An unrecognised foreign judgment does not create a debt

The Court of Appeal has ruled that a bankruptcy petition may not be presented on the basis of a foreign judgement which had not first been recognised or registered in England.

We previously covered two decisions (Drelle and Re a Company) addressing this question.

Mr Drelle was ordered by a Russian court to pay 2 billion Roubles. There is no enforcement convention between Russia and England, meaning recognition requires the commencement of a fresh claim in England based on the Russian judgment. Could the creditor sidestep that and present a bankruptcy petition instead? The High Court said yes. The Court of Appeal has said, unequivocally, it can’t.

Initially Drelle’s appeals had proceeded on the basis he had grounds to dispute enforcement. However, it later focussed on whether an unrecognised foreign judgment could be a petition debt at all under s. 267 IA 1986. A debt is defined by that section as “a liquidated sum payable… either immediately, or at some certain, future time...” 

The Court of Appeal held that a foreign judgment (which is the exercise of a sovereign power) has no direct effect in England until recognised or registered. Until then it cannot be used as a sword whether by way of a direct execution, or by a collective remedy of insolvency proceedings and was not a debt for the purposes of s. 267 IA. The grounds for presenting a bankruptcy petition are narrower than for a company, but this is a significant decision for cross-border practitioners as it removes insolvency proceedings as an enforcement tool absent recognition, seemingly for both individual and company debtors. That may be critical if the ability recognise the foreign judgment might face obstacles such as a registration time limit.

Having said all of this, whilst a foreign judgment may not give rise to a debt according to the Court of Appeal, that does not mean the underlying liability that led to it is not and that creates anomalies. Take for instance Gardens Limited v DOK82 Limited. In that case, the petition debt was a sum due under a contract governed by Hong Kong law and subject to the exclusive jurisdiction of the Hong Kong Courts. A winding up order was made in England and survived an appeal, but if the creditor opted to obtain judgement in Hong Kong first (which presumably is what the parties intended would happen on breach), then according to Drelle, that judgement could not have formed the basis of a petition until it had been registered first.

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

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