High Court finds mere recognition of foreign insolvency under Cross-Border Insolvency Regulations 2006 not sufficient to disapply "immovables rule"

The High Court has held that the recognition of foreign insolvency proceedings under the Cross-Border Insolvency Regulations 2006 (the "CBIR") did not, in itself, vest rights or interests in English land in the foreign representative. Only a successful application for relief under article 21 of the CBIR, which had not been made in this case, would provide a statutory exception to the "immovables rule" under English common law, thereby allowing the English courts to grant a foreign trustee rights to deal with English property: Almeqham v Al-Sanea & Ors [2025] EWHC 322 (Ch).

As discussed in our previous blog post (here), in Kireeva v Bedzhamov [2024] UKSC 39, the Supreme Court upheld the primacy of the "immovables rule", which is a principle of private international law found in many common law jurisdictions. It provides that where immovable property (most commonly land) is situated in England and Wales, neither English law nor the English courts will recognise or give effect to any laws or judicial decisions of other countries in relation to rights to and interests in that immovable property. In Kireeva, the Supreme Court acknowledged (obiter) that statutory exemptions to the "immovables rule" may exist, but they did not apply on the facts in Kireeva and so the court did not explore their precise boundaries.

In Almeqham, the High Court applied the Supreme Court's obiter comments in Kireeva in deciding that, while the recognition of a foreign appointed trustee under the CBIR does not in and of itself create an exception to the "immovables rule", a bankruptcy trustee that has obtained recognition in England may apply for relief under article 21 of the CBIR to gain powers to deal with the debtor's immovable assets in England and thereby gain an interest in the property.

The obvious message for foreign insolvency office holders who wish to be able to take control of a debtor's English immovable property is to first make an application under article 21 of the CBIR for an order entrusting to them the administration and realisation of those assets. Without such an order, the immovables rule may present an insurmountable hurdle.

Background

The defendant, Mr Al-Sanea, was the founder of the Saad Group which included Saad Trading, Contracting and Financial Services Co ("STC"). The Saudi Arabian Courts found that he had helped to orchestrate a multi-billion dollar Ponzi scheme for the benefit of Saudi conglomerate AHAB, which collapsed in 2009 with $9.2 billion in debt. Mr Al-Sanea is currently serving a nine-year prison sentence in Saudi Arabia for bribery and other offences.

Between February and May 2009, Mr Al-Sanea had transferred or organised the transfer of parcels of land in Saudi Arabia (held by him personally or by STC) to his wife and children. The Saudi Arabian Courts found that such transfers were fraudulent and should be reversed, and the King of Saudi Arabia issued orders freezing the assets of Mr Al-Sanea and his family in May 2009.

Mr Almeqham was appointed as liquidation trustee of Mr Al-Sanea and STC in March 2022 by the Saudi Arabian Courts, with title over the debtors' assets vesting in him under Saudi Arabian law. In February 2024 the appointment was recognised in England under article 20 of the CBIR (which automatically provided a stay and suspension of any actions against the debtors' assets in England).

Following the recognition of his appointment, the liquidation trustee issued proceedings in England against Mr Al-Sanea and five Saad Group offshore companies (the "Offshore Defendants") alleging that, since the freezing orders, Mr Al-Sanea had taken further steps to conceal assets. In particular, the liquidation trustee alleged that, in 2012, the Saad Group transferred 19 English properties to the Offshore Defendants, purportedly in exchange for six pieces of land in Saudi Arabia (though those six pieces of land were never in fact transferred to the relevant Saad Group companies).

The liquidation trustee brought two claims:

1. the Trust Claim: alleging that the Offshore Defendants held the properties in England on a resulting or constructive trust for Mr Al-Sanea and/or STC, and therefore title to the English properties vested in the liquidation trustee by virtue of his appointment;
2. the s.423 Claim: in the alternative, the liquidation trustee sought an order under s.423 of the Insolvency Act 1986 that title to the properties should be vested in him on the ground that the 2012 transfers were made for the purposes of putting the properties beyond the reach of Mr Al-Sanea and STC's creditors.  

In May 2024, the liquidation trustee was granted permission to serve proceedings on the defendants out of the jurisdiction. The Offshore Defendants applied to set aside service out of the jurisdiction and have the claims against them dismissed (the “Jurisdiction Challenge”).

Decision

The High Court (Jonathan Hilliard KC sitting as a Deputy High Court judge) upheld the Jurisdiction Challenge in respect of the Trust Claim, setting aside permission to serve that claim outside the jurisdiction and striking it out. However, the Jurisdiction Challenge was rejected in relation to the s.423 Claim.

It was common ground between the parties that, in relation to the Jurisdiction Challenge, the burden was on the liquidation trustee to establish:

1. a serious issue to be tried on the merits;
2. a good arguable case that one of the jurisdictional gateways in CPR PD6B (para.3.1) applied; and
3. that England was clearly and distinctly the most appropriate forum for the trial of the dispute.

In relation to the Trust Claim, the Offshore Defendants principally sought to argue that there was no serious issue to be tried on the merits. In relation to the s.423 Claim, the Offshore Defendants focussed on the argument that the liquidation trustee had not when seeking permission without notice to serve outside the jurisdiction (and therefore when under a duty of full and frank disclosure) identified a jurisdictional gateway for the claim.

The Trust Claim

As outlined above, the private international law principle (established under English common law) known as the "immovables rule" provides that questions regarding rights to and interests in land and other immovable property are governed by the law of the country in which the property is situated, and jurisdiction to decide those questions belongs to the courts of that country. Therefore, where immovable property is situated within England and Wales, the English courts will not recognise or give effect to any laws or judicial decisions of other countries which purport to govern or decide rights to or interests in that immovable property, save to the extent of any exceptions under English law.

The Supreme Court confirmed the primacy of the "immovables rule" in Kireeva, where it refused to assist a Russian trustee in bankruptcy at common law by appointing the trustee as a receiver over the bankrupt's immovable property in England. It was common ground that the CBIR did not apply in that case but the Supreme Court did consider, in obiter comments, the interrelationship of the CBIR and the "immovables rule". In particular, the Supreme Court considered that a statutory exception to the "immovables rule" had been established by the CBIR. However, the Supreme Court in that case did not need to decide at what point that exception applied.

Returning to the present case, in relation to the Trust Claim, the liquidation trustee submitted that the recognition of a foreign insolvency representative under the CBIR was itself sufficient to exclude the application of the "immovables rule", where the relevant foreign law provides for immovable property to be vested in the representative (as Saudi Arabian law did in this case). The Offshore Defendants argued that mere recognition of a foreign representative was not sufficient to oust the "immovables rule" and that an application for relief under article 21 of the CBIR (which the liquidation trustee had not made) was necessary for the exception to the "immovables rule" to apply so that the court could order that the liquidation trustee had the right to realise any of the debtor’s assets in England, as per the Trust Claim. Both the liquidation trustee and the Offshore Defendants submitted that the Supreme Court's obiter comments in Kireeva supported their submissions.

The judge agreed with the Offshore Defendants' submissions, commenting that the "immovables rule" did apply to the Trust Claim as "recognition of the foreign proceedings … does not itself vest rights or interests in English land in the foreign representative without an order under article 21". Therefore, the English courts were prevented from recognising or giving effect to the liquidation trustee's alleged rights over the English properties.

Therefore, the liquidation trustee could have standing to bring a claim to establish his rights over the English land, but only following a successful article 21 application made in the proper manner. The application could not be made through an amendment to the particulars of claim, as the liquidation trustee had submitted.

The judge therefore allowed the Jurisdiction Challenge in relation to the Trust Claim, finding that the Trust Claim should be struck out on the basis that the liquidation trustee did not have standing and there was therefore no serious question to be tried. It was however open to the liquidation trustee to make an application under article 21 of the CBIR for relief in respect of the Trust Claim in the future.

The s.423 Claim

In the alternative, the liquidation trustee claimed that title to the English properties should be vested in him under s.423 of the Insolvency Act 1986 on the basis that the 2012 transfers were made for the purpose of putting the properties beyond the reach of Mr Al-Sanea and STC's creditors.

The Offshore Defendants challenged the jurisdiction of the English courts to hear the s.423 Claim on several grounds. They argued that the liquidation trustee had failed to identify a jurisdictional gateway for the claim under CPR PD6B para.3.1. They also contended that the liquidation trustee had failed properly to plead the claim, and that it was defective without the joinder of the relevant Saad Group companies in the proceedings.

The court rejected the Jurisdiction Challenge in respect of the s.423 Claim. It found that there was a serious issue to be tried on the merits of the s.423 Claim and that the liquidation trustee had shown a good arguable case that the jurisdictional gateways in relation to property located within the jurisdiction applied. The court also found that the liquidation trustee had properly pleaded the s.423 Claim, and that the absence of the relevant Saad Group companies as parties to the proceedings did not prevent there being a serious issue to be tried. In particular, the court referred to the Court of Appeal decision in Invest Bank PSC v El-Husseini [2024] KB 49 (an appeal against which was dismissed by the Supreme Court on 19 February 2025), in which it was found that s.423 could apply even where the debtor did not beneficially own the assets transferred.