25/02/2026
Is a foreign judgment debt a debt? Michal Hain on Drelle v Servis-Terminal in LMCLQ
Michal Hain has published a case note, ‘Is a Foreign Judgment Debt a Debt?’, in the latest volume of Lloyds Maritime and Commercial Law Quarterly, that is likely to be of interest to practitioners in insolvency, private international law and commercial litigation.
In Servis-Terminal LLC v Drelle [2025] EWCA Civ 62, the Court of Appeal held that a bankruptcy petition could not be presented on the basis of a foreign judgment that has not first been recognised in England. An appeal against that decision is due to be heard by the Supreme Court.
In 2019, a Russian court judgment awarded the trustee in bankruptcy of Servis-Terminal LLC approximately 2 billion roubles (equivalent, at the time, to about £20 million) against the company’s former CEO, Mr Drelle. After Mr Drelle relocated to London, a bankruptcy petition was presented on the basis of the unpaid foreign judgment debt.
The key question on appeal was whether that constituted a “debt” within the meaning of section 267 of the Insolvency Act 1986. This point was first raised before Richards J (on appeal from ICC Judge Burton). Richards J dismissed the appeal, but the Court of Appeal allowed the subsequent appeal. Newey LJ, with whom Snowden and Popplewell LJJ agreed, handed down the leading judgment.
There are three important aspects to the decision.
First, Newey LJ held that held that the “logic” of the principle that a foreign judgment has no direct operation in England “suggests that any use of an unrecognised and unregistered judgment as a ‘sword’, including presentation of a bankruptcy petition founded on it, is objectionable” (at [41]). But a foreign judgment, even if unregistered, gives rise to an obligation, under English law, to pay the judgment debt. Where a creditor enforces that cause of action by issuing a claim, the judgment is being used as a ‘sword’. The foreign judgment also functions as a ‘sword’ when it gives rise to an issue estoppel.
Second, he drew an analogy with the so-called ‘revenue rule’ (i.e. the non-enforcement of obligations to pay foreign taxes). The two problems with this are that (a) a foreign tax liability will not be enforced whereas a foreign judgment gives rise to a (domestic) obligation to pay, and (b) registration would make no difference: the foreign tax liability would not be enforced even if is contained in a judgment and this was registered.
Third, Newey LJ held that the foreign judgment debt was not payable within the meaning of section 267(2)(b) of the Insolvency Act 1986. This was said to be the effect of section 6 of the Foreign Judgments (Reciprocal Enforcement) Act 1933, which provides that “[n]o proceedings for the recovery of a sum payable under a [registrable foreign judgment] may be brought other than proceedings by way of registration”. Although this statute does not apply to Russian judgments, the court accepted the argument it would be odd if there were a difference between an unrecognised foreign judgment and an unregistered foreign judgment (at [49]–[50]). However, the unanimous Privy Council in Sian v Halimeda [2024] UKPC 16 – a case in which Michal Hain appeared for the successful respondent – held that a winding-up petition is not a claim for payment: non-payment is merely evidence of an inability to pay (at [53]–[54]). The court’s reading of the phrase “no proceedings may be brought” to mean that no petition can be presented is likely to have other unintended consequences. Section 34 of the Civil Jurisdiction and Judgments Act 1982 provides that “[n]o proceedings may be brought … on a cause of action in respect of which a judgment has been given in his favour in proceedings between the same parties, or their privies, in a court in another part of the United Kingdom or in a court of an overseas country, unless that judgment is not enforceable or entitled to recognition”. Thus, the court’s reading would prevent a foreign judgment creditor from relying on the underlying debt following a foreign judgment even though they could have relied on the same debt prior to judgment.
The effect of the Court of Appeal’s decision is that petitions can be presented by a creditor who is relying on English debts and foreign debts as well as arbitrable debts, but a creditor cannot rely on foreign judgment debts (even though they are enforceable by claim). In his note, Michal suggests that the better view is that a foreign judgment is a debt, and that the Supreme Court should so hold.
