Drelle v Servis-Terminal LLC [2026] UKSC 29: The Supreme Court Reverses the Court of Appeal on Unrecognised Foreign Judgments as the Basis of a Bankruptcy Petition
Key Takeaway
The UK Supreme Court has confirmed that creditors may present a bankruptcy petition based on an unrecognised and/or unregistered foreign judgment. The obligation to pay under such a judgment constitutes a "debt" for the purposes of section 267 of the Insolvency Act 1986.
Background
In a previous article, we analysed the Court of Appeal's decision in Servis-Terminal LLC v Drelle [2025] EWCA Civ 62. The Court of Appeal had held that a bankruptcy petition could not be presented on the basis of a foreign judgment that has neither been recognised at common law nor registered under statute in England.
We noted at the time that there was "room for further debate about whether presenting a bankruptcy or winding-up petition qualifies as a form of enforcement," and that the Court of Appeal's characterisation of insolvency proceedings as merely "collective enforcement of debts" appeared to "contradict the then-prevailing jurisprudence."
The Supreme Court has now resolved that debate in Valeriy Ernestovich Drelle v Servis-Terminal LLC (In Liquidation) [2026] UKSC 29, reversing the Court of Appeal and providing clarity on a question of considerable practical importance for creditors holding foreign judgments.
The Facts
The facts are only briefly restated here. Servis-Terminal LLC ("ST"), a Russian company in bankruptcy, obtained a judgment of the Arbitrazh Court of the Yaroslavl Region ordering Mr Drelle, its former Director General, to pay approximately RUB 2 billion in respect of losses occasioned by his breach of duty. That judgment was upheld on appeal through to the Supreme Court of the Russian Federation.
Subsequently, ST served a statutory demand and presented a bankruptcy petition in England. ICC Judge Burton made a bankruptcy order, finding that there was no genuine and substantial dispute regarding the debt in question. The bankruptcy order was then upheld on appeal.
However, the Court of Appeal allowed Mr Drelle's further appeal, and held that a foreign judgment had to be recognised in England before it could serve as the basis of a bankruptcy petition. In essence, the Court of Appeal reasoned that:
- An obligation to pay imposed by an unrecognised foreign judgment is not a debt recognised, and has no operation, under English law;
- The judgment must be recognised under English law before it can be enforced in England as a debt (including for the purposes of the bankruptcy regime under the Insolvency Act 1986); and
- A winding-up or bankruptcy petition is a process for “collective enforcement of debts”, and so the restriction against enforcement of a unregistered foreign judgment applies to the presentation of a petition.
The Supreme Court's Decision
The Supreme Court allowed ST's appeal and held that an unrecognised foreign judgment for a debt or definite sum of money gives rise to an obligation to pay the judgment sum, and that this obligation constitutes a “debt” within the meaning of section 267 of the Insolvency Act 1986.
The obligation principle
Central to the Supreme Court's reasoning was its affirmation of the "obligation principle", “the well-established common law principle … 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”.
Tracing the principle back to Parke B's decisions in Russell v Smyth (1842) and Williams v Jones (1845), and other authorities since, the Court concluded that this obligation to pay “arises when the final and conclusive judgment is given” and “does not depend upon recognition”. The Court of Appeal’s conclusion, that a foreign judgment has no legal effect in England unless and until it is recognised, was in fundamental contradiction to this principle.
Misreading Dicey
The Supreme Court also addressed the Court of Appeal’s reading of Dicey, Morris & Collins, The Conflict of Laws (16th Ed) (“Dicey”), and found that the Court of Appeal had misunderstood the text. The statement in Rule 45 of Dicey, that a foreign judgment has no "direct operation" in England, refers only to processes of execution (such as charging orders and third-party debt orders). Having no “direct operation” does not mean that foreign judgments have no legal effect whatsoever.
Indeed, a footnote in Dicey relevantly states: “The judgment creditor may serve a statutory demand in terms of the foreign judgment, just as with any other unpaid debt.”
Bankruptcy is not a form of enforcement
Moreover, the Supreme Court held at paragraph 86 that:
"… although bankruptcy (or winding up) proceedings are often loosely categorised as a means of collective enforcement of debts … they are in no relevant sense a means of enforcement of a judgment. Bankruptcy proceedings initiate a scheme for the division of the debtor's assets pari passu among his unsecured creditors, under the protection of a moratorium upon the enforcement or execution of any judgment: they are in that sense the very antithesis of the enforcement of an individual creditor's judgment: see Sian Participation Corpn v Halimeda International Ltd [2024] UKPC 16; [2025] AC 1321 at paras 32 and 54 and In re International Tin Council [1987] Ch 419 at 455F-G per Millett J. "
In our earlier article, we expressed the view that the Court of Appeal’s characterisation of bankruptcy proceedings—as effectively a “process for collective enforcement of debts”—contradicted the prevailing jurisprudence.
The Supreme Court has now confirmed, in clear terms, that this characterisation is incorrect: bankruptcy is not a means of enforcement. To the contrary, the bankruptcy process involves a moratorium upon enforcement.
Practical Significance
This decision is important to practitioners. Creditors holding unrecognised or unregistered foreign judgments may now present a bankruptcy (or winding up) petition in reliance upon those judgments, without first having to bring recognition proceedings in England. The obligation to pay under a foreign judgment constitutes a "debt" for the purposes of section 267 of the 1986 Act, provided the usual conditions (i.e. that the debt is for a liquidated sum, exceeding the bankruptcy level, and is unsecured) are satisfied.
As the Supreme Court put it at paragraph 78: “… there is no requirement that [a] statutory demand be based upon a judgment debt at all. Any debt will do.”
Consistency with Hong Kong Law
This decision is also consistent with the current position in Hong Kong. As stated in our previous article, the leading decision under Hong Kong law is Liu Yongliang v Bank of China Limited, Dongguan Branch [2021] HCA 1048. In that case, the Hong Kong Court of Appeal held (in effect) that judgments did not need to be registered to form the basis of a bankruptcy petition, because bankruptcy proceedings are not “proceedings for the recovery of a sum payable” under a foreign judgment, which would require registration under the relevant Ordinances in Hong Kong.
