Can A Creditor Present A Bankruptcy Petition Based On An Unrecognised Foreign Judgment?

A recent UK Supreme Court decision has clarified whether an unrecognised foreign judgment can be used as the basis for a bankruptcy petition in England and Wales. In the recent case of Drelle v Servis-Terminal LLC [2026] UKSC 29, the Court considered whether a creditor could rely on an unrecognised and unregistrable foreign judgment as grounds to present a bankruptcy petition under s.267 of the Insolvency Act 1986 (IA86).

The judgment provides important guidance on what constitutes a 'debt' for the purposes of a bankruptcy petition and highlights the additional steps creditors holding foreign judgments may need to take before pursuing insolvency proceedings in England and Wales.

Recognition, registration and enforcement generally

In England & Wales, a foreign judgment generally has no direct legal effect, but there are procedures by which it can be made effective such that a judgment creditor can seek to enforce it in this jurisdiction.

First, the UK has reciprocal enforcement arrangements with a number of specified countries. Where this is the case, there are dedicated procedures which may provide for the registration of the foreign judgment, after which it may be enforced. Where there is no such statutory scheme, the judgment can be enforced by bringing a new claim in England & Wales based on the foreign judgment – which involves recognition of the foreign judgment.

The question that arose in this case however involved a judgment that was not registrable, and had not been formally recognised – what was the legal effect of that judgment, and did it require recognition if the judgment creditor sought to use it as the basis for bankruptcy proceedings, rather than enforcement.

Background facts and Russian proceedings

In outline, the appellant, Servis Terminal (ST) was a Russian company, acting through its trustee in bankruptcy. ST had brought a claim in Russia against the respondent, Mr Drelle, who was the former Director General of the company. ST alleged that Mr Drelle acted unreasonably and in bad faith by causing the company to make a loan of RUB 2 billion (approximately £20 – 25 million) which was ultimately not repaid, causing the company loss. A Russian court held that Mr Drelle had breached his duties to ST, and he was ordered to pay the company RUB 2 billion. Mr Drelle appealed the decision up to the Supreme Court of the Russian Federation, but at every stage his appeal was dismissed.

Bankruptcy proceedings in England

By 2020, Mr Drelle had settled in London, where ST served a statutory demand on him based on the Russian judgment debt, and subsequently presented a bankruptcy petition.

Mr Drelle opposed the making of a bankruptcy order, and applied to set aside the statutory demand, on the basis that the Russian judgment debt was disputed on bona fide and substantial grounds (Mr Drelle raised various arguments challenging the propriety of the Russian court process). At the trial of the bankruptcy petition though, Insolvency and Companies Court (ICC) Judge Burton found the Russian judgment debt was not disputed on bona fide and substantial grounds, and a bankruptcy order was made against Mr Drelle.

The Appeals

Mr Drelle appealed the bankruptcy order on the grounds that the ICC judge was wrong to conclude the debt was not disputed on bona fide and substantial grounds – but he also contended for the first time that the Russian judgment could not be used as the basis for a petition debt, because the Russian judgment which formed the basis of the bankruptcy petition had not been formally recognised in this jurisdiction. Mr Drelle's first appeal to the High Court was dismissed, but his second appeal was allowed by the Court of Appeal, which held that a bankruptcy petition cannot be presented on the basis of an unrecognised foreign judgment. ST appealed to the Supreme Court.

Supreme Court appeal

For the purposes of the Supreme Court appeal, there were three key issues:

1. What is the effect of an unrecognised foreign judgment for a debt at common law?
2. Does such a judgment give rise to a 'debt' within the meaning of s.267 IA86, such that a petitioner can rely upon it to present a bankruptcy petition?
3. There was a third issue concerning the definition of a 'foreign creditor' under the UN Commission on International Trade Law, which we do not consider here.

The effect of an unrecognised foreign judgment at common law

The Russian judgment was given by a court of competent jurisdiction, was final and conclusive in Russia, but was not registrable in England and Wales (there being no statutory scheme in England & Wales for registration of Russian judgments) and therefore had not been formally recognised. The Supreme Court therefore needed to determine the legal effect of such a foreign judgment in England. Mr Drelle submitted that an unrecognised foreign judgment had no legal effect in England, and as such could not be relied upon as the basis of a bankruptcy petition.

The Supreme Court however disagreed, with reference to the 'obligation principle' – a 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 judgment sum. That obligation arises when the final and conclusive foreign judgment is given, and does not depend on formal recognition.

While a foreign judgment may not have direct operation in England & Wales (a foreign judgment creditor could not, for example, seek a third party debt order in respect of a foreign judgment unless it has been formally recognised) that does not mean it has no legal effect – it can still have indirect operation, as shown by the ability to sue on a foreign judgment for a debt.

Does such a judgment give rise to a debt within the meaning of s.267 IA86?

Having established that an unrecognised foreign judgment still has legal effect in England & Wales, the court then turned to consider whether this common law obligation to pay the judgment amounted to a 'debt' within the meaning of s267 IA86, such that failure to pay it would allow the judgment creditor to present a bankruptcy petition.

The court noted that, under the statutory scheme of the IA86, all that is required is that the debtor appears to be unable to pay, or have no reasonable prospect of being able to pay a sum – as they put it, "any debt will do". As demonstrated by the discussion of the "obligation principle", the common law has always understood an unrecognised foreign judgment for a sum of money to give rise to an obligation to pay that sum. It was therefore a 'debt' within the understanding of the common law, and the court saw no reason why the drafters of the IA86 should have intended the word 'debt' in s.267 to have any narrower meaning.

Having concluded that the obligation to pay a sum under an unregistrable, unrecognised foreign judgment is a 'debt' for the purposes of s.267 IA86 the appeal was allowed.

Any debt will do

This judgment emphasises that the requirements for bringing a bankruptcy petition in England & Wales are straightforward – a qualifying debt is a sum which the debtor appears to be unable to pay, and where that sum is represented in a foreign judgment, there is no need for a creditor to follow the further formal processes for recognition that would apply if they instead sought to enforce the judgment.

Read the original article on GowlingWLG.com