IP Briefing – Drelle v Servis Terminal LLC (In Liquidation)

The Supreme Court has recently reversed an English Court of Appeal case in determining whether a bankruptcy petition in England can be founded upon a foreign judgment that has not been recognised in the jurisdiction.

For background, the creditor (a Russian company in liquidation) had obtained a judgment through the Russian courts for 2 billion roubles against a former director who now lives in London. Rather than attempting to have the courts recognise the foreign judgment, the company bypassed this and immediately served a statutory demand under the 1986 Act.

The Supreme Court was asked to consider whether the foreign judgment was capable of being used to found a bankruptcy petition. The Supreme Court determined that a ‘final and conclusive’ foreign judgment, although unrecognised, creates a legal obligation to pay that sum without any need for prior recognition. This is in keeping with the common law understanding of foreign judgments before the 1986 Act was in force.

However, this does also allow for a defence. If it can be shown that the foreign judgment can be disputed on ‘genuine and substantial grounds’, such as fraud, the judgment cannot be used to found the petition.

The Supreme Court also considered whether the foreign judgment would fall under the meaning of ‘debt’ in Section 267 of the 1986 Act. In respect of this the court confirmed that the word “debt” should be interpreted in a wide general sense and said “We can envisage no reason why section 267 should have used ‘debt’ in any narrower sense than we have described, or why its purpose should not have extended to a legal obligation to pay under an unrecognised foreign judgment”. It should be noted that the Court was clear that this only applies where the judgment is “unregistrable”; where there is a statutory scheme in place for the recognition of judgments from that country, this must be followed before the judgment can be founded upon in bankruptcy proceedings. The relevant statutory schemes include the Foreign Judgments (Reciprocal Enforcement) Act 1933 and Administration of Justice Act 1920. Notable omissions from these statutory schemes, which therefore constitute “unregisterable” judgements, include the United States, China, Japan, Hong Kong, Saudi Arabia and the UAE.

Although Drelle was an English bankruptcy and section 267 does not apply in Scotland, if the same approach is followed by courts in Scotland it has the potential to have a significant impact going forward. The Supreme Court’s decision would be persuasive to Scottish Courts who would be free to adopt the Supreme Court’s construction of “debt” in similar cases.
If acting for creditors holding foreign judgments, IPs should note that there may be the potential going forward to serve a statutory demand, and then proceed to petition for the debtor’s sequestration, based on the judgment. Anyone acting for a debtor in a similar action should scrutinise the foreign proceedings closely as the best opportunity for a defence now lies in demonstrating that the judgment debt is genuinely disputed.

BBM Solicitors specialise in advising IP’s in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal (emb@bbmsolicitors.co.uk).This briefing note is current as at 17 September 2026 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).