Valeriy Ernestovich Drelle v Servis-Terminal LLC (In Liquidation in the Russian Federation)

A final and conclusive foreign judgment for a debt or definite sum creates an immediate common law obligation to pay. Recognition is not a condition of that obligation. Although the judgment has no direct operation as an English judgment and cannot itself be executed, it may operate indirectly through the obligation it creates.

That obligation is a debt within section 267 of the Insolvency Act 1986, provided the other statutory conditions are met. A bankruptcy petition initiates collective, pari passu distribution rather than enforcing the individual judgment. The registration restriction for registrable foreign judgments does not alter the position of an unregistrable judgment at common law. Article 13 of the cross-border insolvency Model Law addresses a creditor’s geographical location, not the legal source of its claim.

Servis-Terminal LLC, a Russian company in liquidation, obtained a final judgment in Russia requiring its former director, Mr Drelle, to pay RUB 2 billion. The judgment was not registrable under the Foreign Judgments (Reciprocal Enforcement) Act 1933 and had not been recognised through an English action. Servis-Terminal nevertheless relied on it when presenting a bankruptcy petition under section 267 of the Insolvency Act 1986.

The Insolvency and Companies Court made a bankruptcy order. Richards J dismissed Mr Drelle’s first appeal in [2024] EWHC 521 (Ch). The Court of Appeal allowed his second appeal in [2025] EWCA Civ 62, holding that an unrecognised foreign judgment could not found a bankruptcy petition.

The principal questions for the Supreme Court were whether the foreign judgment created any common law obligation before recognition, whether that obligation was a debt within section 267, and whether article 13 of the cross-border insolvency Model Law affected the answer.

1. Disposition. The appeal was unanimously allowed. The Court of Appeal had erred in holding that an unrecognised foreign judgment could not provide the debt required by section 267 of the Insolvency Act 1986. The case was remitted to the Court of Appeal to determine Mr Drelle’s outstanding grounds challenging the conclusion that the debt was not disputed on bona fide and substantial grounds.

2. Common law obligation. A final and conclusive judgment of a competent foreign court for a debt or definite sum creates an obligation to pay when the judgment is given. That obligation does not depend upon prior recognition in England. The established obligation principle, stated in Russell v Smyth, Williams v Jones, Godard v Gray and Schibsby v Westenholz, remained the juridical basis for enforcing such judgments.

3. Direct and indirect operation. A foreign judgment has no direct operation because it has no status as an English judgment and cannot itself be enforced through domestic execution procedures. It nevertheless has indirect legal effect. An action may be brought on the obligation created by a money judgment, while findings in other foreign judgments may be relied on as conclusive in proceedings on the underlying cause of action. The common law does not confine an unrecognised judgment to use as a defence.

4. Meaning of debt. In section 267, debt bears its general common law meaning of a legal obligation to pay money. The statutory context imposes additional characteristics, including that the sum be liquidated, payable to the petitioning creditor and unsecured, but supplies no basis for excluding an obligation created by an unregistrable foreign judgment. The Russian judgment therefore created a debt for section 267 purposes.

5. Bankruptcy was not enforcement of the judgment. A bankruptcy petition begins a collective scheme for pari passu distribution under a moratorium. It is not execution or enforcement of an individual creditor’s judgment. The restriction in section 6 of the Foreign Judgments (Reciprocal Enforcement) Act 1933, as considered in In re A Judgment Debtor, applies to registrable judgments. It does not alter the common law position for judgments outside that statutory scheme.

6. Revenue rule and article 13. The revenue rule was inapplicable because the petition asserted a private payment obligation rather than a foreign sovereign right. Article 13 of the Model Law, given force by the Cross-Border Insolvency Regulations 2006, uses foreign as a geographical description of the creditor. It does not require a creditor relying on a foreign judgment to be compared with one holding an English judgment.

1. United Kingdom Supreme Court: In Valeriy Ernestovich Drelle v Servis-Terminal LLC (In Liquidation in the Russian Federation) [2026] UKSC 29 , the court unanimously allowed Servis-Terminal’s appeal on Ground 1 and remitted Grounds 2 to 4 to the Court of Appeal.
2. Court of Appeal: In [2025] EWCA Civ 62 ; [2026] Ch 1; [2025] BPIR 564, the court allowed Mr Drelle’s appeal on the ground that an unrecognised foreign judgment could not found a bankruptcy petition. It did not determine his remaining grounds.
3. High Court: Richards J dismissed Mr Drelle’s first appeal in [2024] EWHC 521 (Ch) ; [2024] BPIR 496, holding that the Russian judgment created a debt within section 267 of the Insolvency Act 1986.
4. Insolvency and Companies Court: ICC Judge Burton held in [2023] EWHC 506 (Ch); [2024] BPIR 285 that the judgment debt was not disputed on bona fide and substantial grounds. A bankruptcy order was subsequently made.