Court of Appeal: Servis-Terminal LLC v Valeriy Ernestovich Drelle [2025] EWCA Civ 62
Supreme Court: Valeriy Ernestovich Drelle v Servis-Terminal LLC (In Liquidation in the Russian Federation) [2026] UKSC 29
Summary of the Supreme Court's decision
The Supreme Court unanimously reversed the Court of Appeal's ruling (please see our article on that decision here) - holding that a foreign judgment creditor holding a judgment for a debt in respect of a liquidated sum does not need to obtain prior recognition of a foreign judgment before presenting a bankruptcy petition in England. An unrecognised and unregistrable foreign judgment for a debt or definite sum of money gives rise to an immediate common law obligation to pay, which can constitute a "debt" for the purposes of section 267 of the Insolvency Act 1986 (the "1986 Act").
Background / facts of the case
Mr Valeriy Drelle was formerly the Chief Executive Officer of Servis-Terminal LLC, a Russian company. Following the Company's bankruptcy in Russia, its trustee brought proceedings against Mr Drelle in connection with a RUB 2 billion loan the Company had made to another Russian company in December 2011. The loan monies were ultimately not recovered.
After Mr Drelle became resident in London, the Company served a statutory demand and presented a bankruptcy petition against him in October 2020, relying solely on the unpaid Russian judgment debt, without first seeking its recognition in England.
A bankruptcy order was made at first instance in March 2023, and Mr Drelle's appeal to the High Court was dismissed, with Richards J holding that an unrecognised foreign judgment could still form the basis of a bankruptcy petition.
Mr Drelle then challenged Richard J's decision in the Court of Appeal.
The Court of Appeal's decision
The Court of Appeal allowed Mr Drelle's appeal and set aside the bankruptcy order. Lord Justice Newey held:
- A bankruptcy petition cannot be presented in respect of a foreign judgment which has not been the subject of recognition proceedings. There is a general principle that a foreign judgment has no direct operation in England and Wales, as it would be contrary to the principles of state sovereignty and the court's jurisdictional authority to do so.
- An obligation to make a payment imposed by an unrecognised foreign judgment is not enforceable in England and Wales and does not constitute a "debt" for the purposes of the requirements for bankruptcy petitions under section 267 of the Insolvency Act 1986. A sum is not payable until the judgment is recognised by a court in the England and Wales jurisdiction.
The Supreme Court's decision
The Supreme Court (Lord Briggs and Lord Hamblen, with whom Lord Sales, Lord Stephens and Lord Doherty agreed) unanimously allowed Service Terminal's appeal.
The Supreme Court affirmed the "obligation principle": a foreign judgment for a debt or definite sum of money, given by a court of competent jurisdiction and otherwise final and conclusive, gives rise to an immediate obligation at common law on the judgment debtor to pay the relevant sum, independently of any formal recognition in English proceedings. While an unrecognised foreign judgment does not have the status as a judgment in England, such that none of the modes of execution which are available for an English judgment, like a third party debt order or a charging order, can be invoked in respect of it, it does not mean that it cannot be relied upon as evidence of an unpaid debt for the purposes of a bankruptcy petition.
The Supreme Court rejected each of the Court of Appeal's key foundations. The reliance of the Court of Appeal on Rule 45 of Dicey, Morris & Collins, that a foreign judgment has no "direct operation" in England, refers only to the unavailability of English enforcement mechanisms such as charging orders, not to an absence of legal effect; an unrecognised foreign judgment can still operate as a "sword" by grounding a common law action for the judgment sum. The Court of Appeal's reliance on the revenue rule (whereby the English courts have no jurisdiction to enforce penal or revenue laws of another country) was also rejected, as enforcement of a foreign judgment concerning a private right involves no act of a sovereign character to which that rule could apply.
The Court held that the common law obligation arising from an unrecognised and unregistrable foreign judgment can constitute a "debt" within the meaning of section 267 of the 1986 Act. The Court applied the broad common law meaning of "debt", which is a legal obligation to pay a sum of money to another person, and held that there was no basis for a narrower interpretation.
Practical implications
No prior recognition required: A creditor holding an unrecognised and unregistrable foreign judgment for a debt or definite sum may be entitled to present a bankruptcy petition in England and Wales without first obtaining recognition of the foreign judgment. The foreign judgment itself can give rise to a "debt" under section 267 of the 1986 Act.
Distinction between recognition and enforcement: The decision draws a clear line between the obligation to pay a debt which may arise from a foreign judgment (which exists immediately at common law) and the formal enforcement mechanisms available for English judgments (which are not available until recognition is obtained). Creditors should bear this distinction in mind when considering which remedies to pursue.
Challenge ability of the foreign judgment remains live: The decision does not prevent a debtor from challenging the foreign judgment on grounds such as fraud, breach of natural justice, or public policy. Those challenges are to be determined on their merits. In this case, Mr Drelle's grounds of challenge to the ICC judge's conclusions on this point have been remitted to the Court of Appeal.
