Servis-Terminal LLC v Valeriy Ernestovich Drelle

An unrecognised and unregistered foreign money judgment has no direct operation in England and Wales. It cannot be used as a sword to invoke the collective enforcement process of bankruptcy.

Accordingly, the payment obligation imposed by such a judgment is not a debt for the purposes of section 267 of the Insolvency Act 1986. A creditor must first obtain an English judgment, register the foreign judgment, or establish another statutory or treaty basis for enforcement. The statutory word debt is informed by the wider common law, including territorial sovereignty and the rule against enforcing foreign revenue claims.

Servis-Terminal LLC, a Russian company in bankruptcy, obtained a Russian judgment requiring its former chief executive, Mr Drelle, to pay RUB 2 billion in damages for breach of director’s duties. The Russian appeals were unsuccessful. The company then served a statutory demand on Mr Drelle in London and presented an English bankruptcy petition.

ICC Judge Burton held that the alleged debt was not genuinely and substantially disputed and made a bankruptcy order. Richards J dismissed Mr Drelle’s appeal, holding that the absence of English recognition proceedings did not prevent the Russian judgment from founding a bankruptcy petition: [2024] EWHC 521 (Ch).

The central issue before the Court of Appeal was whether an unrecognised foreign judgment ordering payment of money could constitute a debt capable of founding a creditor’s bankruptcy petition.

1. Appeal allowed unanimously. The bankruptcy order was set aside and the petition dismissed. Newey LJ gave the principal judgment. Popplewell LJ agreed. Snowden LJ agreed for Newey LJ’s reasons and gave additional reasons.

2. A foreign judgment has no direct operation in England and Wales. Although it may be conclusive for limited recognition purposes, it cannot be used affirmatively to obtain enforcement through English court processes unless it has first been recognised or registered, or an applicable statute or treaty permits enforcement.

3. Bankruptcy is not direct execution in the narrow sense, but it is a process of collective enforcement against a debtor’s property. A creditor relying solely on an unrecognised foreign judgment therefore cannot invoke bankruptcy as an alternative means of enforcing the payment ordered by the foreign court.

4. The word debt in section 267 of the Insolvency Act 1986 is not autonomous or unlimited. It must be construed against the general law. A sum payable only under an unrecognised foreign judgment is not enforceable as such in England and Wales and is not a liquidated sum payable to the petitioning creditor within section 267.

5. The analogy with foreign revenue claims supported that conclusion. The revenue rule prevents a foreign tax liability from becoming a bankruptcy debt despite the absence of express limiting language in section 267. The same territorial-sovereignty principle applies to an unrecognised foreign judicial order.

6. Newey LJ further held that Re a Judgment Debtor supports the proposition that, where the registration regime in the Foreign Judgments (Reciprocal Enforcement) Act 1933 applies, a bankruptcy petition cannot be founded on the foreign judgment before registration. That was reinforcing reasoning, not necessary to the result.

7. The court did not decide the remaining grounds concerning whether the Russian judgment was impeachable or otherwise substantially disputed. Any future recognition claim would have to be determined afresh.

• Court of Appeal (Civil Division): Allowed the appeal, set aside the bankruptcy order and dismissed the petition: [2025] EWCA Civ 62 .
• High Court (Insolvency and Companies List): Richards J dismissed Mr Drelle’s appeal and held that the unrecognised Russian judgment could found a bankruptcy petition: [2024] EWHC 521 (Ch) .
• Insolvency and Companies Court: ICC Judge Burton held that the alleged debt was not genuinely and substantially disputed and made a bankruptcy order on 31 March 2023.