Can an unrecognised foreign judgment support a bankruptcy petition? Supreme Court clarifies in Servis-Terminal LLC v Drelle [2026] UKSC 29
Russian to judgment?
To present a bankruptcy petition, a petitioner must have an outstanding debt under section 267 of the Insolvency Act 1986 (the “Act”). In a recent judgment, the Supreme Court found that a Russian judgment for a debt that has not been registered or recognised can still constitute a debt for the purposes of section 267 of the Act. This significant judgment is likely to have both practical and legal consequences.
Background to Servis-Terminal LLC v Drelle and the Russian judgment debt
On 24 May 2019 a Russian Court ordered Mr Drelle to pay 2 billion roubles to Servis-Terminal LLC. Russian judgments cannot be registered in this jurisdiction. Without seeking recognition of the Russian judgment by a domestic court, Servis-Terminal served a statutory demand on Mr Drelle on 9 October 2020. Four days later, on 13 October 2020, Servis Terminal presented a bankruptcy petition against Mr Drelle, on an expedited basis pursuant to section 270 of the Act.
On 27 October 2020 Mr Drelle applied to have the statutory demand set aside on the basis that:
‘the Russian Judgment debt was disputed on bona fide and substantial grounds because the Russian judgments were improperly obtained, biased and/or contrary to natural justice and English public policy, and further or alternatively that they were obtained by fraud and/or collusion.’
The petition was opposed on the same grounds, and the petition and the set-aside application were considered over three days by ICC Judge Burton at the end of June 2022. In her judgment handed down on 9 March 2023, she found in favour of Servis-Terminal, concluding that the debt founded on the Russian judgment was not disputed on bona fide and substantial grounds. Mr Drelle appealed and his appeal was dismissed.
Mr Drelle pursued a further appeal to the Court of Appeal on various grounds including that the lower court had erred in holding that an unrecognised foreign judgment is a debt within the meaning of section 267(2)(b) of the Act. His appeal succeeded on those grounds. Servis-Terminal appealed and the appeal was heard by the Supreme Court on 24 and 25 June 2026.
The Supreme Court's decision
The Supreme Court had to consider whether an unregistered and unrecognised foreign judgment debt could constitute a debt for the purposes of section 267 of the Act. But before deciding the issue, it first had to consider how such a judgment was treated by the common law.
The Supreme Court’s decision was made in reliance on “the obligation principle”, whereby a foreign judgment gives rise to an obligation to pay the sum for which judgment has been given. It rejected Mr Drelle’s submission that an unrecognised judgment having no “direct operation” in England means that it is of no legal effect until it is recognised. Instead, the Supreme Court found that the principle of “direct operation” was relevant only to the availability of processes of execution for the enforcement of judgments. The Supreme Court’s conclusion was therefore that, at common law, the legal effect of an unrecognised foreign judgment for a debt or definite sum of money is that it gives rise to an obligation to pay the judgment sum.
It is consequently no surprise that the Supreme Court went on to hold that the very wide definition of a debt under section 382 of the Act could include an unrecognised and unregistered foreign judgment debt for the purposes of section 267.
Key implications for bankruptcy petitions and foreign judgment creditors
Practitioners will not need to concern themselves with having a foreign judgment debt recognised before using it to form the basis of a bankruptcy petition under section 267. Care should be exercised before issuing proceedings on the basis of unrecognised foreign judgments, however. Paragraph 35 of the Supreme Court’s judgment makes clear that in this case no issue was taken on the various appeals in relation to ICC Judge Burton’s finding that the Russian judgment was given by a court of competent jurisdiction, that it was final and conclusive and that it was unimpeachable. In other cases, the same findings may not be made.
The judgment also serves as a reminder to practitioners that in a globalised world they can look further afield for assets, which include foreign judgments for debt.
A wider point for consideration is whether the decision could apply by extension to corporate insolvency such that an unregistered foreign judgment could be relied on as the basis for a winding-up petition. The Supreme Court did not explicitly comment on this and it is of note that there are different statutory definitions for debts in personal and corporate insolvency; the former being defined in section 382 of the Act and the latter in rule 14.1 of the Insolvency Rules. Nonetheless, the decision in Drelle makes it clear that an unrecognised foreign judgment may constitute a debt notwithstanding that it is not immediately enforceable and it is difficult to see any basis on which the Companies Court could find that an unrecognised foreign judgment would not constitute a debt.
You can find the Supreme Court’s judgment here.