Aug 2026
Executive Summary
On 27 July 2026, the UK Supreme Court handed down judgment in Drelle v Servis-Terminal LLC [2026] UKSC 29, overruling the Court of Appeal’s decision in Servis-Terminal LLC v Drelle [2025] EWCA Civ 62. The central issue was whether a creditor may rely on an unrecognised and unregistrable foreign judgment as a debt to present a bankruptcy petition under section 267 of the Insolvency Act 1986. On 31 January 2025, the English Court of Appeal held that a bankruptcy petition cannot be presented on the basis of an unrecognised foreign judgment.
The Supreme Court held the Court of Appeal wrong and confirmed the “obligation principle”: at common law, an unrecognised foreign judgment for a debt or definite sum of money gives rise to an immediate legal obligation to pay that sum. The obligation arises when the judgment is given and does not depend on recognition. On the construction of section 267, the Supreme Court held that “debt” is not defined and should be given its general common law meaning—a legal obligation owed by one person to pay a sum of money to another—which was understood, at the time the 1986 Act was passed, to include an obligation arising from an unrecognised foreign judgment.
The Supreme Court also clarified the relationship between insolvency and enforcement. While bankruptcy and winding-up proceedings are sometimes loosely categorised as a means of collective enforcement of debts, they are not, in any relevant sense, mechanisms for enforcing an individual judgment. Rather, they initiate a statutory process for the pari passu distribution of assets among creditors generally and operate under a moratorium that restricts individual enforcement action. Insolvency proceedings were accordingly described as “the very antithesis” of enforcing an individual creditor’s judgment.
Facts and Findings
Servis-Terminal LLC (“ST”), a Russian company in bankruptcy, obtained a judgment of RUB 2 billion against its former Director General, Mr. Drelle, for breach of duty in causing ST to advance a loan that was never repaid. All Russian appeals were dismissed. Mr. Drelle settled in London.
In October 2020, ST served a statutory demand and presented a bankruptcy petition under section 267 of the Insolvency Act 1986, relying on the Russian judgment, which had not been recognised in England and was not registrable under any reciprocal enforcement regime. ICC Judge Burton made a bankruptcy order; Richards J upheld it; the Court of Appeal reversed, holding that a petition could not rest on an unrecognised foreign judgment. The Supreme Court allowed ST’s appeal.
Having considered the arguments, the Supreme Court reaffirmed the “obligation principle”: a foreign judgment for a debt or definite sum of money gives rise to an obligation to pay the judgment sum, arising when the final and conclusive judgment is given, and not dependent on recognition1. “Debt” in section 267 of the Insolvency Act 1986 bears its wide common law meaning, a legal obligation to pay a sum of money, and is not specially defined in the Act2. The obligation arising from an unrecognised foreign judgment falls squarely within that meaning3.
What are the Implications of Drelle for the BVI, Cayman Islands and Bermuda?
Prior to the English Court of Appeal’s decision, the position across the relevant offshore jurisdictions was broadly consistent: recognition or formal domestic enforcement of a foreign judgment or award was not a precondition to relying on it to found insolvency proceedings.
UK Supreme Court and Privy Council decisions are treated as highly persuasive (and, in the case of Privy Council appeals from the BVI or Cayman Islands, binding).
BVI
Shortly before the Supreme Court’s decision in Drelle, this question was considered in JJW Hotels & Resorts Holding Inc. v Benjamin Alexander Rhodes and Another [BVIHC (COM) 2025/0296]. The respondents served a statutory demand based on costs orders made by the Guernsey courts. The applicant sought to set aside the demand, relying on the Court of Appeal’s decision in Drelle.
Mithani J KC (Ag) set aside the statutory demand, holding that where the sole source of indebtedness is a foreign judgment (as opposed to a pre-existing contractual obligation), that judgment must be recognised before the debt can be treated as due and payable under section 155 of the Insolvency Act 2003. The BVI Court distinguished the Privy Council’s decision in Vendort Traders Inc v Evrostroy Grupp LLC [2016] UKPC 15, where the debt arose from a contract confirmed by an arbitral award (i.e. a pre-existing contractual obligation), on the basis that in JJW Hotels the debt under a costs order arose solely from the foreign court orders themselves.
JJW Hotels was decided on 31 March 2026, before the UK Supreme Court handed down Drelle on 27 July 2026. Following UK Supreme Court’s unequivocal reaffirmation that a foreign judgment for a debt itself gives rise to a legal obligation to pay, independent of recognition, if JJW Hotels reasoning is relied on in the future, the BVI courts will have to reconsider the position and will probably come to a different conclusion.
In Vendort Traders Inc, Lord Sumption held that an arbitration award gave rise to an enforceable debt as soon as it was issued and was conclusive evidence as between the parties that an enforceable debt was due. The only relevance of a recognition order was that it made available the court’s procedural facilities for satisfying that debt; the order recognises the enforceability of the debt, but the source of its enforceability is not the order but the underlying obligation. Vendort thus established that prior court recognition or enforcement of a foreign arbitral award (and, by extension on the reasoning, a foreign judgment) is not a precondition to relying on it as the basis for a statutory demand or winding-up proceedings.
The Supreme Court’s reaffirmation in Drelle suggests that the distinction identified in JJW Hotels between “pre-existing contractual obligations” and “debt arose from the foreign court orders” does not impact on the ability of a foreign judgment creditor to reply on the judgment debt (including a costs order) as the basis for a statutory demand or winding up proceedings.
Cayman Islands
In a pre-Drelle judgment, in Re Guoan International Limited [FSD 0153-2021 (IKJ)], Justice Kawaley held that a final and conclusive foreign judgment (in that case, a Hong Kong judgment) could be relied upon to found a statutory demand and winding-up petition without first being formally enforced in the Cayman Islands. The Court rejected the contrary Bermudian authority of Holborn Oil Company Limited v Tesora Petroleum Corporation [1990], which had held that a foreign judgment must be locally enforced before it can ground a winding-up petition, finding it unsupported by authority and out of step with the common law recognition principles set out in Dicey, Morris & Collins. Justice Kawaley held that the petitioners were entitled in principle to seek a winding-up order based on their statutory demand, which was in turn based on the Hong Kong judgment, although the petition was ultimately adjourned on comity grounds to allow the company to seek a stay of the judgment pending appeal in Hong Kong.
More recently, in a post-Drelle decision (ie after the CA Decision), in Re SIN Capital (Cayman) Ltd [2025] CIGC (FSD) 18, Justice Doyle granted a winding-up order based on a statutory demand that relied on a Singapore arbitral award and a related Singapore High Court enforcement order, without requiring prior recognition or registration in the Cayman Islands. The petitioner simply relied on the statutory demand. Justice Doyle drew attention to the CA Decision and also to the Isle of Man decision in Obertor Ltd v Gaetano Ltd (2010), where the Manx court did not require a foreign judgment to be registered prior to reliance on a statutory demand. Notwithstanding the position set out in the CA Decision, Justice Doyle was satisfied that no further steps needed to be taken in the Cayman Islands to recognise or register the award, and made the winding-up order.
While the Grand Court had already supported reliance on unrecognised foreign judgments and awards in insolvency proceedings, the Supreme Court’s unequivocal endorsement of the obligation principle and its confirmation that prior recognition is not required removes ambiguity on the point.
Bermuda
With respect to Bermuda, Kawaley J (then as a Cayman judge) expressly considered and declined to follow the Bermuda Supreme Court decision in Holborn Oil Co Ltd v Tesora Petroleum Corp [1990] SC (Bda) Civ 273, in which it had been held that a foreign judgment is not enforceable in Bermuda per se and that there was accordingly no debt which would give the petitioner a right to a winding-up order. Kawaley J considered Holborn “unsupported by any other authority,” doubted it reflected the modern Bermuda law position, and declined to follow it. Kawaley J’s observation is indicative of the position of Bermuda law given his former role as the Chief Justice of Bermuda, and significantly, his view is now reaffirmed by the Supreme Court’s unequivocal endorsement of the obligation principle.
What are the Key Takeaways from Drelle?
The UK Supreme Court’s decision in Drelle settles a question that has divided practitioners and courts across common law jurisdictions: an unrecognised foreign judgment for a debt creates a legal obligation to pay at common law, and that obligation is a “debt” sufficient to ground insolvency proceedings. Prior recognition is not required.
In the BVI, Drelle casts significant doubt on JJW Hotels and is likely to require the BVI courts to reconsider that position. Creditors holding unrecognised foreign judgments in the BVI should take note: the legal landscape has shifted materially in their favour.
In the Cayman Islands, the position is more straightforward. The Grand Court had already supported reliance on unrecognised foreign judgments and awards in insolvency proceedings, as demonstrated in Re Guoan International Limited and Re SIN Capital. The UK Supreme Court’s decision removes any remaining ambiguity and provides authoritative support for the approach the Cayman courts have already adopted.
In Bermuda, the UK Supreme Court’s decision reaffirmed Kawaley J’s previous doubt that Holborn reflected the modern Bermuda law position, which led to his decision to decline in following it in Re Guoan International Limited. The UK Supreme Court’s decision in Drelle will be a strongly persuasive authority in support of that view if the Bermuda Court is asked to consider the position in a future case.
The Supreme Court’s decision is highly persuasive in offshore jurisdictions. The practical significance to creditors is clear: they can continue to rely on foreign judgment and award debts as the basis for statutory demands and insolvency petitions without first seeking recognition. This promotes an effective cross-border enforcement regime.
For creditors holding foreign judgments from non-reciprocal jurisdictions, Drelle is a welcome development. The procedural hurdle of prior local recognition has been removed. Debtors, however, are not without protection: traditional recognition defences (lack of jurisdiction, fraud, public policy, denial of natural justice) remain available as grounds to challenge the statutory demand or petition, and the Court’s discretion over whether to make an insolvency order is preserved.
1 See paragraph 56.
2 See paragraph 81.
3 See paragraph 82.