3 key developments affecting the success of foreign insolvency proceedings in England and Wales

Cross-border issues are a key aspect of corporate restructurings and insolvencies, as companies may operate across multiple jurisdictions with differing insolvency regimes. 

The Court of Appeal confirmed earlier this year in Servis-Terminal LLC v Drelle [2025] that for a foreign debt judgment to form the basis for insolvency proceedings in England, it must be recognised via recognition proceedings in the English courts. Evolving case law highlights the areas to keep an eye on when considering the enforcement of an overseas decision in England. This article serves as a refresher on the key considerations in recognition proceedings. 

Background refresher – The legal landscape 

The cross-border insolvency framework is underpinned by the United Nations Commission on International Trade Law (“UNCITRAL”) which aims to ensure consistency in managing cases across countries, the fair treatment of creditors, asset protection and legal certainty. The UK implemented the UNCITRAL through the Cross-Border Insolvency Regulations 2006 (“CBIR”), enabling foreign representatives to seek assistance from UK courts in connection with foreign insolvency proceedings. 

The considerations of the court – Recent developments 

A key element comprising the legal landscape for recognising foreign insolvency proceedings stems from case law. In order to have a foreign insolvency judgement recognised, an application to the relevant court in England & Wales is required. This will typically be done by the insolvency practitioner seeking to have the judgment recognised. 

Post-Brexit, the English and Welsh courts have received a significant number of applications from entities seeking recognition, particularly those commenced in jurisdictions such as Bermuda and Guernsey, resulting in some key considerations being brought to the forefront of the framework for recognition.

1. The Court’s jurisdiction 

Typically, the English court will have jurisdiction to recognise a foreign insolvency judgment if the debtor was domiciled in England, or, where the debtor has submitted to the jurisdiction of the court. Jurisdiction was addressed in Xenfin Fund 1 Trading Ltd (In Liquidation) v GFG Ltd (2025). The claimant was a Guernsey company (company 1) owned by another Guernsey company (company 2). In bringing legal proceedings in England under an agreement governed by English Law with a non-exclusive jurisdiction clause, the defendants as directors of both companies, argued that Guernsey was the proper forum due to local connections and a Guernsey jurisdiction clause. The Court held that the claimant acted reasonably in commencing proceedings in England, given the strong links to the jurisdiction, highlighting the readiness of the English courts to assert jurisdiction where the claimants act reasonably in bringing the application for recognition. 

2. Financial distress

The judgment in the Re Sturgeon Central Asia Balanced Fund Ltd (in liquidation) [2020] clarified that for recognition of foreign insolvency proceedings under the CBIR 2006, the debtor must be insolvent or in severe financial distress. A solvent company undergoing winding-up proceedings, even under a law relating to insolvency, does not qualify as a "foreign proceeding" under Article 2(i) of the UNCITRAL, emphasising that recognition should focus on insolvency-related proceedings. Consequently, the recognition order in this case was terminated as the company was solvent and not in financial distress.

3. The nature of the assets 

To the extent that the assets of the debtor are immovable property situation in England and Wales, the English courts will not recognise foreign judgments in respect of rights and interests in those assets. In a recent case involving underlying Russian bankruptcy proceedings, the UK Supreme Court reaffirmed the applicability of the immovables rule. In Kireeva v Bedzhamov [2024] UKSC 39, Kireeva was the trustee in the bankruptcy of Bedzhamov, who owned a property in England. The Court held that due to the immovables rule, the trustee had no interest in the English property and thus the property could not be realised. 

Practical considerations for applicants  

Listed below are some practical considerations for applicants of cross-border insolvency recognition:

1. Determine the applicable statutory framework: applicants should familiarise themselves with relevant legal frameworks for recognition, such as the UNCITRAL Model Law and CBIR 2006. These frameworks provide the basis for recognition of foreign insolvency proceedings in the UK.

2. Assess geographic extent of assets: understanding the geographic extent of a company’s operations and assets is crucial in seeking recognition of insolvency proceedings in relevant jurisdictions and ensuring that these assets can be preserved or realised for the benefit of creditors.

3. Consider availability of a Stay: a stay halts the enforcement action of creditors, preventing dissipation of the debtor’s assets. This is essential for preserving their value for equitable distribution and provides opportunity for the debtor to pursue restructuring or reorganising without the immediate threat of creditor actions.

4. Recognise variations across jurisdictions: following Brexit, automatic mutual recognition between the UK and EU no longer applies. Applicants should be prepared to rely on the local laws of EU member states.

5. Plan for increased complexity and costs: cross-border insolvencies now involve greater complexity and costs due to the lack of recognition and reliance on informal protocols. 

6. Address immovable property issues: for immovable property in England and Wales, foreign insolvency representatives must apply under Article 21 of the CBIR to administer such assets. Applicants should ensure compliance with this rule as English courts retain exclusive jurisdiction over the rights and interests in such property located within the jurisdiction. 

7. Monitor relevant case law: applicants should stay informed of case law developments such as Re Sturgeon Central Asia Balanced Fund Ltd (on the solvency requirement for recognition). These cases highlight the nuances within this area of law, setting out key considerations and potential obstacles in cross-border insolvency recognition applications.