As modern corporations increasingly establish representative offices and branches across various jurisdictions and attract international investment, the bankruptcy of global enterprises has become a critical area of legal practice. Navigating the intersection of domestic statutes and international treaties is essential for safeguarding corporate assets and managing creditor claims.

As a general rule, the lex personalis (personal law) of a legal entity is determined by the laws of the country where it is incorporated. However, if a foreign entity conducts its primary business activities within Russia, Russian law may apply to claims regarding the liability of its founders, participants, or other controlling persons (alternatively, the creditor may elect the entity's personal law). This dual-pathway approach ensures that stakeholders are protected regardless of the entity's formal place of registration.

Despite the historical expansion of transnational corporations, current global economic and political instability has led to an increase in cross-border insolvency. Because these entities are subject to the laws of both their jurisdiction of incorporation and the jurisdictions where their branches or assets are located, bankruptcy proceedings must harmonize national statutes with established international legal norms.

Recognizing Foreign Entities as Bankrupt in Russia: Criteria and Grounds

Under Russian law, the key criteria for a Commercial (Arbitration) Court to assert jurisdiction over a foreign entity's insolvency include, but are not limited to:

1. The presence of the foreign company’s tangible assets or real estate within the territory of Russia;
2. Operational bank accounts maintained with Russian financial institutions;
3. Formal tax registration with the Russian federal authorities, among other nexus factors.

Legal Support for the Bankruptcy of Foreign Corporations in Russia

Sanctions and restrictive measures imposed by various foreign states have frequently made it impossible or impractical to initiate insolvency proceedings in Western jurisdictions. In response, Russian courts have increasingly become the primary forum for resolving these cross-border economic disputes.

The Commercial Procedure Code of the Russian Federation (APC RF) mandates that domestic courts handle economic disputes involving foreign organizations or international bodies under the following circumstances:

1. The defendant is located or resides in Russia, or the defendant's assets are situated within Russian territory;
2. A management body, branch, or representative office of the foreign entity is located within the Russian Federation;
3. The dispute arises from a contract where performance took place, or was intended to take place, in Russia;
4. The claim arises from damages incurred within Russia or caused by actions occurring on Russian soil;
5. The dispute involves unjust enrichment occurring within the Russian jurisdiction.

Furthermore, the Supreme Court of the Russian Federation (Case No. А40-248405/2022) established that current national legislation allows for bankruptcy proceedings even when a foreign element exists on the side of either the debtor or the creditor. Once jurisdiction is established, the court must determine the "Center of Main Interests" (COMI) to decide whether to initiate "Main" or "Secondary (Local)" insolvency proceedings.

Counseling International Companies: Main vs. Secondary Proceedings

If a legal entity is only nominally registered abroad but functions as a Russian organization—meaning its Center of Main Interests (COMI) is in Russia—the court will initiate "Main" insolvency proceedings. This creates a legal effect that extends across other jurisdictions, encompassing the debtor’s global assets and all creditors, including foreign claimants.

Conversely, if the COMI is located in a foreign jurisdiction but the debtor maintains a permanent establishment or assets in Russia, the court may initiate "Secondary (Local)" proceedings. This mechanism specifically protects the interests of Russian creditors who may lack effective access to the foreign jurisdiction where the main proceeding is held. Secondary proceedings are restricted to the assets and creditors connected to the entity’s activities within Russia.

Utilizing these cross-border bankruptcy procedures allows creditors to actively participate in the insolvency cases of foreign entities, providing a structured pathway to assert claims and recover outstanding debts. Given the technical complexity of these cases, it is vital to retain counsel capable of identifying "controlling persons" and navigating international enforcement standards.

Comprehensive Legal Support for Cross-Border Insolvency

1. Advising on jurisdictional risks and the applicability of Russian law to foreign-controlled entities.
2. Structuring strategic insolvency plans for transnational corporations and their local subsidiaries.
3. Managing the end-to-end administration of cross-border bankruptcy filings and COMI assessments.
4. Representing client interests in high-stakes litigation involving foreign claimants and international asset recovery.