Valeriy Ernestovich Drelle v Servis-Terminal LLC (In Liquidation in the Russian Federation)
| Court | The Supreme Court of the United Kingdom |
| Justices | Lord Sales, Deputy President; Lord Briggs; Lord Hamblen; Lord Stephens; Lord Doherty |
| Judgment of | Lord Briggs and Lord Hamblen, with whom the other three members of the court agreed |
| Hearing | 24 and 25 June 2026 |
| Judgment | 27 July 2026 |
| Appellant | Servis-Terminal LLC, in liquidation in the Russian Federation, acting by its trustee in bankruptcy |
| Respondent | Valeriy Ernestovich Drelle, formerly Director General of Servis-Terminal LLC |
| On appeal from | [2025] EWCA Civ 62 |
| Case reference | UKSC/2025/0094 |
| Matter | Whether a foreign judgment that has never been recognised in England, and that no registration statute reaches, is a debt for the purposes of section 267 of the Insolvency Act 1986 |
Summary
Servis-Terminal held a Russian judgment against its former Director General for RUB 2 billion. It never asked an English court to recognise that judgment, and no registration statute reached it. Mr Drelle said such a judgment has no legal effect here until recognised, so there was no debt. Servis-Terminal said the judgment itself imposes an obligation to pay, and that obligation is the debt.
The Supreme Court allowed the appeal, unanimously. A judgment given abroad for money creates the obligation when it is given, not when an English court blesses it, and that obligation answers the word debt in the section. Mr Drelle has not lost the case. His other grounds, that the debt was open to a bona fide and substantial dispute, return to the Court of Appeal.
Background and facts
In December 2011 Servis-Terminal lent RUB 2 billion to another Russian company against a personal guarantee from its owner. A bank the guarantor controlled collapsed in July 2015, taking about RUB 7.9 billion that Servis-Terminal held there, and the loan was never repaid. In April 2017 the Arbitrazh Court of Yaroslavl Region declared Servis-Terminal bankrupt and appointed a trustee.
The trustee sued Mr Drelle for causing the loan to be made unreasonably and in bad faith. After fourteen months and ten hearings the court held on 24 May 2019 that he had breached his duties, and ordered him to pay RUB 2 billion. Three Russian courts above it dismissed his appeals. He had settled in London.
On 9 October 2020 Servis-Terminal served a statutory demand on that judgment and four days later presented a petition, with no recognition proceedings. The Insolvency and Companies Court found no bona fide and substantial ground of dispute and made a bankruptcy order in March 2023. The High Court dismissed the first appeal. The Court of Appeal allowed the second on one ground alone.
The issue
Whether the obligation created by a foreign judgment, never recognised here and reached by no registration scheme, is a debt within section 267(2)(b) of the Insolvency Act 1986.
The decision
The starting point is the common law. Since the 1840s the answer has been the obligation principle: where a court of competent jurisdiction has adjudicated a sum to be due, a legal obligation to pay arises, and an action of debt lies on it. Parke B stated it, Blackburn J endorsed it, and the modern cases repeat it.
That obligation arises when the final and conclusive judgment is given. It does not depend upon recognition.Lord Briggs and Lord Hamblen, paragraph 56
The Court of Appeal had read the rule that such a judgment has no direct operation in England as meaning it has no legal effect at all. Direct operation is about execution: a charging order, a third party debt order, a receiver, none of which runs on a judgment given abroad. Suing on the obligation is indirect operation, and the rule draws no line between defensive and offensive use.
At common law, the legal effect of an unrecognised foreign judgment for a debt or definite sum of money is that it gives rise to an obligation to pay the judgment sum.Lord Briggs and Lord Hamblen, paragraph 75
The revenue rule the Court of Appeal leaned on was a false analogy. It bars claims asserting a foreign sovereign right, a tax or a penalty. A private creditor suing on a private right asserts nothing of the sort.
On the statute, debt is nowhere defined for section 267, and the definition of bankruptcy debt elsewhere in the Act governs who may prove, a separate question. At common law a debt is a legal obligation to pay money, and Parliament must be taken to have used it in that sense in 1986. Presenting a petition is not execution either: bankruptcy opens a rateable distribution behind a moratorium.
the obligation to pay a sum of money under an unregistrable, unrecognised foreign judgment is a debt within the meaning of section 267 of the 1986 ActLord Briggs and Lord Hamblen, paragraph 89
Two limits sit on the reasoning. The ruling concerns a judgment no registration statute reaches; where the 1933 Act applies, section 6 bars proceedings other than registration, and that bar was long ago held to catch bankruptcy, a point nobody challenged here. Servis-Terminal also argued that article 13 of the Model Law put it on the same footing as a creditor with an English judgment. The court said it did not need to reach that argument, and rejected it briefly: foreign there describes where a creditor is.
The appeal was allowed. The bankruptcy order was not restored: the grounds the Court of Appeal never reached go back to that court.
Practical implications
For anyone chasing a construction debt this reopens a route shut since January 2025. A money judgment obtained abroad against a director, a guarantor, a sole trader or a partner now living in England can carry a statutory demand and a petition, with no preliminary action to have it recognised here.
The route has a hard edge. Ask first whether the judgment is registrable. Judgments inside the 1933 Act scheme must be registered before any petition, and a creditor who skips that step loses it.
None of this makes the judgment unassailable. The debtor may still say it was procured by fraud, or offends natural justice or English public policy, and if that is arguable the petition fails at the first hurdle. Those are the grounds now remitted in this case.
Practice points
- Establish whether the judgment is registrable before serving anything. If a registration statute reaches it, register it first, because a petition founded on a registrable but unregistered judgment is barred.
- Where no registration statute applies, no recognition action is needed before the statutory demand goes out. The obligation to pay arises when the judgment abroad is given.
- Confirm the common law conditions before relying on the judgment: the foreign court had jurisdiction over the debtor, the judgment is final and conclusive, and it is for money. A judgment ordering something other than payment will not carry a petition.
- Sums payable as tax, or as a fine or other penalty, sit outside the common law action on a judgment and cannot found a petition however the judgment is dressed up.
- Expect the debtor to attack the foreign proceedings rather than the arithmetic. Gather the evidence on jurisdiction, service, the conduct of the hearing and any allegation of fraud before serving, because that is where the argument will happen.
- Do not call the petition an enforcement of the judgment in your own evidence or correspondence. The court treats bankruptcy as a collective distribution rather than execution, and that distinction is what carried the appeal.
- This ruling was given on section 267 and personal bankruptcy. Do not carry it across to a company without checking the winding up provisions and the cases on them.