Case Digest No. 28 · Cross-border insolvency
Supreme Court clarifies creditors’ position regarding unrecognised foreign judgments
Drelle v Servis-Terminal LLC [2026] UKSC 29
The Supreme Court held that a qualifying unrecognised and unregistrable foreign judgment creates an obligation to pay which can constitute a debt for the purposes of section 267 of the Insolvency Act 1986.
Supreme Court
[2026] UKSC 29
September 2026
Decision at a glance
The question, answer and consequence.
- Legal question
- The central issue was Supreme Court clarifies creditors’ position regarding unrecognised foreign judgments.
- Court's answer
- The Supreme Court held that a qualifying unrecognised and unregistrable foreign judgment creates an obligation to pay which can constitute a debt for the purposes of section 267 of the Insolvency Act 1986.
- Practical consequence
- The Supreme Court confirmed that a qualifying final foreign judgment can create a common-law obligation to pay before recognition proceedings are brought. That conclusion materially changes bankruptcy strategy for creditors and debtors relying on, or resisting, unregistered foreign judgments.
The case in context
Servis-Terminal LLC was a Russian company in bankruptcy. Mr Drelle was its former Director General and a former shareholder. Servis-Terminal had advanced a loan of RUB 2 billion to another Russian company, supported by a personal guarantee from that company's owner. The lending took place against the background of Servis-Terminal holding substantial funds with a Russian bank. The bank collapsed, the loan was not repaid and Servis-Terminal itself entered bankruptcy in Russia.
The Russian trustee brought proceedings against Mr Drelle alleging that he had caused Servis-Terminal to make the loan unreasonably and in bad faith, thereby causing loss. The Russian court held that he had breached his duties and ordered him to pay RUB 2 billion. His appeals in Russia were dismissed. Servis-Terminal then relied on that final Russian judgment in England, serving a statutory demand and presenting a bankruptcy petition under sections 267, 268 and 270 of the Insolvency Act 1986.
The issue before the Supreme Court
The central question was whether a creditor can rely on a final foreign money judgment which has neither been registered nor recognised in separate English proceedings as establishing a debt sufficient to support a creditor's bankruptcy petition under section 267 of the Insolvency Act 1986.
The appeal therefore required the Court to address the legal effect at common law of an unrecognised foreign judgment, the meaning of “debt” in section 267 and a fallback argument based on article 13 of the UNCITRAL Model Law on Cross-Border Insolvency.
Procedural history
At first instance, ICC Judge Burton rejected the contention that the Russian judgment debt was disputed on bona fide and substantial grounds. A bankruptcy order was made on 31 March 2023. On appeal, Richards J held that the Russian judgment constituted a debt within section 267(2)(b), notwithstanding that it had not first been recognised.
The Court of Appeal allowed Mr Drelle's further appeal on that legal issue. It held that a bankruptcy petition could not be founded on an unrecognised foreign judgment. Because that conclusion disposed of the appeal, the Court of Appeal did not determine the remaining grounds challenging the finding that the judgment debt was not disputed on bona fide and substantial grounds.
Decision
The Supreme Court unanimously allowed Servis-Terminal's appeal. It restored the conclusion that a qualifying unrecognised and unregistrable foreign money judgment gives rise to an obligation to pay capable of constituting a debt under section 267. The case was remitted to the Court of Appeal to determine the outstanding grounds that it had not previously addressed.
- A qualifying unrecognised foreign money judgment gives rise at common law to an obligation to pay the judgment sum.
- Dicey Rule 51 does not confine an unrecognised foreign judgment to use as a shield.
- The obligation can constitute a debt within section 267 of the Insolvency Act 1986.
The common-law obligation principle
The Court held that a final and conclusive foreign judgment for a debt or definite sum of money gives rise at common law to an obligation to pay the judgment sum. That obligation arises when the foreign judgment is given; it is not created only when an English court later recognises the judgment.
This conclusion was inconsistent with the Court of Appeal's premise that the foreign judgment had no legal effect before recognition. Recognition proceedings provide the procedural means by which the obligation may ordinarily be enforced directly, but they are not the source of the underlying obligation.
The Supreme Court also rejected the proposition that Dicey Rule 51 confines an unrecognised foreign judgment to defensive use as a “shield”. A foreign judgment is used affirmatively when a claimant sues on the judgment debt, and its findings may also be relied upon as conclusive in proceedings based on the underlying cause of action.
Section 267 of the Insolvency Act 1986
Section 267 requires a creditor's petition to concern a debt owed to the petitioning creditor and, relevantly, a liquidated sum payable immediately or at a certain future time. The Supreme Court saw no reason to give “debt” a meaning narrower than the established common-law understanding in force when the legislation was enacted.
An obligation to pay the sum awarded by a qualifying foreign money judgment therefore falls within the statutory concept. The Court also rejected reliance on the foreign-revenue rule: there is a material difference between a sovereign authority asserting a public right to tax or penalties and a private person asserting a private right embodied in a foreign judgment.
Article 13 of the Model Law
Servis-Terminal's alternative argument relied on article 13 of the Model Law, which addresses access by foreign creditors to domestic insolvency proceedings. The Supreme Court was not persuaded that article 13 independently resolved the appeal. “Foreign” was used as a geographical descriptor and did not answer whether the Russian judgment created the relevant debt. The case was decided through the common-law obligation principle and the construction of section 267.
Why the decision matters
The Supreme Court confirmed that a qualifying final foreign judgment can create a common-law obligation to pay before recognition proceedings are brought. That conclusion materially changes bankruptcy strategy for creditors and debtors relying on, or resisting, unregistered foreign judgments.
The judgment separates three concepts that can otherwise become blurred: the legal obligation generated by a final foreign money judgment, the procedural recognition or registration of that judgment, and the use of the resulting debt within English insolvency legislation. That distinction affects the strategy of petitioning creditors, judgment debtors, trustees and cross-border disputes teams considering whether an overseas judgment can support insolvency action before separate enforcement proceedings have been completed.
Particularly relevant to: Petitioning creditors, debtors, trustees in bankruptcy and cross-border disputes teams.
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Relationship to other decisions in the library
Servis-Terminal LLC v Drelle [2025] EWCA Civ 62
The Supreme Court allowed the appeal from the Court of Appeal's decision and remitted the outstanding grounds.