Servis-Terminal LLC v Valeriy Ernestovich Drelle [2025] EWCA Civ 62
Summary of decision
A foreign judgment creditor wishing to pursue bankruptcy proceedings against a debtor in England must first obtain recognition of that foreign judgment through English court proceedings. Presenting a bankruptcy petition on the basis of an unrecognised foreign judgment alone is not permissible.
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 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 the appeal and set aside the bankruptcy order. Lord Justice Newey established the following:
- 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.
Practical Implications
Creditors with a foreign judgment must now obtain recognition of that judgment from the Courts of England and Wales before serving a statutory demand. A bankruptcy petition (and likely a winding up petition) will fail if the foreign judgment has not first been recognised. In most cases, the recognition of a foreign judgment is expected to be a straightforward procedural process, provided there are no grounds for challenge to the foreign judgment.
