No Recognition Required: UK Supreme Court Confirms Unrecognised And Unregistrable Foreign Judgment Can Support Bankruptcy Proceedings

The Supreme Court of the United Kingdom has unanimously allowed the appeal in Drelle v Servis-Terminal LLC [2026] UKSC 29, confirming that, in principle, a creditor may present a bankruptcy petition based on an unrecognised and unregistrable foreign judgment. The decision reverses the Court of Appeal’s more restrictive approach and has important implications for creditors pursuing cross-border recovery strategies in England and Wales.

The case concerned a Russian judgment that had neither been recognised in England and Wales nor qualified for registration under the Foreign Judgments (Reciprocal Enforcement) Act 1933, Russia not being a participating jurisdiction.

Background

In May 2019, Servis-Terminal LLC (ST), a Russian company in bankruptcy, obtained a judgment against Mr Drelle, its former Director General, in a Russian court. ST had advanced a RUB 2 billion loan to a third-party company, secured by a personal guarantee from the third-party’s owner, who was also the majority shareholder of another Russian company (the Russian Credit Bank).

After the loan was advanced, the Russian Credit Bank collapsed. The guarantor fled Russia and was declared bankrupt, and the loan was never repaid. Subsequently, ST itself was declared bankrupt in Russia. Acting through its trustee in bankruptcy, ST alleged that Mr Drelle had acted unreasonably and in bad faith in causing the loan to be advanced, thereby causing loss to ST. The Russian court found in ST’s favour and held that Mr Drelle had breached his duties to ST. Mr Drelle had relocated to England and, after ST obtained the judgment against Mr Drelle in Russia, ST served a statutory demand and subsequently presented a bankruptcy petition under the UK Insolvency Act 1986 (the IA 1986), relying directly on the Russian judgment. Despite Mr Drelle’s opposition, a bankruptcy order was made. Mr Drelle then appealed against the bankruptcy order on two grounds. First, that the court’s conclusion that the Russian judgment debt was not disputed on bona fide and substantial grounds was wrong; and second, that an unrecognised foreign judgment could not constitute a “debt” under section 267 of the IA 1986.

Mr Drelle’s opposition eventually reached the Court of Appeal in 2024, which allowed the appeal on the second ground, holding that an unrecognised foreign judgment cannot found a bankruptcy petition.

The Supreme Court’s Decision

The Supreme Court disagreed with the Court of Appeal and allowed ST’s appeal, addressing three key issues.

Issue 1: The Common Law Effect of an Unrecognised Foreign Judgment

Central to the Supreme Court’s reasoning was the “obligation principle.” The Supreme Court reaffirmed that a final and conclusive foreign judgment for a debt or definite sum of money, given by a court of competent jurisdiction, gives rise to an immediate legal obligation on the judgment debtor to pay the amount awarded. This obligation arises upon the giving of the judgment and does not depend upon formal recognition in England.

The Supreme Court rejected the Court of Appeal’s reliance on the legal principle known as Dicey Rule 45 (from Dicey, Morris & Collins, The Conflict of Laws) which states that a foreign judgment has no “direct operation” in England, clarifying that this rule refers only to execution. Although a foreign judgment cannot be enforced by direct execution processes such as third-party debt orders or charging orders, that does not mean the judgment has no legal effect whatsoever. While incapable of direct execution absent recognition, a foreign judgment may nevertheless have important legal consequences in England.

The Supreme Court also dismissed the Court of Appeal’s analogies to the revenue rule and its suggestion that unrecognised foreign judgments could only be used as a “shield” and not a “sword.” The revenue rule, which prevents enforcement of foreign sovereign claims such as taxes, has no application where a private party enforces a private right, as was the case here.

Issue 2: Does Such a Judgment Constitute a ‘Debt’ Under Section 267 of the IA 1986?

The Supreme Court held that the word “debt” in section 267 bears its broad common law meaning, namely a legal obligation owed by one person to pay a sum of money to another person. An obligation to pay a sum of money under an unregistrable and unrecognised foreign judgment therefore falls within section 267. This means a foreign judgment may, without prior recognition proceedings, satisfy the debt requirement for the presentation of a bankruptcy petition.

The Court also confirmed that bankruptcy proceedings are not “enforcement” of a judgment in the relevant sense. Rather, they initiate a collective insolvency process for the administration and distribution of the debtor’s assets. In that sense, they are fundamentally different from enforcement mechanisms used by individual judgment creditors.

Issue 3: Article 13 of the UNCITRAL Model Law

ST advanced a fallback argument based on Article 13 of the UNCITRAL Model Law (as enacted by the Cross-Border Insolvency Regulations 2006). Under Article 13, foreign creditors have the same rights as domestic creditors regarding the commencement of, and participation in, insolvency proceedings. ST contended that “foreign” was not confined to the geographical location of the creditor but included the law under which the creditor was owed its debt. The Supreme Court rejected this argument and held that “foreign creditor” in the Model Law refers to geographical location, not the law governing the debt.

Key Takeaways

The Supreme Court’s decision provides important clarification on the interaction between foreign judgments and English insolvency law:

1. An unrecognised and unregistrable foreign judgment for a definite sum of money may give rise to an immediate legal obligation constituting a “debt” for the purposes of section 267 of the IA 1986.
2. A creditor is not required to obtain recognition of such a judgment before relying on it as the basis for a bankruptcy petition.
3. The decision reinforces the distinction between insolvency proceedings and judgment enforcement, confirming that bankruptcy proceedings are not themselves a form of enforcement.
4. The decision may affect how insolvency processes are considered as part of a broader cross-border recovery strategy.

Postscript

These proceedings are not yet at an end. The Supreme Court remitted to the Court of Appeal the question of whether the wrong standard of appellate review had been applied to the first instance decision and whether the first instance finding that the Russian judgment debt was not disputed on bona fide and substantial grounds was wrong. While that issue remains unresolved, the Supreme Court has provided authoritative guidance on a significant point of principle concerning the status of foreign judgments in English bankruptcy proceedings.

Foreign creditors seeking to recover judgment debts in England and Wales may now have a more direct route to insolvency proceedings, and debtors who are the subject of foreign judgments may find that this route to recovery is considered early by their creditors.

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