The UK Supreme Court has, in a landmark decision, unanimously restored a more creditor-friendly position regarding the use of insolvency proceedings to enforce foreign judgments. Drelle v Servis-Terminal LLC [2026] UKSC 29 removes a significant procedural hurdle that creditors previously faced when attempting to wind up companies or bankrupt individuals based on foreign debts.
The core issue
Prior to this ruling, the legal landscape was uncertain regarding whether a creditor could petition for the winding-up of a company (or bankruptcy of an individual) in England and Wales based on a foreign judgment that was not yet recognised or registered by a UK court.
The UK Court of Appeal had ruled that a foreign judgment needed to be formally recognised first to constitute a valid “debt” for the purposes of an insolvency petition. This created a difficulty for creditors. Creditors often needed to use the insolvency process to pressure payment. They were, however, but were told they could not start the process without first going through a separate, costly recognition proceeding.
Background to the Supreme Court’s decision
The UK Supreme Court’s decision concerned a Russian judgment that was obtained against Servis-Terminal LLC, that was sought to be enforced in England via a winding-up petition.
The UK’s Insolvency and Companies Court (“ICC”) made a bankruptcy order in March 2023, based on the Russian judgment. The Russian decision was not subject to any proceedings in the UK to recognise it.
The respondent obtained permission to appeal against the bankruptcy order arguing, amongst other things, that the Russian judgment did not constitute a petition debt since it had not been the subject of recognition proceedings in the UK.
The central legal question for the Court of Appeal was whether an unrecognised foreign judgment could constitute a “debt” sufficient to ground insolvency proceedings under the UK’s Insolvency Act 1986. The Court of Appeal decided that it could not.
The Court of Appeal’s decision was based on several legal conclusions, two of the most notable being:
- a foreign judgment like the one in dispute had no legal effect a common law until it was recognized by the domestic court; and
- Rule 45 of Dicey’s Conflict of laws that says a foreign judgment has no “direct operation” in a jurisdiction, meant that the Russian judgment could not be enforced.
The effect of the Court of Appeal’s decision: successful recognition proceedings were now a mandatory pre-requisite to enforcement via insolvency proceedings.
What the UK Supreme Court decided
The Supreme Court has decisively reversed the Court of Appeal’s position. The Supreme Court (in an admirably brief decision) held that recognition is not a prerequisite to enforcement. A creditor seeking to enforce via bankruptcy proceedings does not need to have a foreign judgment recognised by a UK court before filing a winding-up or bankruptcy petition.
The Supreme Court, in arriving at its conclusion dispelled all the reasons raised by the Court of Appeal to justify its decision, including the two points noted above. The Supreme Court:
- affirmed that a foreign judgment for a debt or definite sum of money, like the Russian judgment, gives rise to an immediate obligation at common law on the foreign judgment debtor to pay the relevant sum and this obligation does not depend upon recognition of the foreign judgment; and
- confirmed that Rule 45 of Dicey only means that a foreign judgment does not have the status as a judgment in the domestic court so that none of the modes of execution that are available for an domestic judgment, can be utlised to directly enforce it. The Supreme Court considered that Rule 45 does not mean that a foreign judgment has no legal effect, simpliciter.
The Court, ultimately, held that an unrecognised and unregistrable foreign judgment is sufficient to constitute a debt that entitles a creditor to bring insolvency proceedings.
The foregoing ought not be taken as carte blanche. The ruling in Drelle v Servis-Terminal LLC applies only where the judgment to be enforced is one that is unregistrable. That is: not capable of registration under specific statutes. In the case of the UK, this would include, for example, the Administration of Justice Act, 1920 and the Foreign Judgments (Reciprocal Enforcement) Act, 1933 that both outline circumstances under which particular judgments must be registered. In those cases, the existing registration rules remain unchanged and must be observed.
The key takeaways
The decision certainly lowers the bar for creditors looking to enforce debts across borders. Creditors seeking to bring bankruptcy petitions to enforce foreign judgments can now more confidently bypass the time-consuming and expensive step of obtaining a separate declaration of recognition before initiating insolvency proceedings.
The Drelle decision restores clarity on the position. This has implications for several several jurisdictions with broadly similar legal frameworks to the UK who also rely on a common law legal tradition. Prior to this decision, there was a marked uncertainty (and divergence) in those jurisdictions.
That said, while the threshold to a petition has, again, been lowered, the debtor does retain the right to challenge the petition on the usual grounds: (i) the debt is disputed on substantial grounds or (ii) the foreign judgment itself is flawed.
What to do
The threat of a winding-up or bankruptcy petition is a powerful negotiation tool. The Drelle decision has effectively restored the leverage creditors held against judgment debtors by making it easier to file these petitions. Creditors should, therefore, reconsider whether an immediate insolvency petition is a viable strategy to recover funds, given the reduced procedural hurdles that may apply.
Creditors should review your foreign judgment to ensure that it is procedurally and substantively robust. Judgment debtors, even where the court is willing to proceed to act on a foreign judgment as the basis for a petition, may attempt to use the petition hearing to challenge the underlying validity of the foreign court’s decision.
Link: Supreme Court decision in Drelle v Servis-Terminal LLC.
This article is for informational purposes only and does not constitute legal advice.
About Author: Bartlett Morgan is an experienced corporate and commercial lawyer with a focus on commercial disputes.
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