Freezing orders and recognition orders

The respondent (KD) was declared bankrupt in Russia in July 2019, shortly after he moved to London. The appointed bankruptcy manager (P) sought continuation of a freezing order after a recognition order was granted.

P sought recognition of the Russian bankruptcy as a foreign main proceeding. Before this application was heard, P applied for interim relief, fearing dissipation of KD’s assets. A freezing order was granted until the date of the application for recognition of the Russian bankruptcy proceedings.

The recognition order was made effective, but P contended that the freezing order should be continued as, unless restrained by means of an order, KD may seek to put his assets beyond the reach of his creditors. KD argued that this order is not required and the court had no jurisdiction to continue it due to the recognition order, which effectively suspended his rights in relation to his assets as if he had been subject to an English bankruptcy order.

The court accepted that KD’s conduct continued to be a “matter of serious concern” but held that there was no good reason for the order to remain in place, as:

  1. A “foreign proceeding” does not qualify as a “substantive proceeding” within Section 25 of the Civil Jurisdiction and Judgments Act 1982.
  2. There is no need or scope for the order as there is little difference between the effects described in the Cross-Border Insolvency Regulations/Model Law and that of domestic law.

The court also expressly ordered that KD’s right to transfer or dispose of his assets was suspended following the recognition order and that he must “comply with the duties set out in Section 333 of the Insolvency Act 1986”. These obligations are set out in law but the court found there would be no harm in making such orders which may have some utility.

Protasov v Derev [2021] EWHC 392 (Ch)

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