Drelle v Servis-Terminal LLC [2026] UKSC 29 : Supreme Court confirms an unrecognised foreign judgment can form the basis of a petition debt
On 27 July 2026, the Supreme Court handed down its anticipated judgment in Valeriy Ernestovich Drelle v Servis-Terminal LLC (In Liquidation) [2026] UKSC 29. In overturning the Court of Appeal decision, the Supreme Court unanimously held that an unrecognised foreign judgment can form the basis of a petition debt for the purposes of bankruptcy proceedings under the Insolvency Act 1986 (“IA 1986”).
Background
The appellant, Servis-Terminal LLC (“ST”), is a Russian company in liquidation. The respondent, Mr Valeriy Drelle (“Mr Drelle”), is the former Director General of ST (as well as a shareholder).
In 2019, ST obtained a Russian judgment against Mr Drelle in respect of a RUB 2 billion loan advanced by ST. ST claimed that by causing ST to advance the loan, Mr Drelle had acted unreasonably and in bad faith, and had caused loss to ST (the “Judgment”). Mr Drelle appealed the Judgment first to the Russian Court of Appeal and then to the Russian Supreme Court, with the Russian Supreme Court finding he had no grounds for appeal.
Subsequently, an English bankruptcy petition was presented against Mr Drelle by ST. Mr Drelle sought to set aside the petition on the grounds that (i) the Judgment was disputed on bona fide and substantial grounds because the various judgments in Russia were improperly obtained, biased and/or contrary to natural justice and English public policy, and (ii) further or alternatively, that they were obtained by fraud and/or collusion.
At the trial of the petition, the English court found that the Judgment debt was not disputed on bona fide and substantial grounds. Accordingly an English bankruptcy order was made (the “Bankruptcy Order”).
Mr Drelle obtained permission to appeal the Bankruptcy Order, on the basis that (i) the court’s conclusion that the Judgment debt was not disputed on bona fide and substantial grounds was wrong, and further (ii) that the Judgment did not constitute a petition debt since it had not been the subject of recognition proceedings.
That first appeal was dismissed. Mr Drelle subsequently obtained permission to appeal to the Court of Appeal on the grounds that the High Court had (i) erred in holding that an unrecognised foreign judgment is a debt (“Ground 1”), and also (ii) on the grounds that the court had applied the wrong standard of appellate review, and that the judge’s conclusion that the Judgment debt was not disputed on bona fide and substantial grounds was wrong (“Grounds 2 to 4”).
Mr Drelle’s appeal to the Court of Appeal was allowed. Significantly, the Court of Appeal held that a bankruptcy petition could not be presented on the basis of an unrecognised foreign judgment. In view of the Court of Appeal’s finding in relation to Ground 1, it was unnecessary for it to make a determination in respect of Grounds 2 to 4 (which it observed might also prejudice any future recognition proceedings).
ST appealed to the Supreme Court.
The issues
The Supreme Court identified 3 key issues:
- What is the legal effect (if any) of an unrecognised foreign judgment for a debt or definite sum of money?
- Does an unrecognised foreign judgment give rise to a “debt” within the meaning of section 267 of the Insolvency Act 1986 such that a bankruptcy petition can be presented in reliance upon it?
- Does article 13 of the United Nations Commission on International Trade Law of 30 May 1997 (“the Model Law”) have the effect that a “foreign creditor” under an unrecognised foreign judgment for a debt has the same rights as a creditor with an equivalent claim under English law?
Issue 1: What is the legal effect of an unrecognised foreign judgment?
There was no disagreement between ST and Mr Drelle that the Judgment had been given by a court of competent jurisdiction, was final and conclusive, and - as matters stand now - was unimpeachable.
The Supreme Court found that in those circumstances, an immediate obligation arose under common law to pay the judgment sum. That obligation did not depend on prior recognition of the Judgment. The Supreme Court held that this statement of principle (the so-called ‘obligation principle’) had been approved and reiterated in several leading authorities. Consequently, the Court of Appeal had erred in finding that a foreign judgment had no legal effect at common law until it had been recognised, as this would be contrary to the obligation principle.
The Supreme Court also rejected the Court of Appeal’s reliance on Rule 45 of Dicey, Morris & Collins, The Conflict of Laws. Rule 45 provides:
“Rule 45 - A judgment of a court of a foreign country (hereinafter referred to as a foreign judgment) has no direct operation in England but may
- be enforceable by claim or counterclaim at common law or under statute, or
- be recognised as a defence to a claim or as conclusive of an issue in a claim […]”
The Supreme Court rejected the Court of Appeal’s reliance on the language of “no direct operation”, finding that this language simply referred to the fact that a foreign judgment did not have the same status as an English judgment in terms of modes of execution (for example, changing orders or third-party debt orders). It did not mean that the foreign judgment had no legal effect whatsoever.
Similarly, the Supreme Court dismissed the analogy with the ‘revenue rule’ (i.e. that the English courts have no ability to enforce the penal, revenue or other public laws of another country). It held that this rule applies only to claims asserting sovereign rights, not to private commercial debts.
Issue 2: “debt” within the meaning of s.267, IA 1986
The Supreme Court further concluded that an obligation to pay an unrecognised foreign judgment can constitute a “debt” for the purposes of s.267, IA 1986.
Whilst the term “debt” is not specifically defined in s.267, IA 1986, the common law understanding of this term supported a broad definition. The general common law meaning of the word “debt” is wide: a legal obligation owed by one person to pay a sum of money to another. The common law also supported the view that an unrecognised foreign judgment gave rise to a legal obligation to pay the sum concerned.
Issue 3: relevance of Article 13, Model Law
ST argued as a fallback submission, that if its primary case as to the meaning of “debt” in s.267 of the 1986 Act was unsuccessful, it should nonetheless succeed in its appeal on the basis of Article 13 of the Model Law.
Article 13 provides that (subject to certain exceptions): “foreign creditors have the same rights regarding the commencement of, and participation in, a proceeding under British insolvency law as creditors in Great Britain”.
The Supreme Court found that Article 13 was concerned with the geographical location of the foreign creditor - not with the law under which they are owed the relevant debt. Accordingly, Article 13 had no relevance to the proceedings.
Grounds 2 to 4
The Supreme Court made no finding in relation to Grounds 2 to 4 relied on by Mr Drelle in the Court of Appeal proceedings (including that the Russian Judgment debt was disputed on bona fide and substantial grounds).
As noted above, the Court of Appeal previously made no decision on those grounds as it was unnecessary for it to do so in light of its finding on Ground 1. However, given the Supreme Court’s ruling on Ground 1, overturning the Court of Appeal’s decision, the case will now be remitted back to the Court of Appeal to determine those remaining Grounds 2 to 4.
Comment
The practical significance of the Supreme Court’s decision is considerable for creditors holding foreign judgments (in particular judgments which sit outside specific statutory enforcement regimes).
As long as the relevant judgment is conclusive and final, in principle such creditors will no longer need to seek recognition of the foreign judgment, prior to seeking to commence bankruptcy proceedings on the basis of it.
For further information, please email the authors.
