Court of Appeal overturns bankruptcy order based on Russian judgment, citing evidence of judicial bias

The Court of Appeal of England and Wales has overturned a bankruptcy order against a former Russian company director based on a RUB 2 billion judgment obtained in Russia, ruling that evidence suggesting the outcome of the Russian proceedings had been predetermined was sufficient to establish a genuine and substantial dispute over the debt. Lord Justice Miles, with Lady Justice Falk and Lord Justice Newey agreeing, held that the lower courts had wrongly discounted hearsay evidence of alleged judicial interference and imposed an excessively demanding evidential threshold on a debtor seeking to challenge a foreign judgment. The Court confirmed that allegations of fraud, bias or breaches of natural justice must be assessed under the ordinary civil standard of proof, without any heightened requirement simply because a foreign judgment is being challenged.

The dispute arose from the bankruptcy of Servis-Terminal LLC, a Russian company whose largest creditor was Gazprom Neft, a subsidiary of the Russian state-controlled energy group Gazprom. In December 2011, Servis-Terminal advanced a RUB 2 billion loan to Fort-Steiton LLC, a company owned by Russian banker Anatoly Motylev. The loan was never repaid, and Servis-Terminal entered bankruptcy in April 2017.

Servis-Terminal's bankruptcy trustee subsequently brought proceedings against its former director general, Valeriy Drelle, alleging that he had acted unreasonably and in bad faith by approving the loan. In May 2019, a Russian court ordered Drelle to pay RUB 2 billion, a decision upheld through three levels of appeal. Drelle, who had relocated to London, challenged the judgment on grounds that included alleged judicial bias, political interference and procedural irregularities.

Servis-Terminal served a statutory demand in October 2020 and petitioned for Drelle's bankruptcy. ICC Judge Burton rejected his challenge and made a bankruptcy order in March 2023, finding that he had failed to establish a genuine and substantial dispute over the judgment debt. Mr Justice Richards upheld that decision in March 2024.

The litigation subsequently reached the Supreme Court, which ruled in Servis-Terminal LLC v Drelle [2026] UKSC 29 that an unrecognised foreign judgment could constitute a debt for the purposes of section 267 of the Insolvency Act 1986 (our summary here). The Supreme Court remitted Drelle's remaining grounds of appeal, concerning the alleged impropriety of the Russian proceedings, to the Court of Appeal.

Central to the renewed appeal was evidence from Alyona Zheglova, Servis-Terminal's former finance director, who described a January 2019 conversation with a business contact who had reportedly spoken to the chairman of the Russian court hearing Drelle's case. According to Zheglova, she was told that Gazprom Neft was driving the litigation, that Drelle could not win and that judgment would be entered against him for RUB 2 billion. The Russian court subsequently awarded that precise amount, despite the possibility of further evidence being submitted after the conversation.

The lower courts had discounted Zheglova's account as double hearsay. Lord Justice Miles rejected that approach, holding that the evidence was admissible under the Civil Evidence Act 1995 and could not be treated as lacking weight merely because it contained multiple levels of hearsay. Although its hearsay character was relevant to the weight it deserved, the evidence had to be assessed alongside expert testimony concerning political influence over the Russian judiciary and Gazprom Neft's interest in the proceedings.

The Court also rejected the proposition that Drelle had to demonstrate that the Russian judgment was deliberately wrong. Lord Justice Miles explained that a biased judge might deliberately produce a legally defensible decision to protect the interests of a favoured party. Where the allegation concerns judicial predetermination, the critical question is whether the proceedings were improperly influenced, rather than whether the resulting judgment was legally incorrect.

Importantly for insolvency practitioners, the Court distinguished between proving that a foreign judgment was improperly obtained and establishing a sufficiently substantial dispute to prevent bankruptcy proceedings from continuing. The latter requires only a genuine dispute on substantial grounds, not a final determination of the allegations. The Court also confirmed that there is no special heightened evidential standard for challenging foreign judgments on grounds of fraud or breach of natural justice.

Applying those principles, the Court found that Zheglova's evidence, considered alongside expert evidence concerning the Russian judicial system and alleged errors in the underlying proceedings, raised a genuine and substantial case that the judgment was impeachable for fraud, breach of natural justice or public policy reasons.

The Court emphasised that it was not determining whether the Russian judgment had actually been procured through judicial interference. Those allegations should instead be resolved in separate recognition proceedings, which Servis-Terminal had commenced in April 2025 and which had been stayed pending the outcome of the bankruptcy litigation, where disclosure and cross-examination would be available.

The appeal was allowed and Drelle's bankruptcy order was set aside.

Read the decision here.

Charles Samek KC and Bláthnaid Breslin, both of Littleton Chambers, instructed by Sterling Law, represented Drelle.

Mark Phillips KC and Clara Johnson, both of South Square, instructed by Madison Legal, acted for Servis-Terminal.