In a nutshell
In a unanimous judgment, the Supreme Court has now confirmed that a bankruptcy petition can be presented on an unrecognised and unregistrable foreign judgment. Such a judgment creates a “debt” within the meaning of s.267 of the Insolvency Act 1986 (IA 1986).
Summary and practical implications
Practitioners will be relieved to hear that foreign creditors no longer need to have foreign judgments recognised before being able to enforce them in English bankruptcy proceedings.
Normally, there are two ways in which a successful foreign litigant can directly enforce a foreign judgment: register the judgment under statute (The Administration of Justice Act 1920 or the Foreign Judgments (Reciprocal Enforcement) Act 1933), or bring mirror Part 7 proceedings and obtain an English judgment on the same grounds as the original claim (commonly known as a Recognition Claim).
The Supreme Court however has confirmed that a foreign judgment for a debt, or definite sum of money, gives rise to an obligation to pay that sum at the point when the final judgment is given, not when it is recognised. In turn, that creates a “debt” for the purposes of s.267. A debt is simply a legal obligation to pay a sum of money to another person. Section 267 does not otherwise define what is meant by “debt”. There is no requirement under s.267 for the debt to be based on a judgment debt: quite literally, “any debt will do” (Drelle at [78]). Many foreign judgment creditors therefore no longer need to bring a Recognition Claim to rely on the judgment as evidence of a debt in insolvency proceedings.
Note that Drelle only concerned “unregistrable” foreign judgments: that is, judgments which are not covered by any statutory scheme allowing for their registration, such as that under the 1920 and 1933 Acts above. For example, the 1920 Act applies to final judgments from many former commonwealth countries, such as New Zealand, Nigeria and Singapore. Drelle also does not concern judgments which are not final or conclusive, or which are for sovereign debts (such as taxes).
Facts
Servis-Terminal LLC (ST) brought proceedings in Russia against Mr Drelle, a former director, for breaches of his directors’ duties in relation to a loan he procured ST to advance to another Russian company.
The Russian court held that Mr Drelle had breached his duties and ordered him to pay 2 billion Rubles (RUB). Mr Drelle’s appeals against that judgment in Russia, up to and including the Russian Supreme Court, were all dismissed.
At some point in or before October 2020, Mr Drelle left Russia and settled in London. On 9 October 2020, ST served a statutory demand on Mr Drelle in England. Four days later, ST presented a bankruptcy petition on an expedited basis under s.270 of the IA 1986.
The trial of the petition took place before ICCJ Burton, who found the judgment debt was not genuinely disputed. A bankruptcy order was made against Mr Drelle on 31 March 2023.
Mr Drelle appealed to the High Court, which dismissed his appeal. However, Mr Drelle obtained permission to appeal for a second time to the Court of Appeal, which in turn allowed his appeal. ST appealed to the Supreme Court.
Judgment
The Supreme Court was invited to decide two key issues:
- What is the legal effect (if any) of an unrecognised foreign judgment for a debt or definite sum of money?
- Does an unrecognised foreign judgment give rise to a “debt” within the meaning of section 267 of the Insolvency Act 1986 such that a bankruptcy petition can be presented in reliance upon it?
In addition, the Appellant sought to argue that the UNCITRAL Model Law on Cross-Border Insolvency gives a foreign creditor equivalent rights to a creditor with a claim under English law. This argument however was given short shrift by the Supreme Court, which was “entirely unpersuaded” by it (at [93]).
Issue (1): Does an unrecognised foreign judgment for a debt give rise to an obligation to pay that debt?
The Supreme Court was unequivocal that under common law, a judgment debtor has an immediate obligation to pay a foreign judgment creditor, even if that judgment is not registered or recognised in England and Wales. Neither are defendants permitted to reopen issues of fact or law that have been decided against him or her by the foreign court (Owens Bank v Bracco [1992] 2 AC 443 (HL), affirmed at [50] of Drelle).
The Court of Appeal had relied heavily on a rule known as the “direct operation” rule, set out in Dicey, Morris & Collins on the Conflict of Laws, which provides that a foreign judgment has no “direct operation” in England and cannot be “immediately enforced by execution” (at 58-59). However, the Supreme Court held a foreign judgment could still have indirect operation. That is, although the foreign judgment does not have the same status as an English judgment for the purposes of enforcement – and so for example, a foreign creditor cannot obtain a third-party debt order or charging order to enforce a foreign judgment in England – the facts and matters decided in the judgment can be indirectly enforced.
The Supreme Court gave two examples of this so-called indirect operation:
- Firstly, where (as in Drelle itself) a bankruptcy petition is presented on a foreign judgment for a specific debt, what is being sued upon is the common law obligation to pay the judgment itself. Indeed, as bankruptcy proceedings are a class action remedy for the equal distribution of a debtor’s assets amongst her creditors, they are in that sense the “very antithesis” of the “enforcement of an individual creditor’s judgment” (at [86]).
- Secondly, where a foreign judgment is not for a debt or specified sum of money, the claimant can sue on the underlying cause of action and can rely on the issues of fact and law that were determined in the judgment.
Issue (2): Can an unrecognised foreign judgment be a “debt” for the purposes of s.267 IA 1986?
The Supreme Court observed that “debt” has a wide meaning, and that s.267 did not otherwise define it, as stated above. Although the IA 1986 carried over some concepts from the earlier Bankruptcy Act of 1914, it mostly made a fresh start. In particular, a statutory demand under s.268 IA 1986 does not require the underlying debt to be a judgment debt: indeed, “any debt will do” (at [78]).
In short, the Supreme Court simply interpreted the meaning of “debt” under s.267 as its ordinary meaning under the common law: a legal obligation owed by one person to pay a sum of money to another person.
Comment
The ruling restores the prior position that had been upheld by the High Court in relation to both bankruptcy (Drelle v Servis-Terminal LLC [2024] EWHC 521 (Ch)) and corporate insolvency (Re A Company [2024] EWHC 1070 (Ch)). This state of affairs had been thrown into doubt when the Court of Appeal overturned the High Court’s judgment (Servis-Terminal LLC v Drelle[2025] EWCA Civ 62).
Re A Company [2024] EWHC 1070 (Ch) applied the High Court’s reasoning in Drelle in relation to corporate insolvency, before Drelle was overturned by the Court of Appeal in January 2025. Whilst the position in relation to companies has not been formally tested after the Supreme Court’s judgment, it seems likely that Re A Company [2024] EWHC 1070 (Ch) is now good law again.
Curiously, Drelle seems to make creditors of registrable foreign judgments worse off than creditors of judgments of countries (such as Russia) whose judgments cannot be registered in England and Wales.
Debtors can still, of course, challenge foreign judgments on the grounds that the debt is genuinely disputed. Challenges can also be raised on the grounds of fraud, breaches of natural justice, or other concerns of public policy. Foreign judgment debts are therefore not a fait accompli to debtors facing English insolvency proceedings and will not be blindly accepted by the English courts. This is particularly the case with bankruptcy proceedings, where the courts have a wider jurisdiction than normal to go behind judgments and get at the truth, even where those judgments are final and the time for appealing has expired (Maher v Holmes [2026] EWHC 1337 (Ch)).
Indeed the case for Mr Drelle is still not over: Mr Drelle has also disputed the debt underlying the Russian judgment, and the Supreme Court has remitted the question of whether the debt was genuinely disputed back to the Court of Appeal.
This article reflects the law as of the date it was published. Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational and/or informational purposes. It is not intended to be a substitute for specific legal advice and should not be relied upon for this purpose. This article represents the opinion of the author and does not necessarily reflect the view of any other member of St Philips Chambers.
