In Servis-Terminal LLC v Drelle [2025] EWCA Civ 62, the Court of Appeal considered whether a foreign judgment which had not been recognised could be regarded as creating a “debt” for insolvency purposes in this jurisdiction?
Servis-Terminal LLC obtained a Russian court judgment against Mr Drelle. Servis served Drelle (resident in London) a statutory demand under the Insolvency Act 1986 on the basis of the Russian judgment. Servis later presented a bankruptcy petition against Drelle.
Newey LJ giving the leading judgment (with Popplewell and Snowden LJJ concurring) held that a bankruptcy petition could not be presented in respect of a foreign judgment which had not been recognised or registered in England and Wales (at [55]).
Territorial Competence and Statutory Construction
Phillips KC (South Square Chambers) submitted that section 267 of the Insolvency Act 1986 operates as an autonomous code, requiring merely the existence of a “debt” rather than one actionable at common law. The Court of Appeal robustly rejected this submission, reaffirming the orthodox position in Dicey: a foreign judgment has no direct operation in this jurisdiction.
Snowden LJ underscored the fundamental principle that judicial adjudication is an inherent exercise of state sovereignty (at [41]). It is submitted that this principle constitutes the conceptual fulcrum of the decision. To enforce a foreign judgment absent recognition is tantamount to enforcing the command of a foreign sovereign which is a course that the common law has historically refused to countenance.
Newey LJ buttressed this conclusion through statutory construction, noting that while section 267 does not expressly exclude foreign tax liabilities, such liabilities are plainly unenforceable. It follows, as His Lordship reasoned (at [44]), that the 1986 Act “does not exist in a vacuum” but must be construed against the backdrop of private international law. The Court correctly dismissed the submission that the “special nature” of insolvency proceedings justifies a departure from these structural principles. Accordingly, the judgment serves as a salutary reminder that the machinery of insolvency must remain subject to, and indeed constrained by, the fundamental rules of private international law.
Why Bankruptcy is enforcement
Phillips KC submitted that the exclusionary rule in Rule 45 of Dicey was inapplicable on the basis that bankruptcy proceedings do not constitute “execution” in the strict sense (i.e. asset seizure). The Court of Appeal correctly rejected this narrow distinction, preferring an analysis based on the substantive effect of a bankruptcy petition on its subject.
As Newey LJ elucidated, execution is merely a species of enforcement. This interpretation is to be preferred as a bankruptcy petition is legally predicated on the petitioner’s unpaid debt. It is plain that, by relying on the judgment to ground a petition, the creditor was unequivocally deploying it as a ‘sword’ to invoke the Court’s coercive powers.
The decision disposes of this strained construction, confirming that the exclusionary rule operates as an absolute bar: absent recognition, a foreign judgment cannot found an enforcement action in this jurisdiction, whether by way of individual execution or collective insolvency process.
