Case Digest No. 3 · Cross-border insolvency
Foreign judgments as bankruptcy debts: the Court of Appeal decision
Servis-Terminal LLC v Drelle [2025] EWCA Civ 62
The Court of Appeal held that an unrecognised foreign judgment could not found an English bankruptcy petition. That conclusion was later reversed by the Supreme Court in Drelle v Servis-Terminal LLC [2026] UKSC 29.
Court of Appeal
[2025] EWCA Civ 62
February 2025
Decision at a glance
The question, answer and consequence.
- Legal question
- The central issue was foreign judgments as bankruptcy debts: the Court of Appeal decision.
- Court's answer
- The Court of Appeal held that an unrecognised foreign judgment could not found an English bankruptcy petition. That conclusion was later reversed by the Supreme Court in Drelle v Servis-Terminal LLC [2026] UKSC 29.
- Practical consequence
- This Court of Appeal decision formed an important—but now superseded—stage in the law concerning reliance on an unrecognised foreign judgment in bankruptcy. It remains useful for understanding the procedural history and the arguments subsequently resolved by the Supreme Court in Case Digest No. 28.
Factual background
The Appellant (Drelle) was formerly the CEO of Servis- Terminal LLC (the Company), which is incorporated in Russia. The Company, having been declared bankrupt (insolvent) by a Russian Court, its Trustee in Bankruptcy brought proceedings against the Appellant for breach of duty as a director in relation to a loan. It was alleged by the Company that the Appellant had failed to act in good faith or reasonably when, as a director of the Company, he had procured the loan. The Company claimed that the Appellant was liable to compensate it for the losses it had suffered on the loan. The Russian Court gave
Issue
The central issue was foreign judgments as bankruptcy debts: the Court of Appeal decision.
Procedural history and reasoning
in favour of the Company and the appeal was unsuccessful. The Company served on the Appellant, who was by now resident in London, a statutory demand under s268(1)(a) of the Insolvency Act 1986. The Company subsequently presented a bankruptcy petition against the Appellant, which came before ICC Judge Burton in June 2022. [2025] EWCA Civ 62 KEY TAKEAWAYS: An unrecognised foreign judgment is not capable of providing the basis of a bankruptcy petition. 1. An unrecognised judgment has “no direct operation” in this jurisdiction and so cannot be used as a “sword”. 2. An obligation to make a payment imposed by an unrecognised foreign judgment does not constitute a “debt” for the purpose of s267 Insolvency Act 1986. 3. There is a distinction between a judgment that confirm an underlying debt (for a liquidated sum payable immediately or at some certain, future time) and a judgments that creates the debt. 4. Similarly to the “revenue rule”, these consequences stem from the exercise of sovereign power. 5.
ISSUE Whether a bankruptcy petition can be presented on the basis that a payment ordered by a foreign Court has not been made in circumstances where the foreign judgment has not been the subject of recognition proceedings in this jurisdiction. COURT OF APPEAL JUDGMENT Newey LJ, Popplewell LJ and Snowden LJ WAS THE RUSSIAN JUDGMENT CAPABLE OF PROVIDING THE BASIS FOR A BANKRUPTCY PETITION? Dicey, Morris & Collins’ RULE 51 confirms that a foreign judgment can be determinative on a point even in the absence of recognition or registration. However, rule 51 is concerned with “DEFENCES”. Any use of an unrecognised and unregistered judgment as a “SWORD”, including presentation of a bankruptcy petition founded on it, is OBJECTIONABLE. This is because the principle that a foreign judgment “has no direct operation in England” reflects the common law’s aversion to enforcing a FOREIGN EXERCISE OF SOVEREIGN POWER. WHAT CONSTITUTES A “DEBT” UNDER s267 IA 1986?
The “REVENUE RULE”, that the courts of one country will not enforce the tax laws of another (see Government of India v Taylor [1955] AC 491), has a similar root and is a “particular manifestation of a more fundamental rule, that an assertion or exercise of the sovereign right of a foreign state will not be enforced by an English court” (Professor Briggs). There can be no doubt that the “revenue rule” precludes presentation of a bankruptcy petition in respect of a foreign tax liability. It must therefore serve to prevent a foreign tax from being regarded as a “debt” in respect of which a petition could be presented notwithstanding the fact that nothing to that effect is expressed in s267(2)(b) insolvency Act 1986. That supports the contention that an unrecognised foreign judgment, which has NO “DIRECT OPERATION” because it arises from an exercise of sovereign power, is likewise not to be seen as giving rise to a “debt” capable of founding bankruptcy proceedings. DISTINCTION BETWEEN JUDGMENTS THAT CONFIRM THE UNDERLYING DEBT AND THOSE THAT CREATE THE DEBT.
Decision and key points
The Court of Appeal held that an unrecognised foreign judgment could not found an English bankruptcy petition. That conclusion was later reversed by the Supreme Court in Drelle v Servis-Terminal LLC [2026] UKSC 29.
- The Court of Appeal held that an unrecognised foreign judgment could not provide the basis of a bankruptcy petition.
- It treated an unrecognised judgment as having no direct operation in England and Wales.
- This conclusion was reversed by the Supreme Court in Drelle v Servis-Terminal LLC [2026] UKSC 29.
Why this decision matters
This Court of Appeal decision formed an important—but now superseded—stage in the law concerning reliance on an unrecognised foreign judgment in bankruptcy. It remains useful for understanding the procedural history and the arguments subsequently resolved by the Supreme Court in Case Digest No. 28.
Particularly relevant to: Insolvency practitioners, petitioning creditors, debtors and private-international-law specialists.
Case history
Relationship to other decisions in the library
Drelle v Servis-Terminal LLC [2026] UKSC 29
The Supreme Court rejected the Court of Appeal's conclusion concerning an unrecognised foreign judgment as a bankruptcy debt.