English Court of Appeal rules on foreign judgments and bankruptcy

The English Court of Appeal has considered whether an unrecognised foreign judgment constitutes a 'debt' for the purposes of a bankruptcy petition. 

Background 

The case involves Servis-Terminal LLC, a Russian company, and Valeriy Ernestovich Drelle, its former CEO. The liquidator of Servis-Terminal sought compensation from Mr. Drelle, claiming he acted improperly regarding a RUB 2 billion loan made to another company. The Russian Courts ordered Mr. Drelle to pay damages and the liquidator of Servis-Terminal served a statutory demand and then filed a bankruptcy petition in the English Court based on the judgment debt.

Court of Appeal decision 

Initially, the High Court ruled that the foreign judgment could support a bankruptcy petition in England even though it wasn't recognised here (see our Alert). However, the Court of Appeal disagreed. They concluded that an unrecognised foreign judgment cannot form the basis for a bankruptcy petition in England. They set aside the previous order and dismissed the bankruptcy petition against Mr. Drelle.

Key takeaways

• An unrecognised foreign judgment is unenforceable and is not a 'debt' for the purposes of a bankruptcy petition or a statutory demand.
• Judgments by foreign courts have no direct effect in England.
• To enforce such judgments in England, either an English court judgment is required or registration under relevant statutes or treaties.
• Bankruptcy and winding up are collective proceedings to enforce rights, not to establish them. 

This decision confirms that recognition of a foreign judgment (or registration under statute) is required before it can form the basis of a bankruptcy petition and the same would likely apply to a winding up petition.

Servis-Terminal LLC v Drelle [2025] EWCA Civ 62