Servis-Terminal LLC v Valeriy Ernestovich Drelle

The Court of Appeal held that a foreign judgment which has not been recognised or registered in England and Wales cannot, as such, found a bankruptcy petition. The court explained that foreign judgments have "no direct operation in England" and that presentation of a bankruptcy petition is a form of seeking enforcement (collective enforcement) rather than a purely defensive use of a foreign decision. Accordingly, an unrecognised foreign judgment does not constitute a "debt" within section 267(1) and section 267(2)(b) of the Insolvency Act 1986 for the purpose of presenting a creditor's petition.

The judgment relied on principles from Dicey, Morris & Collins and authorities concerning recognition and enforcement of foreign judgments, the "revenue rule" and the precedence of the registration scheme under the Foreign Judgments (Reciprocal Enforcement) Act 1933 as explained in Re a Judgment Debtor [1939] Ch 601. The Court set aside the bankruptcy order made by ICC Judge Burton and dismissed the petition because the Russian judgment had not been the subject of recognition proceedings in England and Wales.

Background and parties. The Company, Servis-Terminal LLC, obtained a Russian Arbitrazh Court judgment (24 May 2019) ordering the appellant, Mr Valeriy Drelle, to pay RUB 2 billion for alleged breaches of directors' duties. The Company served a statutory demand and then presented a bankruptcy petition in England in October 2020. ICC Judge Burton made a bankruptcy order in March 2023, which Richards J dismissed on appeal in March 2024. The Company was respondent to this appeal.

Nature of the application. The appeal raised whether a creditor may present a bankruptcy petition in England on the basis of an unpaid foreign judgment which has not been recognised or registered in this jurisdiction, and relatedly whether the debt was genuinely and substantially disputed.

Issues framed by the court.

• Whether an unrecognised foreign judgment can constitute a "debt" for the purposes of section 267 of the Insolvency Act 1986 so as to found a bankruptcy petition.
• If not, whether other grounds established that the debt was not the subject of a genuine and substantial dispute (this latter issue the court declined to determine finally).

Court's reasoning. The Court surveyed the common law position that foreign judgments have no direct operation in England and that enforcement requires either an English action or registration/recognition (Dicey, Morris & Collins; Owens Bank v Bracco; Rubin). It explained that bankruptcy is a collective enforcement process and that allowing presentation of petitions based on unrecognised foreign judgments would permit use of insolvency machinery as a route to enforce foreign sovereign adjudications without the prior step of recognition. The Court relied on Re a Judgment Debtor [1939] Ch 601 in relation to the 1933 Act and on authorities concerning the "revenue rule" (Government of India v Taylor; Skatteforvaltningen v Solo Capital Partners LLP) to show that the common law disfavours enforcement of foreign sovereign claims absent statutory authorization. The court concluded that an unrecognised foreign judgment does not give rise to a "debt" payable "either immediately or at some certain, future time" for the purposes of section 267(2)(b) if it is unenforceable in England without recognition. The Court therefore allowed the appeal, set aside the bankruptcy order and dismissed the petition.

Procedural note. The Court did not decide the separate questions about whether the judgment was impeachable or otherwise subject to a genuine dispute; it considered those matters for a recognition claim to be litigated afresh if the Company pursues recognition proceedings.

Appeal allowed. The Court held that a foreign judgment which has not been recognised or registered in England and Wales does not, as such, constitute a "debt" for the purposes of section 267(1) and section 267(2)(b) of the Insolvency Act 1986 and therefore cannot found a bankruptcy petition; accordingly the bankruptcy order was set aside and the petition dismissed.

Appeal to Court of Appeal from Richards J in the High Court (Chancery Division, Insolvency and Companies List) [2024] EWHC 521 (Ch) following an ICC decision by Judge Burton (judgment dated 9 March 2023; bankruptcy order made 31 March 2023). This appeal was heard on 11-12 December 2024 and determined 31 January 2025 ([2025] EWCA Civ 62).