once a party has submitted to a foreign insolvency process it is thereby precluded for all purposes from instituting proceedings before the English courts. On the contrary, Gloster LJ recognised at [78 (ix)] of her judgment that there will be cases where it is appropriate for proceedings to take place here even though there was an insolvency process taking place elsewhere.[32]I have concluded that this is one of those cases for the reasons set out in detail earlier in this judgment – that is in summary because, as a matter of English law, the immovable assets of the defendant located in England are not amenable to collection by the Russian insolvency office holder because English law does not recognise such property as being within the scope of the defendant’s bankruptcy in Russia, and because there is no question of the claimant bringing a claim here that could have been proved for or otherwise made in the Russian insolvency proceedings since the only court with jurisdiction to enforce the claimant’s judgment against immovable assets in England and Wales are the courts of England and Wales, at the suit at the claimant.[33]Any issue concerning how any recovery ultimately made by the claimant in this jurisdiction affects the insolvency of the defendant in Russia can and will be resolved either by an undertaking from the claimant at the appropriate stage in these proceedings and/or by agreement between the claimant and Russian officeholder or in proceedings brought by the Russian office holder against the claimant in Russia in the context of the Russia insolvency proceedings.[34]It was for those reasons that I consider and considered that Red October does not assist in resolving the issues that arise in this case other than to identify the general principles identified in earlier judgments up to and including the Supreme Court referred to earlier in this judgment.[35]There is a dispute between the parties as to the scope and effect of Russian law. Professor Asoskov (relied on by the defendant) maintains that Russian law requires all creditors (or at any rate those over which the Russian courts have jurisdiction or to which a creditor has submitted) to bring their claims against the bankrupt by proving in the bankruptcy. Dr Egorov (relied on by the claimant) suggests that rule is of domestic effect only and so does not prevent the commencement of proceedings outside Russia. A significant amount of time was taken up with submissions as to which of the experts was to be preferred. In my judgment the debate does not assist in deciding whether these proceedings should be stayed. That is so because whether the proceedings should be stayed is to be determined applying the English law principles to which I have referred above. Given the conclusions I have reached so far, it is not necessary that I attempt to resolve the differences between the parties’ respective experts on Russian law. In my judgment if the principle that the defendant asserts applies as a matter of Russian law then it will be for the defendant or Russian office holder to apply to the Russian courts for an order precluding the claimant from proceeding as it is entitled to as a matter of English law.[36]In those circumstances I express my view below on the Russian law issues that arise only briefly. The claimant submits that the burden rests on the defendant to show that in bringing these proceedings the claimant is acting unlawfully as a matter of Russian law. I agree. Given that the defendant is seeking an indefinite stay I consider that the correct test that the defendant must satisfy is that it has a much better argument on the material. This is so because if the defendant was to succeed that would in substance be determinative. To decide this issue on the basis that the defendant has to show only a plausible case would set the evidential bar too low given the nature of the application and the relief sought by the defendant. Brownlie v Four Seasons Holdings Inc [2017] UKSC 80; [2018] 1 WLR 192 at [7] does not assist because that case was concerned with the evidence required by a party asserting jurisdiction against a foreign based defendant using one of the PD 6B jurisdictional gateways so that the issue was whether the court could be shown to have jurisdiction not whether a claim over which it has undoubted jurisdiction should be stayed indefinitely.[37]Turning to the substance, in my judgment the material available to me does not permit me to conclude with sufficient certainty that the claimant’s action in bringing this claim is unlawful according to the laws of Russia. The issue is one that if it has to be decided at all should be decided either when the question whether the claimant is entitled to the relief it seeks in these proceedings is determined substantively or when the claimant takes any substantive steps to enforce its judgment against the defendant’s alleged immovable assets in England and Wales.[38]What is clear is that where a claim has been commenced in Russia against an entity against which bankruptcy proceedings are commenced in Russia then the Russian courts will in effect stay the substantive proceedings and leave the claimant to claim in the Russian bankruptcy proceedings. This is a straight forward application of domestic Russian law under which once a bankruptcy order has been made the sole remedy of a creditor is to prove in the bankruptcy.[39]It would also appear to be established that where a foreign judgment has been obtained against a Russian entity and that entity is made bankrupt in Russia before enforcement of the judgment, then enforcement in Russia other than through the insolvency process is precluded. This is unsurprising given that Russian bankruptcy law provides that proving in the bankruptcy is the only domestic remedy available for creditors. The principle does not appear to be in serious dispute but in any event receives substantial support in paragraph 55 of Professor Asoskov’s first report. That said, I am not persuaded that because a foreign judgment will not be enforceable in Russia against a Russian debtor who has been made bankrupt it therefore follows even by analogy that a Russian claimant is precluded as a matter of Russian law from bringing foreign proceedings against a defendant who is bankrupt in Russia.[40]The position adopted by Russian law in relation to proceedings with an extra-territorial element is significantly less clearcut. There are a limited number of cases which are concerned with situations where bankruptcy proceedings have been brought in foreign states and substantive proceedings started in Russia. Professor Asoskov’s evidence is that where such a situation arises, the Russian court will generally in effect stay the Russian substantive proceedings where the foreign bankruptcy law applies the exclusive remedy principle. This is not a surprising outcome – it is broadly reflective of the modified universalism principle that is applied by courts in England and Wales. However, in a case referred to by the experts as the “Vitmet case”, the Russian Supreme Court was concerned with whether the Russian courts would stay substantive proceedings in Russia against a defendant that was the subject of Ukraine bankruptcy proceedings. The Supreme Court concluded that the substantive proceedings in Russia should be permitted to continue. This approach was contradicted by subsequent lower court decisions where a different position was adopted – see paragraph 58 of Professor Asoskov’s first report. His conclusion is that the Vitmet case should in effect be ignored as being motivated “… by extra-legal considerations, although not expressly articulated...”. His conclusion is that “Russian case law confirms the applicability of the exclusive remedy principle in various scenarios involving Russian and foreign bankruptcy proceedings. Once a person is recognised as bankrupt, the only remedy available to the individual creditor is to file an application to the Russian bankruptcy court to include his claim in the register of creditors. No other proceedings (including in a foreign court or arbitration) may be commenced by an individual creditor.”[41]This is rejected by Dr Egorov, who maintains that the Russian court does not apply a rigid approach to issues such as this and maintains that this is most clearly demonstrated by the decision of the Supreme Court in the Vitmet case. He describes this case as the only ruling of Russia’s highest court on the issue that arises in this case.[42]In one case (referred to in the experts reports as the “Maloy Case”), a creditor initiated bankruptcy proceedings in Russia against V, who then assigned the debt owed by V to Maloy who then sued V in the Ukraine courts and obtained a judgment. The Russian court concluded the Ukraine judgment was contrary to Russian public policy. In the end this is the only decision of a Russian court that is said to support the proposition that enforcement proceedings against a Russian bankrupt are not permitted by a creditor who has submitted to the Russian insolvency proceedings. Dr Egorov maintains that this case is not one that assists. I agree that is at least arguable because it would appear that the Russian court was concerned with an attempt by Maloy to have the Ukrainian judgment he obtained recognised by the Russian court. That would not arise from these proceedings. As Dr Egorov adds, “…the Russian judgment in Mr. Maloy's case is based on the public policy concept, which is contextual in all cases meaning that it depends on specific circumstances of the case.”[43]In my judgment, even if there was a principle of English law to the effect alleged by the defendant, it would be entirely unsafe to conclude on this material that in bringing these proceedings, the claimant is acting unlawfully according to the laws of Russia. The material establishes that Russian law does not permit enforcement in Russia of Russian or foreign judgments where Russian insolvency proceedings have been commenced and it establishes that in some circumstances (but not others) the Russian court will stay proceedings in Russia where insolvency proceedings have been commenced in other jurisdictions that provide an exclusive collective remedy for all creditors. When it will or will not adopt that course and on what principled basis is unclear on the material available to me and cannot sensibly be resolved on an application of this sort. On any view the material available does not establish is that it is unlawful according to Russian law for a Russian creditor to seek to enforce in another jurisdiction (like England and Wales) that does not permit trustees to claim immovable property for the benefit of creditors generally.[44]Some reliance was placed by the defendant on the decision in PJSC VTB Bank v Laptev [2020] EWHC 321 (Ch). In my judgment that does not assist. It was concerned with whether a party seeking to enforce a Russian debt was entitled to commence insolvency proceedings against the debtor in England and Wales. It was not concerned at all with the issue that arises in this case.[45]In my judgment the extra-territorial effects of a Russian insolvency are insufficiently well established to enable me to conclude that I should stay these proceedings at this stage. Whilst the consistent approach of the Russian courts including the Supreme Court has been to prohibit enforcement actions in Russia where Russian insolvency proceedings have been commenced against the judgment debtor, the position is far less clear as to how it would approach the commencement of enforcement proceedings outside Russia, particularly where there was no other method of gaining access to the assets of the bankrupt.[46]I return to the point I made at the outset of this part of the judgment. A stay such as that sought by the defendant in these proceedings is one that ultimately should be granted only where the applicant for the stay has demonstrated “a powerful reason” founded on the interests of justice for departing from the usual course of permitting claims over which it has jurisdiction to be determined on their merits. That has not been established because(a) there is no common law principle to the effect that a creditor who submits to the jurisdiction of a foreign court administering a debtor’s insolvency becomes bound by the rules governing that insolvency;(b) the true principle that applies at common law is that of modified universalism as summarised above; and(c) it is at least realistically arguable that the modified universalism principle is of no application on the facts of this case to any immovable assets owned beneficially by the defendant located in this jurisdiction because “… the common law does not recognise [such property] as being part of the assets that are within the scope of the respondent’s bankruptcy in Russia…”. Russian law is irrelevant to the issues that arise. If and to the extent that it is unlawful according to the law of Russia for the claimant to seek to enforce against the defendant’s English immovable assets then either the defendant or the office holder can apply to the Russian courts for the appropriate relief.[47]Two points remain. The first concerns whether or not the claimant can or should petition for the bankruptcy of the defendant in England. The defendant maintains that the claimant would not be entitled to take that step applying PJSC VTB Bank v Laptev [2020] EWHC 321 (Ch). If that is correct (something not conceded by the claimant) then it serves to emphasise the point already made concerning the effect of the defendant’s application had I acceded to it. It is not necessary for me to resolve whether PJSC VTB Bank v Laptev (ibid) is correctly decided or not. That issue will arise only if and when the claimant presents a petition seeking the bankruptcy of the defendant in this jurisdiction.[48]The other issue concerns whether I should accept the undertaking that has been offered by the claimant to remit any recoveries achieved in these proceedings to the Russian bankruptcy receiver. My present inclination is not to do so at this stage. It strikes me that the proper time for any undertakings to be considered will be when a court in England is asked to adjudicate substantively on this claim or on any enforcement proceedings commenced by the claimant. However, I will hear brief submissions on this issue at the hand down of this judgment.[49]In the result, the defendant’s application fails and is dismissed.

Cited in 1 later judgment