A Pyrrhic victory? Unrecognised foreign judgments and English bankruptcy petitions: the Court of Appeal’s decision on remittal in Drelle

Overview

On 30 October 2026, the Court of Appeal handed down its judgment in Servis-Terminal LLC v Drelle [2026] EWCA Civ 1390. The decision addresses the grounds of appeal remitted by the Supreme Court following its ruling in Drelle v Servis-Terminal LLC [2026] UKSC 29 – see our blog post here.

While the Supreme Court confirmed in July 2026 that an unrecognised foreign judgment debt can support an English bankruptcy petition under section 267 of the Insolvency Act 1986, it remitted back to the Court of Appeal the question of whether the petition debt was genuinely disputed on substantial grounds.

The Court of Appeal has now unanimously allowed Mr Drelle's appeal and set aside the bankruptcy order, holding that he had established a genuine and substantial dispute as to whether the Russian judgment was impeachable for fraud, breach of natural justice or public policy. The court held that such challenges must be determined in recognition proceedings (that is, with the benefit of disclosure and the cross-examination of factual and expert witnesses) rather than in bankruptcy proceedings.

Background and procedural history

The respondent, Servis-Terminal LLC (ST), is an insolvent Russian company whose principal creditor is Gazprom. The appellant, Mr Drelle, is a former director and shareholder of ST who now resides in England. In 2011, ST advanced a loan of RUB 2 billion to another company. However, that company failed to repay the loan and ST entered insolvency proceedings in Russia. 

In 2018, ST (acting via its trustee-in-bankruptcy) brought proceedings in the Yaroslavl Arbitrazh Court in Russia against Mr Drelle, arguing that by causing ST to advance the loan, he acted unreasonably and in bad faith, and thereby caused loss to ST. 

In May 2019, the Yaroslavl Arbitrazh Court ordered Mr Drelle to pay RUB 2 billion to ST. That judgment was upheld across three tiers of Russian appeal, culminating in the Russian Supreme Court. ST subsequently served a statutory demand and presented a bankruptcy petition on Mr Drelle in London. Mr Drelle opposed these English bankruptcy proceedings on two primary grounds:

• First, that an unrecognised foreign judgment could not ground a bankruptcy petition. As set out in our previous blog, the Supreme Court rejected this challenge in July 2026.
• Second, that the debt was genuinely disputed on substantial grounds because the Russian judgments were obtained through judicial predetermination and bias driven by the influence of Gazprom (ST’s principal creditor, who took an active role in the proceedings against Mr Drelle), rendering it impeachable under English law.

The legal background

It is well established that a bankruptcy (or indeed a winding up) petition cannot proceed where the creditor’s debt is disputed on genuine and substantial grounds. This is because insolvency proceedings (which generally do not involve pleadings, disclosure or oral evidence) are not the proper forum for such substantive disputes. The test for whether a dispute is genuine and substantive is whether the dispute is real (as opposed to frivolous or remote). 

Mr Drelle argued in England that there was such a genuine and substantial dispute in relation to ST’s debt, because the underlying Russian judgments were improperly obtained, biased, contrary to natural justice and English public policy and obtained by fraud and/or collusion. 

The evidence before the Insolvency Court

Mr Drelle relied primarily on two bodies of evidence to substantiate his challenge:

• A witness statement from Ms Zheglova, ST's former finance director, recounting a January 2019 meeting with an audit executive who reported that the Chairman of the Yaroslavl Arbitrazh Court had confirmed that, because Gazprom was pursuing the claim, Mr Drelle could not win and judgment would be entered against him for RUB 2 billion. Crucially, this conversation occurred two months before the evidentiary stage closed.
• Expert evidence from an independent expert on Russian political affairs and state interference in judicial proceedings, regarding acute institutional pressures on regional judges in cases involving state-linked entities like Gazprom. This was supported by procedural evidence from a Russian law expert.

Both ICC Judge Burton at first instance and Richards J on appeal dismissed Mr Drelle's challenge, discounting Ms Zheglova's statement as uncorroborated hearsay and concluding that the expert evidence failed to establish a triable issue in light of the Russian appellate history.

The Court of Appeal's analysis of the legal principles

The Court of Appeal examined several core legal principles governing challenges to foreign judgments in the context of English insolvency proceedings.

Standard of proof and rejecting “deliberately wrong” as a test

ST contended that to impugn a foreign judgment for bias or fraud, a debtor must establish that the judgment was “deliberately wrong” as a matter of law. It argued that the principle of international, meant that the debtor had to meet a heightened standard of “cogent” evidence rooted in international comity.

Lord Justice Miles in the Court of Appeal rejected these propositions, concluding that:

• First, a biased tribunal is capable of drafting a legally and procedurally defensible judgment precisely to withstand appellate scrutiny. Where predetermination is alleged, the English court examines whether the process was tainted, not the substantive correctness of the decision.
• Second, the applicable standard of proof in these circumstances is the balance of probabilities. There is no heightened standard of proof simply because a foreign judgment is being challenged.
• Third, in bankruptcy proceedings, the court does not determine the merits on the balance of probabilities; the debtor need only show a genuine dispute on substantial grounds.

Evaluation of written evidence in insolvency proceedings

The Court of Appeal held that the courts below erred in discounting Ms Zheglova's witness statement as hearsay. Under established principles, written evidence should not be rejected unless it is manifestly incredible.

Ms Zheglova's evidence was detailed and plausible, predicting the exact financial outcome months in advance. Crucially, the English courts below erred by evaluating her statement in isolation rather than in combination with the expert evidence on state influence. Assessed together, the evidence established a genuine and substantial dispute.

Relevance of foreign appellate proceedings

ST argued that Mr Drelle was precluded from alleging bias or predetermination because he had not raised those complaints in his three Russian appeals.

The Court of Appeal confirmed that a defendant alleging that a foreign judgment was procured by fraud or breach of natural justice is not required to exhaust local appellate remedies before raising that defence in England. While foreign appellate judgments may be evidentially relevant, they do not bar the defence or cure an underlying lack of natural justice at first instance.

The appropriate procedural forum

The Court of Appeal emphasised that bankruptcy proceedings are unsuited to resolving complex allegations of foreign judicial bias or fraud.

Where a debtor establishes a genuine and substantial dispute in relation to the bankruptcy petition, the petition must be dismissed or stayed. The appropriate forum recognition proceedings, where disclosure and cross-examination are available, and the Court of Appeal confirmed in this decision that if ST wish to continue their action against Mr Drelle this is the relevant procedural step (not bankruptcy proceedings). 

Practical considerations for practitioners

As well as providing a helpful reminder on the principles regarding whether a debt is disputed on genuine and substantial grounds, this decision provides several practical takeaways for parties dealing with cross-border debt recovery and foreign judgments in England:

• Supreme Court ruling is not a shortcut: while the Supreme Court confirmed that unrecognised foreign judgments can support a statutory demand, the Court of Appeal clarifies that this route offers no shortcut if the debtor raises an arguable common law defence.

   

• Evidentiary threshold: debtors need not prove fraud or bias on the balance of probabilities; plausible written evidence supported by credible expert testimony suffices to establish a genuine dispute on substantial grounds.

   

• Foreign appellate history: Creditors cannot rely on the fact that the debtor has not argued during the underlying foreign proceedings that there was a procedural irregularity - it is sufficient for the debtor to raise these points in the English proceedings.

The judgment Servis-Terminal LLC v Drelle [2026] EWCA Civ 1390 (30 October 2026) can be found here.

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