Bankruptcy petitions and foreign judgments: the Supreme Court draws a clear line

Background

Servis-Terminal LLC (ST), a Russian entity, obtained a Russian court judgment against its former director Mr Drelle for RUB 2 billion. That judgment had not been recognised in England & Wales, and was unregistrable (which is to say the statutory process for registration does not apply to it). ST served a statutory demand and presented a bankruptcy petition based upon the Russian judgment, pursuant to section 267 of the Insolvency Act 1986. A bankruptcy order was made in March 2023, and Robert Starkins, Russ Parkin and Nick Nicholson of Grant Thornton were subsequently appointed as trustees in bankruptcy. 

ST appealed to the Supreme Court against the Court of Appeal's (COA) decision that an unrecognised and unregistrable foreign judgment cannot constitute a “debt” within section 267 capable of founding a bankruptcy petition.

Supreme Court decision

The principal and pertinent questions the Supreme Court addressed on appeal were:

1. What is the legal effect at common law of an unrecognised foreign judgment for a debt or definite sum of money?
2. Does such a judgment give rise to a “debt” pursuant to section 267, such that a bankruptcy petition may be presented based upon that judgment

Mr Drelle argued that an unrecognised foreign judgment has no legal effect in England unless and until it is recognised. ST submitted that the fact that an unrecognised foreign judgment for a debt may be enforced by an action on the judgment demonstrates that judgment does have legal effect.

The Supreme Court determined that at common law the principle upon which foreign judgments for a debt are enforceable in England and Wales by an action on the judgment is that such a foreign judgment itself gives rise to an obligation to pay the sum for which judgment has been given. That obligation arises once the judgment is final and conclusive.

The Supreme Court rejected the COA’s conclusion that a foreign judgment has no “direct operation” in England, holding that this only means it cannot be enforced by execution, not that it has no legal effect at all. It also rejected the COA’s reliance on the “revenue rule” which bars English courts enforcing another country's tax or penal laws, since ST's claim was a private one, not an exercise of sovereign power, unanimously overturning the COA’s 2025 judgment.

The Supreme Court did not address separate elements of Mr Drelle's appeal relating to whether the debt is genuinely disputed on bona fide and substantial grounds, and remitted those to the COA to determine.

What this means in practice

A creditor holding a final and conclusive unregistrable foreign judgment, for a liquidated sum exceeding the bankruptcy level (£5,000), in circumstances where the debtor is unable or appears to have no reasonable prospect of paying that amount, is able to serve a statutory demand or present a bankruptcy petition without the need to first bring recognition proceedings in England & Wales.

Foreign judgments which are covered by the Foreign Judgments (Reciprocal Enforcement) Act 1933 will still need to be registered before bankruptcy proceedings are initiated.

For more insight and guidance or to discuss specific circumstances, get in touch with Russ Parkin or Christopher Jones.

Russ Parkin is a Partner and licensed Insolvency Practitioner and qualified accountant, leading Grant Thornton UK's insolvency and asset recovery team across Leeds and Manchester, and with more than two decades of experience, Russ specialises in complex corporate and personal insolvencies, fraud investigations, pursuing legal claims, asset tracing, and enforcement of judgments and awards.

Christopher Jones is Director and licensed Insolvency Practitioner and qualified accountant based in the firm's Manchester office. His practice sees him investigating, formulating and managing fraud and civil claims in an insolvency context.