Supreme Court removes recognition hurdle for foreign judgment creditors

The unanimous decision overturns an earlier Court of Appeal ruling and confirms that creditors holding judgments from jurisdictions with no recognition treaty or statutory registration regime may rely on those judgments to commence bankruptcy proceedings directly. The removal of that procedural step is expected to reduce both cost and delay for creditors seeking to enforce foreign judgments in England.

Stuart McNeill, a banking litigation expert at Pinsent Masons, said: “Individual defendants sued abroad may need to adjust their litigation strategy in light of this decision. The assumption that recognition proceedings in England would provide a second opportunity to resist enforcement may not transpire in all cases, making active engagement in the foreign proceedings at an earlier stage all the more important.”

The appeal arose from a long-running dispute between Russian company Servis-Terminal LLC (ST) and its former director general, Valeriy Drelle. In 2019, a Russian court ordered Drelle to pay RUB 2 billion (approximately US$23.9 million) after finding that he had breached his duties in connection with a loan made by the company. Drelle unsuccessfully challenged the judgment through the Russian appeal courts.

After Drelle relocated to England, ST sought to recover the debt through English insolvency proceedings. The company presented a bankruptcy petition based on the Russian judgment, despite not having obtained a separate English recognition judgment. The Insolvency and Companies Court made a bankruptcy order, and that decision was upheld by the High Court. However, the Court of Appeal later ruled that the unrecognised foreign judgment could not constitute a qualifying debt for the purposes of section 267 of the Insolvency Act 1986 and set aside the bankruptcy order.

The Supreme Court disagreed. It held that, under longstanding common law principles, a final and conclusive foreign money judgment gives rise to an obligation to pay that can qualify as a “debt” for bankruptcy purposes. Recognition proceedings are not a prerequisite to establishing the existence of that debt.

As a result, creditors holding foreign judgments from jurisdictions that fall outside the UK’s statutory enforcement and registration regimes may proceed directly to bankruptcy proceedings in England and Wales.

The decision narrows the tactical options available to debtors. Previously, a debtor could require a creditor to bring separate recognition proceedings before commencing insolvency action. Following the Supreme Court’s ruling, that is no longer necessary for foreign judgments that fall outside the statutory registration regimes.

McNeill said: “Rather than front-loading disputes into recognition proceedings, debtors are now likely to challenge the petition debt directly within the insolvency proceedings themselves, focusing on fraud, breach of natural justice, public policy concerns, or whether the debt is genuinely disputed on substantial grounds. This represents a shift in battleground rather than the complete removal of any avenue for debtors to resist.”

Slava Tretyak, a litigation expert at Pinsent Masons, said: “The decision marks a meaningful shift towards England becoming a more creditor-friendly insolvency forum. It may be deployed tactically and may encourage foreign judgment creditors to use English bankruptcy procedures more frequently against debtors located in England. A creditor may now view obtaining a foreign judgment as a more effective route towards insolvency pressure in England.

“Whilst the decision of the Supreme Court may sound like a turning point, it does not suggest that foreign judgments will be accepted unquestioningly. Creditors must still overcome challenges that a judgment is impeachable or that the debt is genuinely disputed.”

A legitimate concern raised by the decision is the potential for forum shopping, with creditors seeking judgments in favourable jurisdictions before deploying them in England to support insolvency proceedings. Whether that concern materialises in practice remains to be seen.

Jurisdictional challenges, fraud objections and public policy defences remain available, and the debt must still withstand scrutiny as a valid petition debt.

“Those safeguards may prove sufficient, but the position will need to be monitored carefully,” said Tretyak.