Summary

On 27 July 2026, the UK Supreme Court held unanimously in Drelle v Servis-Terminal LLC [2026] UKSC 29 that an unrecognised and unregistrable foreign judgment for a debt or definite sum of money can constitute a “debt” for the purposes of section 267 of the Insolvency Act 1986, so that a creditor can present a bankruptcy petition in England and Wales on the strength of it without first recognising or registering the judgment here.

The Court confirmed that a foreign judgment given by a court of competent jurisdiction, and that is final and conclusive and not “impeachable” (i.e. capable of being challenged on grounds of fraud, being contrary to public policy or opposed to natural justice), creates an immediate obligation at common law on the judgment debtor to pay the judgment sum. This is the result of the long-standing “obligation principle” and does not depend on the foreign judgment first being recognised or registered in England.

The Supreme Court also rejected the Court of Appeal’s reasoning that:

• The rule that a foreign judgment has “no direct operation” in England means that it has no legal effect. The Supreme Court instead held that “no direct operation” merely means that none of the English execution processes are available in respect of a foreign judgment;
• Using an unrecognised foreign judgment to petition for bankruptcy improperly deployed the judgment as a “sword” rather than a “shield”; and
• The revenue rule (that the English court has no jurisdiction to enforce a foreign tax or penalty) was relevant by analogy to the enforcement of foreign judgments.

The Supreme Court therefore allowed the appeal of Servis-Terminal LLC (the creditor seeking to rely on the unrecognised foreign judgment in England). However, it remitted the case to the Court of Appeal to determine the separate question of whether the underlying Russian judgment debt was disputed on bona fide and substantial grounds.

The Facts: A RUB 2 Billion Loan and a Director’s Liability

In December 2011, Servis-Terminal LLC (ST), a Russian company, advanced a RUB 2 billion loan to another company. The loan was never repaid and ST itself was subsequently declared bankrupt. In March 2018, ST’s trustee-in-bankruptcy brought proceedings in Russia against Valeriy Drelle, ST’s former Director General, alleging that he had caused ST to advance the loan unreasonably and in bad faith. In May 2019, the Russian court ordered Mr Drelle to pay RUB 2 billion to ST (the Russian Judgment). Mr Drelle made various attempts to appeal in Russia but by February 2020 his appeals had all been dismissed.

In October 2020, ST served a statutory demand on Mr Drelle in England (based on the Russian Judgment), followed by a bankruptcy petition. Mr Drelle applied to set aside the statutory demand, arguing that the Russian Judgment debt was disputed on bona fide and substantial grounds, and that the various Russian judgments had been improperly obtained, were biased, were contrary to natural justice and English public policy, and/or had been obtained by fraud and/or collusion. However, in March 2023 the English Insolvency and Companies Court (the ICC) rejected these arguments and made a bankruptcy order against Mr Drelle.

The Legal Question: Is an Unrecognised Foreign Judgment a “Debt” Under Section 267 of the Insolvency Act 1986

Mr Drelle’s central legal argument in the Supreme Court was based on the fact that the Russian Judgment was unrecognised (i.e. not the subject of UK recognition proceedings) and unregistrable (i.e. not capable of being registered in England under a statutory scheme, such as the Foreign Judgments (Reciprocal Enforcement) Act 1933 (the 1933 Act)). This position is not unique to Russia; judgments from jurisdictions such as the United States, Japan and Hong Kong are similarly unregistrable and reliant on the common law regime to be enforced. He argued that such a foreign judgment had no “direct operation” in England and was of no legal effect unless and until it was recognised. It could not therefore constitute a “debt” for the purposes of section 267 of the Insolvency Act 1986 (the 1986 Act) and could not form the basis of a bankruptcy petition against him. 

By contrast, ST argued that such an unrecognised foreign judgment had legal effect in England as a result of what it submitted was the long-standing “obligation principle”. 

The case therefore raised a fundamental question about the status of unrecognised foreign judgments in English insolvency law. 

The Common Law “Obligation Principle”

The Supreme Court’s reasoning rested on the “obligation principle”: a foreign judgment for a debt or definite sum of money creates an immediate obligation at common law on the foreign judgment debtor to pay that sum. This allows a foreign judgment creditor (here ST) to bring an action in England on the judgment and does not depend on the foreign judgment being recognised in the UK. The Court traced the principle from 19^th century authority through the 1932 Greer Report (which led to the 1933 Act) and into modern cases including Adams v Cape Industries [1990], Owens Bank v Bracco [1992] and Rubin v Eurofinance [2012].

Clarifying the Meaning of “No Direct Operation” 

The Court of Appeal had relied on Rule 45 of Dicey, Morris & Collins (that a foreign judgment has “no direct operation” in England) to conclude that a foreign judgment has no legal effect in England. However, the Supreme Court disagreed and held that “no direct operation” means only that the modes of execution available for an English judgment (such as third-party debt orders and charging orders) are not available for a foreign judgment. It does not mean the foreign judgment has no legal effect in England. Rather, a foreign judgment has legal effect (and, as the Supreme Court went on to conclude, can constitute a debt that grounds a bankruptcy petition). 

The Supreme Court also explained that a foreign judgment can operate indirectly in England (such as through a party bringing an action on the common law obligation to pay the judgment sum). It reasoned that this demonstrates that an unrecognised foreign judgment for a debt can be used offensively (for example as the basis for a bankruptcy petition and, by analogy, a statutory demand and/or winding up petition in the context of corporate insolvency) as well as defensively.

The Revenue Rule Was a False Analogy

The Supreme Court also disagreed with the Court of Appeal’s reliance by analogy on the so-called “revenue rule”. This is the rule that the English courts have no jurisdiction to enforce the penal, tax or other public laws of another state. The Court of Appeal had reasoned that an unrecognised judgment resulting from a foreign sovereign act should (like a foreign tax liability) not be treated as a debt. The Supreme Court held that this analogy was misplaced; the revenue rule applies only where a sovereign state asserts a sovereign right (such as a tax or a penalty) and not where a private person asserts a private right (even if that private claim happens to have been adjudicated by a foreign state’s courts). The Supreme Court held that ST’s claim against Mr Drelle was a private claim involving no exercise of sovereign power, such that the revenue rule was irrelevant.

Does Such a Foreign Judgment Give Rise to a “Debt” 

Having decided that an unrecognised foreign judgment for a debt gives rise to an obligation in England to pay that judgment sum, the Supreme Court then concluded that such a foreign judgment can constitute a “debt” for the purposes of section 267 of the 1986 Act. It could therefore form the basis of a bankruptcy petition. 

Although the word “debt” was not defined in the 1986 Act for the purposes of section 267, the Court noted that the general common law meaning of the term “debt” is wide (being a legal obligation to pay a sum of money to another party) and that an unrecognised foreign judgment gave rise to a legal obligation to pay the sum concerned. 

Article 13 of the UNCITRAL Model Law Did Not Assist ST

ST also raised a fallback argument based on Article 13 of the UNCITRAL Model Law on Cross-Border Insolvency (MLCBI) (which has been given effect in Great Britain via the Cross-Border Insolvency Regulations 2006). 

Article 13(1) provides that foreign creditors have the same rights as domestic creditors regarding the commencement of, and participation in, an insolvency proceeding. ST argued that “foreign” in this context refers to the law governing the debt rather than to the creditor’s geographical location. Accordingly, the protection in Article 13(1) for “foreign creditors” applied to creditors (such as ST) relying on a foreign judgment. This meant that creditors relying on a foreign judgment should have the same rights as creditors relying on an English judgment. 

The Supreme Court disagreed. “Foreign” in Article 13 is a geographical descriptor; a foreign creditor is one located abroad. Therefore, the comparator for a Russian-located creditor relying on a Russian judgment is a British-located creditor relying on the same Russian judgment (not a creditor relying on an English judgment). Article 13 therefore has no bearing on whether a creditor, foreign or British, can bring a bankruptcy petition relying on an unrecognised foreign judgment.

Four Courts, Four Stages: The Procedural History

What This Means for the Foreign Judgments (Reciprocal Enforcement) Act 1933

The decision leaves the 1933 Act’s own registration regime untouched, but narrows the practical advantage it previously conferred. Mr Drelle argued that it would be anomalous if an unregistrable, unrecognised judgment (like the Russian Judgment) could be used to found a bankruptcy petition when a registrable-but-unregistered judgment cannot be. This would be the effect of both a Supreme Court decision against Mr Drelle and In re A Judgment Debtor [1939] Ch 601 (which confirmed that section 6 of the 1933 Act bars bankruptcy proceedings on a registrable judgment unless it is registered first).

The Supreme Court rejected the argument. Its answer was that the 1933 Act was never doing what Mr Drelle’s submission assumed: although the 1933 Act barred proceedings based on registrable-but-unregistered judgments, it made no difference to the position of unregistrable, unrecognised judgments at common law. Historically, an unrecognised judgment could not found an “act of bankruptcy” under the Bankruptcy Act 1914 (in force when the 1933 Act was passed). Therefore, section 6 of the 1933 Act simply replicated, for registrable judgments, the effect recognition already had under that older regime. It was the entirely new 1986 Insolvency Act scheme (which dropped the “acts of bankruptcy” concept altogether) that, for the first time, allowed the debt arising from an unrecognised, unregistrable foreign judgment to found a petition.

A Different Model Law Would Have Made This Easier: The 2018 Insolvency-Related Judgments Regime

The Model Law that ST actually (and unsuccessfully) invoked (the 1997 MLCBI) is not the only UNCITRAL instrument in this space. A separate text, the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments (MLIJ), adopted in 2018, was designed specifically to give insolvency judgments a dedicated recognition and enforcement gateway in other jurisdictions. The UK has not yet adopted it, likely in part as a result of concerns that the MLIJ would undermine the “rule in Gibbs” (that English law governed debt can only be amended or discharged by an English court). The UK government instead proposed a narrower measure (known as “Article X”). This would amend Article 21 of the Cross-Border Insolvency Regulations 2006 (which sets out the relief an English court may grant upon recognition of a foreign insolvency proceeding) so that it includes the recognition and enforcement of foreign judgments. At present the Government is still consulting on whether to adopt this “Article X” version of the MLIJ. 

Had the MLIJ been in force in England (either in its full form or by Article X), the Russian Judgment would likely have qualified as an “insolvency-related judgment”; it was obtained by ST’s trustee-in-bankruptcy after ST’s own insolvency proceeding had commenced and was in respect of a claim brought for the benefit of ST’s insolvent estate. ST could then have sought recognition in England through the MLIJ’s own procedure (rather than on the common law “obligation principle”). The MLIJ procedure contains a relatively limited list of grounds for refusal such as proper notice, absence of fraud, consistency with other proceedings, non-interference with the conduct of the insolvency and the originating court’s basis of jurisdiction. 

On these particular facts, the outcome would probably have been the same: Mr Drelle had notice and participated fully, exhausting his appeals through the Russian court system, and his allegations of bias and fraud were already tested and rejected by the first instance judge in England. What would likely have differed is the route – a direct statutory pathway for insolvency-related judgments, rather than a six-year dispute in England involving three appeals. 

What the Court of Appeal Must Still Decide: The Remitted Grounds

While the Supreme Court’s ruling settles these points of principle, it does not finally dispose of the case. 

In order to be relied on in England, a foreign judgment must under the common law be (i) given by a court of competent jurisdiction; (ii) final and conclusive; and (iii) not impeachable. The parties agreed that these first two conditions had been met. However, Mr Drelle had also appealed to the Court of Appeal on grounds that the Russian Judgment was impeachable. He argued that the ICC Judge was wrong to conclude that the Russian Judgment debt was not disputed on bona fide and substantial grounds. He alleged that the Russian proceedings were biased, contrary to English public policy, and/or procured by fraud. Given that the Court of Appeal had not already considered these issues, the Supreme Court remitted these grounds of appeal to the Court of Appeal for determination. 

Those safeguards, going to whether the foreign court’s process and outcome can be relied on at all, remain very much alive and are where the practical battle over this bankruptcy will now continue.

Practical Implications 

Drelle v Servis-Terminal LLC materially widens the pool of creditors who can use the English insolvency jurisdiction. A creditor holding a final and conclusive foreign judgment from a court of competent jurisdiction no longer needs to bring separate recognition or registration proceedings in England before presenting a bankruptcy petition (or, by analogy, a statutory demand or winding up petition) based on that foreign judgment. The common law obligation to pay the foreign judgment sum is itself a “debt”.

That does not mean the gateway is unconditional. The judgment debtor retains the protections built into the common law test itself: the debt must not be the subject of a genuine and substantial dispute, the foreign court must have had competent jurisdiction, and the judgment must be final and conclusive. Further, it must not be impeachable for fraud, breach of natural justice, or public policy – precisely the grounds Mr Drelle is still pursuing on the remitted appeal back in the Court of Appeal. As an aside, in Rubin v Eurofinance SA [2012] UKSC 46 (in which the Supreme Court recognised the existence of the obligation principle referred to above) the relevant debtor (against whom orders had been made in US bankruptcy proceedings) was not present or resident in the US, nor had he submitted to the jurisdiction of the US court. Accordingly, the English court did not enforce the US judgment (and explained that it would not adopt a more liberal rule in the interests of the universality of bankruptcy in order to do so). 

For creditors, registration under the 1933 Act (or similar) remains the more efficient route where it is available, since it carries substantial procedural advantages over bringing an action at common law. For example, it lets a creditor apply for registration without notice to the debtor, obtain a registration order treating the judgment as if it were already an English judgment for execution and interest purposes, and proceed straight to domestic enforcement mechanisms such as charging orders (rather than having to bring an entirely fresh debt claim on the merits). But registration is now no longer the only route into the English bankruptcy jurisdiction. There are a number of jurisdictions where only the common law enforcement route applies and where Drelle will be helpful. A creditor with a judgment outside the scope of the 1933 Act (or similar statutory scheme) – as here, since Russia is not a party to any relevant registration treaty – is no longer locked out simply because that gateway is unavailable to them.

For restructuring and insolvency practitioners, the decision is significant in cross-border matters (both in personal and corporate insolvency) involving debtors with assets or a presence in England but underlying judgments obtained in jurisdictions outside the UK’s statutory judgment registration regimes. 

The judgment can be found here [Drelle v Servis-Terminal LLC [2026] UKSC 29]