Drelle v Servis-Terminal LLC: Supreme Court clarifies cross-border insolvency and asset recovery

The Supreme Court has removed a major obstacle to cross-border recovery, allowing creditors to move more quickly from foreign judgment to insolvency-based enforcement and asset preservation.

On 27 July 2026, the Supreme Court handed down judgment in Valeriy Ernestovich Drelle v Servis-Terminal LLC (In Liquidation in the Russian Federation) [2026] UKSC 29. This landmark ruling for cross-border debt recovery confirms that an unrecognised and unregistrable foreign judgment can form the basis of a bankruptcy petition in England and Wales. The decision overturns the Court of Appeal’s restrictive approach and removes a significant obstacle for creditors seeking to use insolvency proceedings to recover foreign judgment debts.

Background and decision

The case concerned a Russian judgment that had not been recognised or registered in England and Wales, and whether it could nonetheless give rise to an enforceable debt capable of supporting a bankruptcy petition. Last year, the Court of Appeal held that it could not. The Supreme Court's decision rejected that approach, confirming that:

• Where a foreign judgment is final, conclusive and given by a court of competent jurisdiction, it creates an immediate common law obligation on the debtor to pay the judgment sum. Importantly, that obligation arises regardless of whether the judgment has been recognised or registered in England and Wales.
• While an unrecognised foreign judgment cannot be enforced using the enforcement mechanisms available for English judgments, such as third-party debt orders or charging orders, this does not mean it is without legal effect.
• An unrecognised foreign judgment is not merely a "shield" and can be used as a "sword" to proactively pursue a claim.
• A payment obligation imposed by an unregistered or unrecognised foreign judgment constitutes a "debt" under section 267 of the Insolvency Act 1986. While the IA 1986 does not define "debt" for the purposes of section 267, the term should be given its ordinary common law meaning, being a legal obligation to pay a sum of money to another person. 

Practical implications

The Supreme Court’s decision is an important development for cross-border insolvency, enforcement and debt recovery. By confirming that creditors can rely on a qualifying foreign judgment at common law without first obtaining recognition or registration in England and Wales, the Court has aligned the position with that of other leading jurisdictions.

The decision is likely to make cross-border recoveries in England and Wales faster, simpler and more cost-effective, strengthening the tools available to creditors, officeholders and fraud victims.

Depending on the jurisdiction of the originating judgment and the wider circumstances of the case, registering a foreign judgment may be difficult or even impossible (as it was in this case).  

Statutory regimes can make it easier to recognise foreign judgments, but they are not without their downsides. They can add cost and delay, may be subject to challenge, and are available only for judgments from certain countries, excluding key jurisdictions such as the US, UAE, Russia and China.

If the judgment originates from a jurisdiction not covered by the statutory recognition and registration regimes, the creditor's only option will be to enforce their judgment under the common law regime. The common law route requires creditors to bring a new claim in England and Wales based on the foreign judgment, and (most likely) to obtain a summary judgment. Unlike some recognition or enforcement procedures, the common law route generally requires the judgment debtor to be notified before enforcement can proceed, which can often cause difficulties and delays.

The significance of the Drelle decision extends beyond mere procedural efficiency. Insolvency proceedings are often used as an asset preservation tool. In the corporate context, the presentation of a winding-up petition triggers the protections contained in section 127 of the Insolvency Act 1986, under which dispositions of a company's property made after the presentation of a winding up petition are automatically void upon the making of a winding up order (absent a validation order). In the personal insolvency context, section 284 has a similar effect. For creditors concerned about asset dissipation, those provisions can provide powerful protection. 

Following the Court of Appeal's decision in Drelle, creditors with foreign judgments may have been required to obtain recognition of those judgments before they could benefit from insolvency-based protections. This could result in additional cost and delay, particularly where common law recognition was required, while also risking alerting the debtor to impending recovery action. The Supreme Court's decision removes that obstacle and allows creditors to move more quickly to obtain the benefit of insolvency-based protections.

The implications of the decision extend well beyond England and Wales. The Court of Appeal's now overturned decision in Drelle attracted significant attention across the offshore world and had already begun influencing judicial reasoning in other common law jurisdictions. In the British Virgin Islands, for example, the Commercial Court recently considered and followed aspects of the Court of Appeal's analysis in JJW Hotels & Resorts Holding Inc v Rhodes & Anor BVIHC (COM) 2025/0296. 

The Supreme Court's decision also brings the treatment of foreign judgments back into line with the position that already existed in relation to foreign arbitral awards. The Privy Council had already confirmed in Vendort Traders Inc v Evrostroy Grupp LLC [2016] UKPC 15 (an appeal originating from the BVI) that an unrecognised foreign arbitration award can support a statutory demand and insolvency proceedings. The Court of Appeal's decision in Drelle had created an unusual situation in which holders of foreign arbitral awards were in a materially better position than judgment creditors. The Supreme Court's approach places judgment and award creditors on a level playing field in this regard.

Key takeaways

Overall, this decision is good news for creditors, insolvency practitioners, litigation funders and fraud victims. It removes significant procedural hurdles by ensuring that creditors need not incur the time and expense of separate recognition proceedings before pursuing insolvency remedies in England and Wales. It boosts the effectiveness of insolvency proceedings as a recovery and asset preservation tool by reducing the scope for debtors to exploit delay created by recognition requirements.

Why Withers?

Withers is particularly well placed to advise on the implications of Drelle. We regularly coordinate complex recovery strategies that span the UK, Europe, the British Virgin Islands, Cayman Islands, the US, Channel Islands, Asia-Pacific (including Hong Kong, Singapore and China) and the Middle East. With qualified dispute resolution lawyers around the world, including leading litigation and contentious BVI practices, we are able to develop coordinated insolvency, enforcement and asset recovery strategies across the jurisdictions most commonly encountered in international structures and cross-border disputes.