Servis-Terminal v Drelle: A Landmark Decision on the Recognition of Foreign Judgments 

The Court of Appeal has recently clarified an important aspect of cross-border enforcement in insolvency proceedings. In Servis-Terminal LLC v Drelle [2025] EWCA Civ 62, the Court of Appeal ruled that a foreign judgment cannot be used as the basis for a bankruptcy petition in England and Wales unless it has first been recognised by an English court. 

This decision has significant implications for both creditors seeking to recover debts and debtors defending against insolvency proceedings. Below, we explore how the judgment affects businesses, creditors, and debtors.

Background: The role of foreign judgments in bankruptcy petitions

Before the ruling, there had been some confusion over whether an unrecognised foreign judgment could be relied upon in bankruptcy and winding-up proceedings. Under common law principles, foreign judgments are not automatically enforced in England and Wales. However, some creditors sought to use them as the basis for bankruptcy petitions arguing that they constituted a debt.

The Court of Appeal has now settled the matter. Foreign judgements must go through a formal recognition process before they can be enforced in insolvency proceedings. The ruling ensures greater procedural consistency. 

What does the judgment mean for creditors?

This decision imposes an extra step for creditors with foreign judgments against debtors in England and Wales before they can pursue insolvency proceedings. Instead of immediately filing a winding-up petition or a bankruptcy petition, they must first apply to the English courts to have the foreign judgment recognised.

This means creditors must rely on one of the established legal routes in English law, such as:

• The Administration of Justice Act 1920 (for judgments from certain Commonwealth countries)
• The Foreign Judgments (Reciprocal Enforcement) Act 1933 (for judgments from specified countries with reciprocal agreements)
• The common law process, which requires proving that the foreign judgment is final, conclusive, and issued by a competent court

Without proper recognition, a creditor’s petition may be dismissed.

What the judgement means for debtors

For debtors, this ruling adds a layer of protection against bankruptcy petitions based on foreign judgments. Debtors now have a clearer route to challenge bankruptcy proceedings initiated based on unrecognised foreign judgments.

Debtors addressing a bankruptcy petition based on a foreign judgment can argue the following, which is not an exhaustive list:

• That the judgment has not been recognised in England and Wales and therefore should not be relied upon as proof of debt.
• That there are grounds to contest recognition, such as procedural unfairness in the foreign court, lack of jurisdiction, or potential public policy concerns.
• That they have defences under English law that may not have been considered in the foreign proceedings.

This ruling may also give debtors more time to negotiate settlements, restructure debt, or seek alternative legal remedies before being subjected to insolvency proceedings.

Implications for cross-border commercial transactions

The ruling reinforces the principle that foreign judgments are not automatically enforceable in England and Wales. Businesses engaged in cross-border transactions should be aware that if a dispute leads to a foreign court judgment, additional legal steps may be necessary before enforcement can take place in England and Wales.

Companies involved in international commerce should consider drafting contracts that specify the jurisdiction and governing law of disputes. Arbitration clauses, for example, may offer a more efficient dispute resolution than litigation in foreign courts. Arbitration awards generally benefit from more straightforward enforcement mechanisms under international treaties.

The wider legal impact

The decision in Servis-Terminal v Drelle reflects the strict approach of English law to recognising and enforcing foreign judgments. It also highlights the importance of due diligence when dealing with international disputes.

The recognition of foreign judgments can impact decisions on where to litigate and whether alternative dispute resolution is more suitable. It may also allow for challenges to bankruptcy petitions and/or winding up petitions if a judgment is not recognised, providing a way to safeguard financial interests.

Final thoughts 

The Court of Appeal’s ruling clarifies the treatment of foreign judgments in insolvency proceedings. While it may create additional hurdles for creditors, it also ensures consistency in enforcing foreign judgments under English law. Debtors now have clearer avenues to challenge bankruptcy petitions based on foreign judgments that have not undergone the formal recognition process.

Both creditors and debtors must adapt to this clarified framework when dealing with cross-border commercial disputes. Businesses and individuals need to understand these legal principles to navigate cross-border insolvency and enforcement effectively.

At Lincoln & Rowe, we understand the importance of helping our clients keep their businesses running smoothly. As well as in-depth commercial expertise, we provide excellent service to our clients and practical advice and guidance.

We have wide-ranging experience in litigation and corporate law and were named as winners of the Global 100 for Best Firm for Commercial Disputes of the Year 2025 and Gamechangers Global Awards for Commercial Litigation Law Firm of the Year in the United Kingdom 2025.

If you would like to talk to one of our expert legal team members about any queries you may have, contact the author, Dipesh Dosani, or call the team today on 020 3968 6030, and we’ll be happy to help.

The above information is for general guidance on your rights and responsibilities and is not legal advice. If you need more details on your rights or legal advice about what action to take, please contact a legal advisor.