On 27 July 2026, the Supreme Court handed down its unanimous decision in Drelle v Servis-Terminal LLC [2026] UKSC 29, reversing the Court of Appeal and confirming that a creditor may rely on an unrecognised and unregistrable foreign judgment as the basis for a debt sufficient to found a bankruptcy petition under section 267 of the Insolvency Act 1986 ("1986 Act"). This is a significant decision for creditors seeking to recover foreign judgment sums in England and Wales.
Background
In 2024, the High Court rejected Mr Drelle's appeal against a bankruptcy order made on a petition brought by Servis-Terminal LLC ("ST"), a Russian company in liquidation. ST's petition was based on a debt of approximately RUB 2 billion (c.£22 million) arising from a Russian judgment, which had not been the subject of recognition proceedings in England, nor was it registrable under any statutory scheme. The High Court held this constituted a "debt" under section 267 of the 1986 Act even though unrecognised (see our commentary here). The Court of Appeal overturned this decision, finding that a foreign judgment has no "direct operation" in England and could not be used as a "sword" to found a bankruptcy petition unless recognised or registered (see our commentary here).
The Supreme Court's decision
ST appealed to the Supreme Court which, in a unanimous judgment, allowed the appeal. The Supreme Court focussed on two principal issues:
- At common law, what is the legal effect of an unrecognised foreign judgment for a debt or definite sum of money?
- Does such a judgment give rise to a "debt" within the meaning of section 267 of the 1986 Act such that a bankruptcy petition can be presented in reliance upon it?
Legal basis for the decision
The legal effect of an unrecognised foreign judgment for a debt or definite sum of money at common law
ST submitted that the fact that an unrecognised foreign judgment for a debt or definite sum of money may be enforced by an action on the judgment in England and Wales by a foreign judgment creditor shows that that judgment has legal effect (referred to as the "obligation principle"). The Supreme Court agreed, holding, after a review of the authorities, that "the well-established common law principle is that a foreign judgment for a debt or definite sum of money gives rise to an obligation to pay the sum for which judgment has been given. That obligation arises when the final and conclusive judgment is given. It does not depend upon recognition."
It was noted that the Court of Appeal did not appear to have been addressed in detail on the obligation principle and that their conclusion that a foreign judgment has no legal effect until it is recognised is contrary to that principle.
The Supreme Court then considered the Court of Appeal's position that a foreign judgment has no "direct operation" in England, explaining that what this means is that it has no status as a judgment in England, and therefore no processes of execution that are available in respect of an English judgment (such as a charging order or a third party debt order) will be available in respect of a foreign judgment. However, that does not mean that the judgment has no legal effect. A foreign judgment can have indirect operation in England (for example, suing on the common law obligation to pay a judgment sum, which is founded on a foreign judgment for a debt or definite sum of money).
The Court of Appeal was wrong to conclude that an unrecognised foreign judgment can only be used as a "shield" rather than a "sword". The court explained that where a foreign judgment is for a debt or definite sum of money and an action is brought on it, it is clearly being relied upon as a sword.
Finally, the Supreme Court held that the Court of Appeal's reliance on the "revenue rule" (the principle that the courts of one country will not enforce the penal and revenue laws of another country, which is an extension of a foreign sovereign power) was misplaced and had no relevance to the present case. There is a difference between an act of sovereign power and a "private person bringing a claim asserting a private right".
In conclusion:
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.
Construction of section 267 of the 1986 Act
The court noted that, when interpreting the meaning of "debt" (which is not defined) in this context, the 1986 Act makes a "new start" from previous legislation and falls to be construed in its own right, and in light of the common law as at the time of enactment.
Under the 1986 Act, the requirement is simply that a qualifying debt is one which the debtor appears unable to pay or to have no reasonable prospect of being able to pay. There is no requirement that a statutory demand be based upon a judgment debt at all: "Any debt will do".
The common law meaning of "debt" is wide and it is fair to assume that "debt" in section 267 is used in that wide, general sense. It has always been the understanding of the common law that an unrecognised foreign judgment for a sum of money gave rise to an immediate legal obligation to pay that sum, could be enforced by an action on the foreign judgment in an English court and was therefore a "debt" under common law.
The Supreme Court concluded that there was no reason why section 267 should have used "debt" in any narrower sense, or why its purpose should not extend to the legal obligation to pay arising under an unrecognised foreign judgment.
Other interesting points
The court clarified further points which arose in argument regarding the interpretation of "debt" and which featured in the decisions of the lower courts.
It confirmed that bankruptcy (or winding up) proceedings are not means of enforcement of a judgment. Rather, they are "the very antithesis" of the enforcement of an individual creditor's judgment, given that they initiate a scheme of the division of the debtor's assets pari passu amongst unsecured creditors.
The Supreme Court also addressed the argument that holders of unregistrable foreign judgments should not be in a better position than holders of registrable but unregistered judgments under the Foreign Judgments (Reciprocal Enforcement) Act 1933 ("1933 Act"). The court held that this regime made no difference to the use that could be made of unregistrable and unrecognised foreign judgments at common law or under existing bankruptcy legislation.
Practical consequences for creditors
The Supreme Court's decision is a key decision for creditors seeking to recover sums due pursuant to foreign judgments:
- Reduced cost and delay. Foreign judgment creditors holding unrecognised and unregistrable foreign judgments may present bankruptcy petitions directly in England and Wales under section 267 of the 1986 Act, without the cost and delay of prior recognition proceedings.
- Relevance to winding-up petitions. The same principles are likely to apply to winding-up petitions against companies. The Supreme Court's reasoning, that an unrecognised foreign judgment gives rise to a "debt" at common law, is equally applicable in the corporate insolvency context.
- No anomaly with the 1933 Act. The Supreme Court resolved the anomaly alleged by Mr Drelle (that holders of unregistrable judgments would be in a better position than holders of registrable but unregistered judgments) by explaining that the 1933 Act created a self-contained regime for registrable judgments, while the 1986 Act independently created a wider basis for bankruptcy petitions.
- Enforcement options. To pursue enforcement options in England and Wales, such as obtaining a charging order, prior steps to recognise the foreign judgment are necessary.
- Debtor's defences. The debtor can still dispute the underlying judgment. The Supreme Court remitted Mr Drelle's outstanding grounds of appeal back to the Court of Appeal for determination.
Commentary
This decision provides welcome clarity after conflicting authority in recent years. The judgment confirms that an unrecognised and unregistrable foreign judgment does give rise to a "debt" for the purposes of section 267. This is particularly significant for judgments from jurisdictions with no treaty or statutory enforcement regime regarding enforcement of judgments in England and Wales (such as Russia), enabling creditors to use insolvency procedures efficiently without first expending time and cost on recognition proceedings.
If you have any questions about the implications for your enforcement strategy, please contact us.
