Do you recognise me? Supreme Court opens a new route to recovery for foreign judgment creditors

Valeriy Ernestovich Drelle v Servis-Terminal LLC

The Supreme Court has handed down another landmark judgment which allows creditors to pursue recovery of certain foreign judgment debts without the requirement for that debt to be first recognised in England and Wales (‘E&W’). The decision outlines that a foreign debt can constitute a debt for the purposes of forming a creditor-led bankruptcy petition, pursuant to section 267 of the Insolvency Act 1986.  

This solely relates to unrecognised foreign judgment debts of an originating jurisdiction whose debts are deemed unregisterable in E&W. Prior to the Supreme Court ruling, judgment debt from countries such as China, Russia, the US and other non-treaty countries would require recognition. It will be interesting to see if other similar creditors follow suit and petition for bankruptcy based on unrecognised foreign judgment debts as a means of exploring enforcement strategies in E&W.

Here, the ability to claim accrued interest plus costs on judgment debts (appreciating rarely in full) is something we are used to. However, there should be some caution as the Supreme Court ruling indicates that unless specified as a “definite sum of money”, creditors with foreign judgments cannot seek those “unliquidated” elements in their enforcement procedure. As a result, creditors seeking to enforce foreign judgments may want to expedite the enforcement process, which could become faster and cheaper without the recognition requirement. 

In turn, E&W Insolvency Practitioners may see increased enquiries from overseas judgment creditors that want to understand the timeline and options, with this ruling providing overseas creditors with additional recovery options where an application for the debtor’s bankruptcy is subject to the jurisdiction of E&W.

At FRP, we advise on global enforcement strategies and, given the Supreme Court ruling, are preparing for the recovery timetable may become compressed and the ability to realise assets expedited, without the need for recognition processes that can delay matters. In theory, this should improve prospects of mitigating asset dissipation and preserve or increase assets available for creditors, namely in scenarios of fraud or diversion of assets (freezing orders aside).

We suspect this will not be the end of the story and are equipped to explore alternative recovery strategies for foreign judgment creditors. 

If you have any queries about enforcement of a foreign judgment or the processes to pursue recovery of a debt in E&W, please do reach out to the FRP Contentious Insolvency Team.

Judgment can be seen here — Drelle

Subscribe to our latest insights by topic here