Drelle v Servis-Terminal: Foreign Judgments & Bankruptcy

On 27 July 2026 the Supreme Court handed down judgment in Drelle v Servis-Terminal LLC (In Liquidation in the Russian Federation) [2026] UKSC 29, resolving a question of real commercial consequence: can a creditor holding a foreign money judgment that has never been recognised or registered in England present a bankruptcy petition against a debtor here?

The answer is yes.

Allowing the appeal and reversing the Court of Appeal, the Court held that a final and conclusive foreign judgment for a debt or definite sum of money gives rise, at the moment it is given, to a common law obligation to pay. That obligation is a “debt” within the meaning of section 267 of the Insolvency Act 1986. A creditor therefore need not bring separate recognition proceedings before serving a statutory demand or presenting a petition.

For overseas creditors, particularly those holding judgments from jurisdictions with no reciprocal enforcement treaty with the UK, such as Russia, the United States, China and the UAE, this removes an expensive and slow procedural hurdle. For debtors who have relocated to England believing an unenforced foreign judgment cannot easily follow them, it removes a significant line of defence. Our insolvency litigation solicitors and in-house barristers act for creditors and debtors alike in these disputes; this guide explains what the judgment decides and what it means in practice.

Background: A RUB 2 Billion Loan and a Russian Bank Collapse

Servis-Terminal LLC (“ST”) is a Russian company in bankruptcy acting through its trustee-in-bankruptcy; Mr Valeriy Drelle is its former Director General and shareholder. ST’s largest creditor, Gazprom Neft, became a designated person for UK sanctions purposes on 10 January 2025, a reminder that in Russia-related insolvency, sanctions screening and OFSI licensing must be addressed from the outset, an area on which our team routinely advises.

In December 2011 ST lent RUB 2 billion to Fort-Steiton LLC, backed by a personal guarantee from its owner, Mr Anatoly Motylev, then chairman of Russian Credit Bank. When the bank collapsed in July 2015, ST lost some RUB 7.9 billion held there and the loan was never repaid. Mr Drelle left Russia and settled in London.

ST was declared bankrupt in April 2017 and sued Mr Drelle in the Arbitrazh Court of Yaroslavl Region for causing the loan to be advanced unreasonably and in bad faith. He defended on substantial grounds, the loan was made for profit, there was no reason to doubt the borrower’s solvency or the guarantor’s creditworthiness, earlier loans had been repaid with interest, and the shareholders had approved it. The proceedings ran over 14 months and ten hearings. By judgment of 24 May 2019 the court found a breach of duty and ordered payment of RUB 2 billion. Mr Drelle exhausted the Russian appellate system, the Supreme Court of the Russian Federation refusing a further appeal on 17 February 2020.

The English Proceedings

On 9 October 2020 ST served a statutory demand under section 268(1)(a) of the Insolvency Act 1986, and four days later presented a bankruptcy petition on an expedited basis under section 270. Mr Drelle applied to set the demand aside, contending the debt was disputed on bona fide and substantial grounds because the Russian judgments were improperly obtained, biased, contrary to natural justice and English public policy, and obtained by fraud and/or collusion. (If you have received a statutory demand, our guide to challenging a statutory demand explains the strict 18-day deadline.)

The petition was tried over three days before ICC Judge Burton, with expert evidence on Russian law and on State interference in Russian legal proceedings. She found the debt was not disputed on bona fide and substantial grounds; a bankruptcy order followed on 31 March 2023. Richards J dismissed the first appeal.

The Court of Appeal disagreed. Newey LJ reasoned that Dicey Rule 45 establishes that a foreign judgment has no “direct operation” in England, so petitioning uses it as a “sword” whereas Rule 51 concerns only its use as a “shield”; that by analogy with the revenue rule a judgment arising from an exercise of sovereign power should not be a “debt”; and that since In re A Judgment Debtor holds a petition cannot rest on an unregistered but registrable judgment, it would be anomalous for an unrecognised judgment to fare better.

Issue 1: The Obligation Principle

Section 267 requires a petition to be founded on a debt which is liquidated, unsecured, payable to the petitioner, and above the bankruptcy level of £5,000. Only one limb was in issue: the entire appeal turned on four words, “a debt … payable to [ST]”.

Lord Briggs and Lord Hamblen (with whom Lord Sales, Lord Stephens and Lord Doherty agreed) traced the obligation principle through two centuries of authority: Russell v Smyth (1842) and Williams v Jones (1845), where Parke B held that where a competent court adjudicates a sum to be due, a legal obligation to pay arises on which an action of debt may be maintained; and Godard v Gray and Schibsby v Westenholz (1870), where Blackburn J confirmed that English courts enforce foreign judgments not by treaty or statute but because the judgment itself creates that obligation. It was endorsed in Adams v Cape Industries plc [1990] Ch 433, Owens Bank Ltd v Bracco [1992] 2 AC 443 and Rubin v Eurofinance SA [2012] UKSC 46, where Lord Collins called it “purely theoretical and historical”, a description the Court respectfully qualified.

The Court then dismantled the Court of Appeal’s reasoning:

1. “No direct operation” means no execution. It means the judgment has no status as a judgment in England, so none of the CPR Part 70 processes, charging orders, third party debt orders, receivers, are available. It does not mean the judgment has no legal effect.
2. The sword/shield distinction is wrong. Where a creditor sues on a foreign money judgment it is plainly using it as a sword. Rule 51 draws no distinction between reliance on a judgment to support a claim and to support a defence.
3. The revenue rule analogy is false. That rule exists because enforcing a foreign tax claim extends the sovereign power which imposed it. There is “a world of difference” between a sovereign asserting a sovereign right and a private person asserting a private right, as confirmed in Skatteforvaltningen v Solo Capital Partners LLP [2023] UKSC 40. ST’s was a claim any private citizen could bring. (The rule still bars foreign tax debts from founding a petition, an issue our sister site on tax disputes addresses domestically.)

Issue 2: Is That Obligation a “Debt”?

Parliament uses an undefined legal term in its then-current common law sense. A debt is simply a legal obligation to pay a sum of money, whether arising under contract, deed, statute or judgment, and section 267 uses the word in that wide sense before prescribing precisely which characteristics the debt must have. (“Bankruptcy debt” is defined in section 382 but deliberately not used in section 267, it addresses who may prove, a broader category than who may petition.)

Although insolvency proceedings are loosely called collective enforcement (see Wight v Eckhardt Marine GmbH [2003] UKPC 37), they initiate a pari passu distribution under a moratorium on individual enforcement, “the very antithesis” of enforcing one creditor’s judgment, consistent with Sian Participation Corp v Halimeda [2024] UKPC 16. That insolvency is a class remedy rather than a debt collection tool underpins the abuse-of-process jurisdiction our winding-up petition solicitors invoke where petitions are presented for collateral purposes. Dicey agrees: footnote 33 to paragraph 14-012 states a judgment creditor may serve a statutory demand in terms of a foreign judgment, just as with any other unpaid debt.

Whatever section 6 of the 1933 Act did to registrable judgments, it made no difference to unregistrable ones at common law, and in 1933 an unrecognised judgment could not in any event have founded an act of bankruptcy under the Bankruptcy Act 1914, which required a judgment debt capable of execution. It was the new scheme in the 1986 Act that first made this possible.

The Model Law Argument, and What Was Not Decided

ST’s fallback, that “foreign creditor” in Article 13 of the UNCITRAL Model Law (in force via the Cross-Border Insolvency Regulations 2006) refers to the law governing the debt rather than the creditor’s location, failed. The Court was “entirely unpersuaded”: “foreign” describes geographical location.

Importantly, the Court did not decide that the Russian judgment is enforceable or that the bankruptcy order stands. Mr Drelle’s remaining grounds, that the debt was disputed on bona fide and substantial grounds, have been remitted to the Court of Appeal, which must address the allegations that the Russian proceedings were predetermined and obtained by fraud.

Practical Implications

• For creditors: The two-stage process, Part 7 claim on the judgment, summary judgment, then statutory demand, collapses into one. Note that the six-year limitation period under section 24 of the Limitation Act 1980 applies to the common law obligation, not the longer period for English judgments. The decision does not assist where the judgment is registrable under the 1920 or 1933 Acts, is for tax or a penalty, is not final and conclusive, or where the foreign court lacked jurisdiction on English principles.
• For debtors: The surviving defences are substantive rather than procedural: lack of jurisdiction of the foreign court; fraud (which may be raised even if argued and rejected abroad, Owens Bank v Bracco); breach of natural justice; English public policy; section 32 of the Civil Jurisdiction and Judgments Act 1982; want of finality; cross-claim or set-off; or solvency. The 18-day set-aside deadline is strictly applied, and our bankruptcy solicitors can act at short notice. Where a previous adviser missed a limitation date or registration requirement, a claim may lie in professional negligence.
• For companies: The ratio rests on the obligation principle and the ordinary meaning of “debt”, both of which apply equally under section 123, so there is a strong argument an unrecognised foreign judgment can equally found a winding-up petition. The point is untested; companies served with a demand should take advice within the seven-day window in which injunctive relief is most effective.

How LEXLAW Can Help

Drelle v Servis-Terminal will be cited in cross-border insolvency disputes for years. Whether you hold a foreign judgment that has proved difficult to enforce, or face a statutory demand founded on proceedings conducted abroad, the consequences are immediate.

LEXLAW is a City of London litigation practice at 4 Middle Temple Lane, with solicitors and in-house barristers who appear in the Insolvency and Companies Court, the High Court and on appeal. We combine the conflict of laws analysis needed to test whether a foreign judgment is final, conclusive and unimpeachable with the insolvency litigation experience needed to run, or resist, a petition. We advise on creditor strategy, statutory demands and set-aside applications, bankruptcy and winding-up petitions, injunctions to restrain advertisement, annulment, recognition and registration of foreign judgments, and sanctions compliance including OFSI licensing.

Contact our insolvency litigation team for a confidential, fixed-fee initial assessment.