Foreign judgments cannot underpin insolvency proceedings unless recognised in the jurisdiction, says English Court of Appeal

Reversing the decision of the High Court, the Court of Appeal has determined that a creditor cannot rely on a foreign judgment to pursue insolvency proceedings unless the judgment has first been recognised in the jurisdiction. 

In 2024, the High Court in Drelle v Servis-Terminal LLC confirmed its stance on foreign money judgments. The court found that a judgment of the Russian court could form a basis for bankruptcy proceedings in England notwithstanding that the foreign judgment had not been subject to recognition proceedings in England. The decision has now been overturned on appeal. 

The High Court had based its decision on the distinction between the enforcement of a foreign judgment and the question of what was a debt for the purposes of the Insolvency Act 1986 and relied on the principle that (subject to exceptions) a foreign judgment is conclusive of any matter that it adjudicates on notwithstanding any lack of recognition. It went on to conclude that the foreign judgment was a "debt" notwithstanding that there were obstacles to enforcement. 

In January, disagreeing with the High Court, the Court of Appeal in Servis-Terminal LLC v Drelle [2025] determined that foreign judgments, as an exercise of sovereign power by the judicial organs of a foreign state, have no direct effect in England and cannot be enforced using any process of the English court (including, in this case, bankruptcy proceedings). The English law principle that a foreign judgment to be conclusive of any matter that it adjudicates on does not enable the judgment to be used as a "sword" to pursue insolvency proceedings. 

Further, in this case, the Russian judgment did not itself arise out of a debt claim but arose out of a claim for breach of fiduciary duty. There was therefore no underlying debt and the judgment itself had to be relied upon. 

The appeal court held that instead the judgment creditor must either bring proceedings in England to recognise the foreign judgment (under common law or one of the other applicable regimes for enforcement). 

Osborne Clarke comment 

The judgment resolves a significant uncertainty in the use of foreign judgment debts to underpin insolvency proceedings. The judgment makes clear that only foreign judgments which have been recognised in England may found such proceedings. 

In practice, this means that the process of commencing insolvency proceedings where reliance is placed on a foreign judgment will be slowed down. However, if there was a genuine dispute as to the recognition of the foreign judgment in England, one would previously still have expected to have to complete the recognition process before commencing any insolvency proceedings. 

While this decision relates to a bankruptcy petition, the principles should apply equally to winding up petitions.