Supreme Court allows bankruptcy petitions based on unrecognised foreign judgments

The UK Supreme Court has ruled that a creditor may present a bankruptcy petition based on a final, conclusive and unregistrable foreign money judgment without first obtaining recognition in England.

The unanimous decision overturned the Court of Appeal and revived, subject to unresolved appeal grounds, Servis-Terminal LLC’s petition against former director Valeriy Drelle based on a Russian judgment ordering him to pay RUB 2 billion.

Servis-Terminal sued Drelle in Russia after alleging that he acted unreasonably and in bad faith by causing the company to make an unrepaid RUB 2 billion loan. The Russian court entered judgment against him in 2019, and three further levels of appeal were unsuccessful.

Servis-Terminal served an English statutory demand and presented a bankruptcy petition in 2020. Insolvency and Companies Court Judge Burton rejected Drelle’s arguments that the judgment was affected by bias, fraud, collusion and breaches of natural justice and public policy, and a bankruptcy order was made in 2023.

Justice Richards upheld the order, but the Court of Appeal ruled in 2025 that the Russian judgment could not support a petition until it had been recognised in England.

The Supreme Court disagreed, holding that the Court of Appeal had failed to apply the common law “obligation principle.” A final foreign judgment issued by a court of competent jurisdiction creates an immediate legal obligation to pay the amount awarded. Recognition allows the creditor to obtain an English judgment and use domestic execution procedures, but it does not create the underlying debt.

The Court distinguished between a foreign judgment having no direct operation in England and having no legal effect. An unrecognised judgment cannot be executed through measures such as charging orders or third-party debt orders, but the payment obligation it creates may still constitute a debt under section 267 of the Insolvency Act 1986.

The Court found no reason to give “debt” a narrower meaning. The Russian judgment imposed a liquidated, unsecured and immediately payable obligation exceeding the statutory bankruptcy threshold.

It also rejected the argument that presenting a bankruptcy petition amounted to enforcing the judgment. Bankruptcy is a collective process for distributing assets among creditors, rather than a method of individual execution.

The ruling does not apply in the same way to foreign judgments covered by the Foreign Judgments (Reciprocal Enforcement) Act 1933, which must be registered before bankruptcy proceedings are brought. Russian judgments are not subject to that regime.

The Supreme Court remitted the case to the Court of Appeal to determine Drelle’s remaining arguments that the debt is disputed on bona fide and substantial grounds. The ultimate validity of the bankruptcy order therefore remains unresolved.

Read the decision here.