Supreme Court Forges a Sword for Foreign Creditors

Case Background

Servis-Terminal LLC, a Russian company acting through its trustee in bankruptcy, had obtained a Russian judgment against its former Director General, Valeriy Drelle, for RUB 2 billion. The Russian judgment followed proceedings arising out of a loan made by Servis-Terminal to another Russian company. Mr Drelle challenged the judgment in Russia, but his appeals were dismissed. Servis-Terminal then served a statutory demand and presented a bankruptcy petition in England based on the Russian judgment, without first bringing separate recognition proceedings.

The appeal in Valeriy Ernestovich Drelle v Servis-Terminal LLC (In Liquidation in the Russian Federation) [2026] UKSC 29 centered on the question: can a creditor present a bankruptcy petition in England and Wales on the footing of a foreign judgment that has not first been recognised or registered here?

The procedural history

At first instance, the Insolvency and Companies Court made a bankruptcy order. The High Court dismissed Mr Drelle’s appeal and held that the petition could be founded on the Russian judgment, even without prior recognition in England and Wales. The Court of Appeal took the opposite view. It held that the unrecognised foreign judgment had no direct operation in England and could not be used as the basis for a bankruptcy petition. Servis-Terminal appealed to the Supreme Court.

The Supreme Court’s decision

The Supreme Court, in a unanimous judgment given by Lord Briggs and Lord Hamblen with Lord Sales, Lord Stephens and Lord Doherty agreeing, allowed the appeal on 27 July 2026. The Court held that a foreign judgment for a debt or definite sum of money can give rise to an immediate common law obligation on the judgment debtor to pay the judgment sum, provided the judgment is final, conclusive, given by a court of competent jurisdiction and not otherwise impeachable.

The Court described this as the long-standing “obligation principle”. Recognition is not what creates the obligation. Rather, recognition proceedings are one way by which the English court may give effect to an obligation that already exists at common law. The Court therefore rejected the proposition that an unrecognised foreign judgment has no legal effect at all in England.

The Court also clarified the often-used statement that a foreign judgment has “no direct operation” in England. That phrase means that the foreign judgment cannot itself be executed as though it were an English judgment, for example by using English judgment execution mechanisms such as charging orders or third-party debt orders. It does not mean that the foreign judgment is legally inactive. It may operate indirectly by creating a common law obligation to pay.

Why it counts as a debt

Section 267 of the Insolvency Act 1986 requires a bankruptcy petition to be founded on one or more debts owed by the debtor to the petitioning creditor. The Act does not define “debt” for this purpose. The Supreme Court therefore gave the word its ordinary common law meaning: a legal obligation to pay a sum of money to another person.

On that basis, the payment obligation arising from a qualifying foreign money judgment is a debt for section 267 purposes. The Court rejected the argument that allowing a bankruptcy petition in these circumstances amounted to impermissible enforcement of the foreign judgment. Bankruptcy is a collective insolvency process, not the same thing as execution of an individual judgment debt.

Article 13 of the Model Law

Servis-Terminal also relied on article 13 of the UNCITRAL Model Law on Cross-Border Insolvency, as given effect in Great Britain by the Cross-Border Insolvency Regulations 2006. The Supreme Court held that article 13 did not alter the analysis. Its reference to “foreign creditors” is concerned with the geographical location of creditors, not the law under which the debt arises. It did not determine whether an unrecognised foreign judgment could support a bankruptcy petition.

Practical significance

The decision is important because it removes a procedural obstacle that the Court of Appeal decision had imposed. Creditors with qualifying foreign money judgments do not necessarily need to bring separate recognition proceedings before using insolvency remedies in England and Wales. That may reduce cost and delay, particularly where the judgment is from a jurisdiction outside statutory registration regimes.

The decision does not mean that every foreign judgment will or can automatically found a petition, and the usual safeguards remain: (1) the judgment must be final and conclusive; (2) the foreign court must have had competent jurisdiction; and (3) the debtor may still raise recognised defences such as fraud, public policy or breach of natural justice where properly arguable. In this case specifically, for example, the Supreme Court remitted Mr Drelle’s remaining challenges to the Court of Appeal, so the ultimate bankruptcy outcome still depends on determination of those issues.

For insolvency and debt recovery practitioners, the key point is that a foreign judgment can be more than evidential background. It can be the source of a common law debt capable of commencing or supporting insolvency proceedings. The ruling is therefore likely to be welcomed by office-holders for providing some much-needed clarity, and judgment creditors seeking rapid remedies or asset-preservation leverage.

Quick takeaways

Written by: Uday Patel, Partner and Head of CS Litigation

Please contact us if you would like more information about the issues raised in this article or any aspect of debt recovery on 020 8290 7400 or email info@jpcreditsolutions.co.uk