The UK Supreme Court has unanimously allowed the appeal in Drelle v Servis-Terminal LLC [2026] UKSC 29, delivering a landmark ruling on cross-border insolvency.
The decision confirms that a creditor may present a bankruptcy petition based on an unrecognised and unregistrable foreign judgment, without first obtaining formal recognition in England and Wales.
The ruling reverses the Court of Appeal’s more restrictive approach and carries significant implications for creditors pursuing cross-border recovery strategies.
The case centred on a Russian judgment that had neither been recognised in England and Wales nor qualified for registration under the Foreign Judgments (Reciprocal Enforcement) Act 1933, as Russia is not a participating jurisdiction.
In May 2019, Servis-Terminal LLC, a Russian company in bankruptcy, obtained a judgment against Mr Drelle, its former Director General, in a Russian court.
ST had advanced a RUB 2 billion loan to a third-party company, secured by a personal guarantee from the third-party’s owner, who was also the majority shareholder of another Russian company, the Russian Credit Bank.
After the Russian Credit Bank collapsed, the guarantor fled Russia and was declared bankrupt, the loan was never repaid, and ST itself was subsequently declared bankrupt in Russia.
ST’s trustee in bankruptcy alleged that Mr Drelle had acted unreasonably and in bad faith in causing the loan to be advanced, and the Russian court found that Mr Drelle had breached his duties to ST.
After Mr Drelle relocated to England, ST served a statutory demand and presented a bankruptcy petition under the UK Insolvency Act 1986, relying directly on the Russian judgment, and a bankruptcy order was duly made.
The Court of Appeal in 2024 allowed Mr Drelle’s appeal on the ground that an unrecognised foreign judgment cannot found a bankruptcy petition, a position the Supreme Court has now firmly rejected.
Central to the Supreme Court’s reasoning was the “obligation principle,” which holds that a final and conclusive foreign judgment for a definite sum of money gives rise to an immediate legal obligation on the judgment debtor to pay.
The Supreme Court clarified that Dicey Rule 45, which states that a foreign judgment has no “direct operation” in England, applies only to execution and does not strip such a judgment of all legal effect.
The court confirmed that bankruptcy proceedings are not “enforcement” of a judgment in the relevant sense, but rather initiate a collective insolvency process for the administration and distribution of a debtor’s assets.
The Supreme Court held that the word “debt” in section 267 of the Insolvency Act 1986 bears its broad common law meaning, encompassing a legal obligation to pay a sum of money arising from an unregistrable foreign judgment.
The court also rejected ST’s fallback argument under Article 13 of the UNCITRAL Model Law, holding that “foreign creditor” in the Model Law refers to geographical location rather than the law governing the debt.
Proceedings are not yet concluded, as the Supreme Court remitted to the Court of Appeal the question of whether the wrong standard of appellate review was applied to the first instance decision.
The ruling is expected to affect how insolvency processes are considered as part of broader cross-border recovery strategies for creditors seeking to recover judgment debts in England and Wales.
Foreign creditors may now have a more direct route to insolvency proceedings, while debtors subject to foreign judgments may find this route to recovery is considered early by their creditors.