UK Supreme Court confirms that unrecognised foreign judgments under common law rules can trigger insolvency proceedings

The effect of the UK Supreme Court’s decision in Drelle v Servis-Terminal LLC [2026] UKSC 29 is that it may be easier to wind up a company or bankrupt an individual on the basis of a foreign judgment from a country with no UK registration or recognition regime than one with such arrangements, by removing doubt as to whether such a judgment gives rise to a "debt" for these purposes. The Court confirmed that an unrecognised foreign judgment debt can directly found a statutory demand or insolvency petition, without going through the process of first seeking recognition of the judgment. The decision resolves last year's Court of Appeal uncertainty, leaving open for future review a striking paradox at the heart of English cross-border enforcement law.

Reversing the decision below in the Court of Appeal (see our previous Legal Update), the Supreme Court held that a foreign judgment for a specified sum, even if unrecognised, gives rise to an obligation to pay, and that this obligation constitutes a "debt" within the meaning of the relevant insolvency legislation. The decision is of wider relevance because it is likely to apply equally to winding up petitions against companies.

Note that it remains open to challenge a bankruptcy or winding up petition based on such a judgment on the grounds that the debt is genuinely disputed on substantial grounds. Further, the English court will look to see that the foreign court which issued the judgment had jurisdiction over the debtor.

This Legal Update summarises the Supreme Court's analysis of the legal position, and considers some of the potential implications of the decision, which may be significant not only in the context of bankruptcy and winding up petitions, but in relation to the status and enforcement of foreign judgments in the United Kingdom more broadly.

Background

The appellant, the trustee-in-bankruptcy of Russian company Servis-Terminal LLC (the "Company"), had presented a bankruptcy petition against the respondent, its former chief executive officer Mr Drelle, who resides in the United Kingdom. The basis of the petition was an unpaid judgment debt in favour of the Company that had been obtained against Mr Drelle in the Russian courts for breaches of various duties. All avenues for appeal in Russia had been exhausted by Mr Drelle. The Company then served a statutory demand on Mr Drelle in England on the basis of the Russian court judgment, and presented a bankruptcy petition against Mr Drelle. Mr Drelle applied to set aside both the statutory demand and the bankruptcy petition.

At first instance, the Insolvency and Companies Court found in favour of the Company, rejecting Mr Drelle's argument that the debt was subject to a genuine and substantial dispute, because the Russian court had been unduly influenced by Gazprom, a Russian state-owned energy company that was also the Company's largest creditor. The Court made a bankruptcy order against Mr Drelle.

Mr Drelle appealed the ICC decision; first to the High Court and then to the Court of Appeal. His first appeal failed, but the Court of Appeal then found in his favour, as per our previous Legal Update. The Company appealed to the Supreme Court. The appeal succeeded and the case was remitted to the Court of Appeal to consider the other grounds of appeal, including that the judge at first instance erred in deciding that the debt was not genuinely disputed on substantial grounds.

Supreme Court decision

The Court first considered the underlying legal basis on which a foreign judgment can be enforced in England under the common law—as opposed to pursuant to a treaty or convention to which the UK is party, given that there are no such treaties or conventions in place between the UK and Russia.

The Supreme Court examined the relevant provisions of Dicey, Morris & Collins on The Conflict of Laws, which had been cited and considered in the decisions below (emphasis added):

• Rule 45: A foreign judgment has no direct operation in England, but may be enforceable by claim or counterclaim at common law or under statute.
• Rule 46(1): A foreign judgment may be enforced for the amount due under it as a claim or counterclaim if it is:
  • for a debt or definite sum of money; and
  • final and conclusive.
• Rule 51: A foreign judgment that is final, conclusive, and not impeachable:
  • is conclusive as to any matter adjudicated in that judgment; and
  • cannot be impeached for any error of law or fact.

The Court held that, at common law, foreign judgments are enforceable in the English courts based on the long-established “obligation principle.“ This principle is distinct from considerations of comity, i.e. mutual judicial respect amongst courts of different jurisdictions. The effect of the obligation principle is that a foreign judgment debt creates a prima facie obligation to pay the sum ordered which is both distinct from the underlying liability, and which does not depend on formal recognition of the foreign judgment.

The Court of Appeal was found to have erred in deciding that a foreign judgment has no legal effect until it is formally recognised—to say that a foreign judgment has "no direct operation" in England merely means that foreign judgments are not English judgments and may not be executed in the way that English judgments are.

The Supreme Court concluded that, under the common law, the legal effect of a foreign judgment for a specified sum is that it gives rise to an obligation to pay that sum and such judgments are enforceable in England by an action on the judgment at common law. The obligation to pay does not depend on recognition, but arises when the final and conclusive judgment is given.

Accordingly, an unrecognised foreign judgment falls to be considered as a "debt" as understood generally and for the purposes of the jurisdiction to present a bankruptcy petition, in that there is an immediate legal obligation to pay the sum to the creditor and it is enforceable by an action on the foreign judgment.

Commentary

In practice, the decision is helpful for judgment creditors where there is no applicable recognition regime, as it confirms that they are not required first to commence an action in the English courts to seek formal recognition of the foreign judgment or take other steps before they can serve a statutory demand or present a bankruptcy petition, thus saving additional time and expense that would otherwise be incurred. It should be remembered, however, that this applies only in respect of bankruptcy or insolvency proceedings; an action would still be needed in order for the judgment creditor to enforce / execute the judgment debt under the common law rules for its own benefit. Further, it should also be borne in mind that the ability to present a petition on the basis of a foreign judgment debt does not mean that a bankruptcy or winding up order will necessarily follow, as the court retains its usual discretion and a debtor may oppose the petition on any of the grounds ordinarily available.

The point has proven reasonably controversial amongst legal commentators and practitioners, in part because the position is said to be incongruous with the position for foreign judgments subject to the UK’s reciprocal recognition regimes. Whereas judgments subject to the Foreign Judgments (Reciprocal Enforcement) Act 1933 (the "1933 Act") must be registered before they may be enforced or form the basis of a bankruptcy or winding up petition in England, this ruling states that the requirement does not apply to foreign judgments outside the statutory regime. Some might argue that, as a matter of principle, it should not be easier for a judgment debt issued by a court of a foreign country with no reciprocal recognition arrangements to form the basis of a bankruptcy or winding up petition in England; if anything, it should be the converse.

There is some uncertainty as to whether foreign judgments subject to the 1933 Act must be registered before they may form the basis of a winding up petition. The point did not need to be considered before the Supreme Court, which did though note that the Court of Appeal in In re A Judgment Debtor [1939] Ch 601 had decided that if a foreign judgment is registrable under the 1933 Act, it must be registered before it could found any enforcement proceedings, including bankruptcy proceedings. This is said to be due to section 6 of the 1933 Act, which relates to "proceedings for the recovery of a sum payable under a foreign judgment."

Are bankruptcy or insolvency proceedings really "for the recovery of a sum" in this context? Given the Supreme Court's observation that, "although bankruptcy and insolvency proceedings are often loosely categorised as a means of collective enforcement of debts…, they are in no relevant sense a means of enforcement of a judgment," and given that the court in A Judgment Debtor was applying an earlier and materially different predecessor to the Insolvency Act 1986, it will be interesting to see whether and when the courts will next have the opportunity to consider the apparent incongruity.