Background
Servis-Terminal LLC, a Russian company in bankruptcy, obtained a 2019 Russian judgment ordering its former Director General, Valeriy Drelle, to pay RUB 2 billion for breaching his duties in causing the company to make an unrepaid loan. Drelle’s appeals through the Russian courts were dismissed.
Servis-Terminal relied on the judgment to serve a statutory demand and present an English bankruptcy petition. The Russian judgment had neither been recognised in separate English proceedings nor qualified for registration under a statutory regime. The Insolvency and Companies Court rejected Drelle’s allegations that the judgment was improperly obtained, biased, fraudulent, or contrary to natural justice and public policy, and made a bankruptcy order. The High Court affirmed, but the Court of Appeal set the order aside because it considered an unrecognised foreign judgment incapable of supporting a bankruptcy petition.
The Court’s Holding
The Supreme Court unanimously allowed Servis-Terminal’s appeal. At common law, a final and conclusive foreign judgment for a debt or definite sum of money, made by a court of competent jurisdiction and not otherwise impeachable, immediately creates an obligation to pay. That obligation does not depend on the judgment first being recognised in England and Wales.
The resulting obligation is a “debt” for purposes of section 267 of the Insolvency Act 1986 and may therefore support a creditor’s bankruptcy petition. Although an unrecognised foreign judgment cannot itself be executed as if it were an English judgment, that lack of “direct operation” does not deprive it of all legal effect. The Court also held that article 13 of the UNCITRAL Model Law did not determine the issue because its protection concerns discrimination based on a creditor’s geographical location, not the law under which the debt arose.
The Court did not finally restore the bankruptcy order. It remitted to the Court of Appeal Drelle’s unresolved grounds challenging the finding that the Russian judgment debt was not disputed on bona fide and substantial grounds.
Key Takeaways
- An unrecognised and unregistrable foreign money judgment can create an immediate common-law debt in England and Wales.
- Such a debt may support a bankruptcy petition under section 267 of the Insolvency Act 1986 without prior recognition proceedings.
- The ruling does not treat the foreign judgment as directly executable, and defenses alleging fraud, procedural unfairness, or another basis for impeachment remain available.
Why It Matters
The decision removes the need for a separate recognition action before a creditor may rely on a qualifying foreign money judgment as a bankruptcy petition debt. It distinguishes the common-law obligation created by the judgment from direct execution of the foreign judgment itself.
The ruling is limited to unrecognised judgments that are not subject to a statutory registration regime and satisfy the common-law requirements. Whether this particular bankruptcy order ultimately stands remains dependent on the Court of Appeal’s determination of Drelle’s outstanding challenges to the Russian judgment debt.