Beograd Innovation Ltd v Somovidis - Case Update

The High Court has applied the Supreme Court’s decision in Kireeva v Bedzhamov to reject an application by a Russian bankrupt to stay enforcement proceedings by a creditor in the UK, and in so doing has commented on the scope of the modified universalism principle.

In 2017, the claimant Beograd Innovation Limited acquired rights to enforce a Russian judgment against the defendant Mr Somovidis. Mr Somovidis, formerly based in Russia, was declared bankrupt in Russia in 2019, but has resided in England since 2016 and is alleged to own substantial immovable property here. Beograd Innovation sought recognition and enforcement of the judgment in England, and Mr Somovidis resisted on the basis that the proceedings should be permanently stayed under the “exclusive remedy principle”—the principle that creditors must bring all claims through the Russian bankruptcy process.

The Court found that although English courts generally support foreign insolvency proceedings through the doctrine of modified universalism, this principle is limited in its application. Applying the Supreme Court’s ruling in Bedzhamov, the Court noted that English common law does not recognize foreign bankruptcy claims over immovable property (such as land or houses) located in England. As a result, granting a stay would unjustly shield the defendant’s English real estate from enforcement while offering no corresponding ability for Russian authorities to recover that property. Since the Russian receiver cannot bring enforcement proceedings over those assets, Beograd Innovation’s attempt to do so should not be barred.

The Court relied on a passage from the Supreme Court’s decision to the effect that its ruling may result in a race to enforce by creditors, but stated that this was a matter for Parliament, not the courts, to change:

“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.”

The Court emphasised that a permanent stay is an extreme measure, permissible only where there is a compelling reason in the interests of justice. Since Russian law does not clearly prohibit enforcement actions abroad and the English court has exclusive jurisdiction over immovable property in England, the Court concluded that allowing enforcement to proceed was consistent with justice and public policy.

Ultimately, the application for a stay was dismissed, paving the way for Beograd Innovation to proceed with enforcement of the Russian judgment against Mr Somovidis’s English assets.

Read the decision HERE.

Professionals involved:

• Alexander Milner KC and Joseph Leech of Fountain Court Chambers (instructed by Steptoe International) for Beograd Innovation Ltd

• James Sheehan KC and Oliver Goldstein of Essex Court Chambers (instructed by Withers) for Dimitrios Konstantinosovich Somovidis