No recognised, registrable foreign judgment? No problem
1.Executive summary
In Valeriy Ernestovich Drelle (Respondent) v Servis-Terminal LLC (In Liquidation in the Russian Federation) (Appellant) [2026] UKSC 29,[1] the Supreme Court held that:
- at common law, an unrecognised foreign judgment for a debt or definite sum of money will give rise to an obligation to pay said sum; and
- the obligation to pay a sum of money under an unregistrable, unrecognised foreign judgment qualifies as a “debt” for the purposes of section 267 of the Insolvency Act 1986 (the “1986 Act”).
The Supreme Court’s decision may open the floodgates for would-be creditors outside England and Wales to pursue personal bankruptcy orders against debtors based in the jurisdiction. Whilst the Supreme Court did not consider the issue in this case, it is likely that the same effect will apply to winding up petitions presented against corporate debtors.
2. Background
The Respondent, Mr Drelle, is the former Director General and shareholder of the Appellant, Servis-Terminal LLC (In Liquidation in the Russian Federation) (“Servis-Terminal”).
In December 2011, Servis-Terminal (a Russian company in bankruptcy) advanced a loan of RUB 2 billion to Fort-Steiton LLC, guaranteed by its owner, Mr Anatoly Motylev, the chairman and majority shareholder of the Russian Credit Bank ("RCB"). Following RCB's collapse in July 2015, Servis-Terminal lost approximately RUB 7.9 billion held in its accounts with RCB, and the loan was never repaid. Mr Motylev left Russia and was subsequently declared bankrupt.
Servis-Terminal successfully sued Mr Drelle at first instance in Russia on the basis that, by causing Servis-Terminal to advance the loan, Mr Drelle had acted unreasonably and in bad faith, and had caused loss to Servis-Terminal.
The case went all the way to the Russian Supreme Court, with Mr Drelle having appealed the first instance judgment on several bases, all of which were rejected by the Russian Supreme Court. Therefore, the judgment at first instance was upheld (the “Russian Judgment”).
Mr Drelle failed to pay the Russian Judgment debt of c. RUB 2 billion. He subsequently left Russia and settled in London.
On 9 October 2020, Servis-Terminal served Mr Drelle with a statutory demand under section 268(1)(a) of the 1986 Act for the Russian Judgment debt (the “Statutory Demand”). Mr Drelle failed to pay the amount demanded.
Servis-Terminal then served Mr Drelle with a bankruptcy petition on 13 October 2020 (the “Petition”).
On 27 October 2020, Mr Drelle applied to set aside the Statutory Demand on the basis that the Russian Judgment debt was disputed on bona fide and substantial grounds because the judgments in the Russian courts were improperly obtained, biased and/or contrary to natural justice and English public policy; and further or alternatively, that they were obtained by fraud and/or collusion.
At the trial of the Petition, ICC Judge Burton held that the Russian Judgment debt was not disputed on bona fide and substantial grounds. A bankruptcy order was made on 31 March 2023 (the “Bankruptcy Order”).
Mr Drelle appealed against the Bankruptcy Order again on the grounds that the Russian Judgment debt was disputed on bona fide and substantial grounds. He also argued that the Russian Judgment did not constitute a petition debt because it had not been the subject of recognition proceedings in England and Wales. The High Court dismissed Mr Drelle’s appeal.
However, the Court of Appeal subsequently upheld ground 1 of Mr Drelle’s appeal, holding that the High Court had erred in finding that an unrecognised foreign judgment is a debt within the meaning of s.267(2)(b) of the 1986 Act.
In order not to prejudice any potential recognition proceedings in the future, the Court of Appeal did not address grounds 2 to 4 of the appeal, namely, whether the High Court had applied the wrong standard of appellate review to the decision to grant the Bankruptcy Order and that ICC Judge Burton’s conclusion that the Russian Judgment was not disputed on bona fide and substantial grounds was wrong. The Supreme Court likewise did not address grounds 2 to 4, instead remitting them back to the Court of Appeal for determination.
Servis-Terminal appealed the Court of Appeal’s decision to the Supreme Court, which upheld the ground 1 appeal for the reasons outlined below.
3. Issue 1: At common law, what is the legal effect, if any, of an unrecognised foreign judgment for a debt or definite sum of money?
(In)direct operation
In the absence of settled case law, the Supreme Court turned to the persuasive (albeit not binding) secondary authority of Dicey, Morris & Collins, The Conflict of Laws (16th ed) (“Dicey”) and the rules contained therein.
Rule 45 in Dicey states that a judgment of a foreign court of a foreign country 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.
Mr Drelle argued that the fact that an unrecognised judgment has no “direct operation” in England means that it is of no legal effect unless and until it is recognised. Furthermore, a foreign court’s authority, carrying with it powers of enforcement and sanction, ends at the border of the state in which it sits. Accordingly, before a foreign judgment can be deployed offensively in England, it must itself, he argued, first be recognised by the English court. 2
The Supreme Court noted the Court of Appeal’s significant reliance on Rule 45 in Dicey, further noting that this would mean that a foreign judgment has no status as a judgment in England, rendering processes of execution of said judgment in England unavailable. 3
However, the Supreme Court held as follows that a foreign judgment is capable of having indirect operation in England:
“… Being able to sue on a foreign judgment for a debt or definite sum of money involves indirect reliance on the judgment. What is being sued upon is the common law obligation to pay the judgment sum, and that obligation is founded upon the foreign judgment itself, rather than on the underlying facts (such as a contract to pay) which led to the judgment. If the action succeeds then there will be an English judgment for which processes of execution are available. Where the judgment is not for a debt or definite sum of money then the underlying cause of action can be sued upon and the foreign judgment relied upon as being conclusive as to matters of fact and law determined thereby—see Dicey Rule 51 and Rule 45(2). Again, that involves the indirect operation of the foreign judgment.” 4 (emphasis added)
The obligation principle
The Supreme Court refers to Dicey and various nineteenth century precedents 5 that establish the so-called obligation principle, namely, that English courts will recognise and enforce foreign judgments. The obligation principle requires that, where a competent jurisdiction has held that a certain sum is due from one person to another, a legal obligation arises to pay that sum, on which an action of debt to enforce the judgment may be maintained.
In summary, the Supreme Court held:
“the well-established common law principle is that a foreign judgment for a debt or definite sum of money gives rise to an obligation to pay the sum for which judgment has been given. That obligation arises when the final and conclusive judgment is given. It does not depend upon recognition. As noted in the Greer report, the cause of action is “as for a debt”. 6
The Court of Appeal do not appear to have been addressed in detail on the obligation principle. Their conclusion that a foreign judgment has no legal effect until it is recognised is, however, contrary to that principle….” 7 (emphasis added)
The revenue rule
The so-called revenue rule derives from Dicey Rule 20, which provides that English courts have no jurisdiction to entertain an action for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign state.
The Supreme Court rejected the Court of Appeal’s reliance on the revenue rule, holding that the revenue rule prevents the enforcement of claims brought by a sovereign authority, whereas the present claim was brought by a private person asserting a private right.
Furthermore, the Supreme Court held that, even where the claim is brought by a sovereign authority, the revenue rule does not apply where the claim does not involve the assertion of a public right, but is of a kind which could be brought by any private citizen.
The Supreme Court held that the claim brought by Servis-Terminal to found the Petition did not involve any elements of a sovereign nature. 8 As such, the revenue rule did not apply to the case at hand.
Conclusion on issue 1
The legal effect at common law of an unrecognised foreign judgment for a debt or definite sum of money is that it gives rise to an obligation to pay the judgment sum. 9
4. Issue 2: Does such a judgment give rise to a “debt” within the meaning of section 267 of the 1986 act such that a bankruptcy petition can be presented in reliance upon it?
The Supreme Court held that a qualifying debt for the purposes of section 267 of the 1986 Act is one which the debtor appears to be unable to pay, or appears to have no reasonable prospect of being able to pay. 10
The Supreme Court also deliberately noted that “there is no requirement that [a] statutory demand be based upon a judgment debt at all. Any debt will do.” 11 Accordingly, the word “debt” in section 267 should be construed widely.
Moreover, the Supreme Court held:
“We can envisage no reason why section 267 should have used “debt” in any narrower sense than we have described, or why its purpose should not have extended to a legal obligation to pay under an unrecognised foreign judgment... There is no reason why inability to discharge the legal payment obligation arising from an unrecognised foreign judgment should not qualify for that purpose.” 12
It is also interesting to note that the Supreme Court rejected Mr Drelle’s characterisation of bankruptcy petitions as a means of enforcement of a judgment debt. Instead, the Supreme Court characterised bankruptcy petitions as the opposite – namely, a scheme for the division of a debtor’s assets pari passu among his unsecured creditors, under the protection of a moratorium upon the enforcement or execution of any judgment. 13
In conclusion, the Supreme Court held that the obligation to pay a sum of money under an unregistrable, unrecognised foreign judgment is a debt within the meaning of section 267 of the 1986 Act. 14
This article was co-written by Jessica Nsinga.
