Recognition Not Required: The Supreme Court Reverses Drelle

Creditors no longer need to have a foreign judgment recognised before petitioning on it. Unless the judgment is registrable, in which case nothing has changed. The BVI position, where the Commercial Court followed the reversed decision only months ago, changes with it.

On 27 July 2026 the Supreme Court unanimously allowed the creditor’s appeal in Drelle v Servis-Terminal LLC [2026] UKSC 29, reversing the Court of Appeal decision that has governed enforcement practice in England and offshore since January 2025.

What the Court decided

An unrecognised foreign money judgment gives rise to an immediate common law obligation to pay the judgment sum. That obligation is a “debt” within section 267 of the Insolvency Act 1986, and a bankruptcy petition may be founded on it.

The obligation arises when the foreign judgment is given. It does not wait for recognition.

Why the Court of Appeal was wrong

The Court of Appeal had held that a foreign judgment has no legal effect in England until recognised. Four strands of that reasoning were taken apart.

“No direct operation” was misread. Rule 45 of Dicey says a foreign judgment has no direct operation in England, and the Court of Appeal read that as meaning no legal effect at all. It means something narrower: the judgment is not an English judgment, so English execution machinery, charging orders, third party debt orders, the appointment of a receiver, cannot be used on it. That is why a creditor must sue on the judgment rather than execute it. The right to sue on it is itself proof that the judgment has legal effect.

Sword and shield was a false distinction. The Court of Appeal accepted that an unrecognised judgment could be relied on defensively but not offensively. Rule 51 draws no such line, and an action brought on a foreign judgment for a debt has always been offensive use of it. The distinction produced a great deal of commentary and does not survive.

The revenue rule was a false analogy. The Court of Appeal reasoned that because the revenue rule stops a foreign tax being a “debt” under section 267, and because both rest on a reluctance to give effect to foreign sovereign power, an unrecognised judgment should be treated the same way. The Supreme Court disagreed. There is a world of difference between a sovereign asserting a sovereign right and a private party asserting a private one, and Servis-Terminal is a private creditor suing on a private claim.

A petition is not enforcement. The premise underlying much of the Court of Appeal’s analysis was that petitioning enforces the judgment. It does not. Bankruptcy initiates a scheme of pari passu distribution behind a moratorium on enforcement, which is the antithesis of enforcing one creditor’s judgment. The editors of Dicey take the same view, noting that a creditor may serve a statutory demand in the terms of a foreign judgment as with any other unpaid debt.

One telling detail: at paragraph 57 the Supreme Court records that the Court of Appeal does not appear to have been addressed in detail on the obligation principle at all. That goes some way to explaining how three Lords Justices came to depart from settled law.

The qualification that matters

Section 6 of the Foreign Judgments (Reciprocal Enforcement) Act 1933 is untouched, and the decision in In re A Judgment Debtor [1939] Ch 601, that the section 6 bar extends to bankruptcy proceedings, was not challenged on the appeal. A judgment that is registrable but unregistered still cannot found a petition.

So the threshold question in every matter is now registrability. Broadly, the 1933 Act covers judgments from countries with reciprocal arrangements, including Australia, India, Pakistan, Israel, Norway and several EU states under surviving bilateral conventions, together with Guernsey, Jersey and the Isle of Man. Registration under the Administration of Justice Act 1920 applies to superior court judgments from a further group of Commonwealth countries. The Hague Conventions of 2005 and 2019 provide their own routes. Russia falls outside all of them, which is why Drelle was argued at common law.

Two practical points follow. If the judgment is registrable under the 1933 Act, register before you petition. If it is not, you may proceed on the judgment itself. The position under the 1920 Act, where a common law action has generally been treated as an alternative rather than being excluded, was not before the Supreme Court and would benefit from argument.

Why this is not a green light for creditors

The decision resolves a question of standing. It says nothing about the merits of any foreign judgment, and the substantive defences are untouched.

A debtor may still say the judgment was obtained by fraud, that it offends natural justice, or that it is contrary to English public policy. Separately, and often more usefully, a debtor may say the debt is disputed on bona fide and substantial grounds, which remains a complete answer to a statutory demand.

Mr Drelle himself is proof of the point. His bankruptcy order has not been restored. His grounds arguing that the ICC judge was wrong to find the debt undisputed, and that the High Court applied the wrong standard of appellate review, were never determined by the Court of Appeal and have been remitted to it. He may yet succeed. What has changed is not that these arguments have got harder, but that they are now the whole fight rather than a fallback.

The BVI position

In JJW Hotels & Resorts Holding Inc v Rhodes and Another (BVIHC (COM) 2025/0296), the Commercial Court, in a judgment of Mithani KC J (Ag), set aside a statutory demand founded on unrecognised Guernsey costs orders. The judge followed the Court of Appeal in Drelle and, in doing so, had to address the Privy Council’s decision in Vendort Traders Inc v Evrostroy Grupp LLC, which points the other way. He reconciled them by treating Vendort as confined to obligations existing independently of the foreign adjudicative process, so that a judgment which itself created the obligation fell on the Drelle side of the line.

That was a careful piece of reasoning, but its foundation has now gone. The Supreme Court does not cite Vendort, which was not before it, and the article should not be read as saying otherwise. Its reasoning is nonetheless squarely consistent with the broader reading of that case, and Vendort remains binding in the BVI.

Three points follow:

• A UKSC decision is persuasive rather than binding in the BVI, but on English common law of this character it will be treated as authoritative. It is difficult to see a BVI court preferring a reversed Court of Appeal decision to the reasoning that displaced it.
• The recognition-first advice that has governed statutory demands since early 2025 can be revisited, subject to the same registrability question under the BVI’s own regimes.
• On the Guernsey facts of JJW Hotels, registrability would have been the live question in England. The equivalent analysis in the BVI is now the first thing to check.

Cayman is confirmed in the stance it took in Re SIN Capital. In Hong Kong, the impetus for departure from existing authority has largely evaporated.

In short

For creditors who paused enforcement while the appeal was pending, the position is considerably better than it was a week ago. For debtors relying on recognition as a procedural shield, it is considerably worse. For everyone, the first question is registrability and the second is whether the judgment can be impeached.

I act for creditors and debtors in cross-border insolvency and enforcement matters in the BVI and in England. If the reversal affects a matter you are running, I am happy to discuss it.