Petitioning on the basis of foreign judgments: the impact of Drelle in offshore jurisdictions

The English Court of Appeal, in Servis-Terminal v Drelle [2025] EWCA Civ 62 (Drelle), ruled that a bankruptcy petition may not be presented against a debtor in reliance on a foreign judgment which has not been recognised in England. 

In the common law jurisdictions in which Ogier operates (the Cayman Islands, BVI, Guernsey, Jersey and Ireland), such Court of Appeal judgments have persuasive effect, but are not strictly binding. This has therefore raised an important question in those jurisdictions as to whether a judgment creditor still has standing to present a creditor's winding up petition on the basis of an unrecognised foreign judgment against the debtor, or whether recognition of the judgment must be sought in the first instance.  

This article outlines the reasoning underpinning the Drelle decision and considers whether the judgment has, or may in future, alter the approach of the courts in the Cayman Islands, BVI, Jersey, Guernsey and Ireland.  

The English Court of Appeal's decision in Drelle 

Mr Drelle, former CEO of Russian company Servis-Terminal, was indebted to Servis-Terminal in the sum of RUB 2 million pursuant to a Russian court judgment. The judgment was final but had not been recognised in England. The bankruptcy trustees of Servis Terminal issued a statutory demand to Mr Drelle under section 268(1)(a) of the Insolvency Act 1986 in reliance on the Russian judgment (all avenues for appeal having been exhausted). They then issued a bankruptcy petition and a bankruptcy order was ultimately made against Mr Drelle.  

Mr Drelle's initial appeal to the High Court was dismissed by Richards J on the basis that the fact the judgment had not been the subject of recognition proceedings in England did not prevent it from being the basis of a bankruptcy petition.  

However, on further appeal, the Court of Appeal found that "not having been the subject of recognition proceedings, the judgment was not capable of providing the basis for a bankruptcy petition and, accordingly, that the bankruptcy order which ICC Judge Burton made should be set aside and the petition dismissed" (Judgment at [56]).  

During the ruling, the Court of Appeal drew the following conclusions: 

• a creditor who presents a bankruptcy or winding up petition in respect of a judgment debt is seeking enforcement (Judgment at [39])

• the rule against enforcement of unrecognised foreign judgments is comparable to the revenue rule which seeks to protect sovereign rights (Judgment at [41]-[42])

• an unrecognised foreign judgment does not constitute a "debt" for the purposes of the Insolvency Act (Judgment at [55]) 

Thus, the Court of Appeal concluded that "a person should not be able to invoke the collective enforcement mechanisms of bankruptcy or winding up proceedings in the English court unless and until he obtains an English judgment, or registers the judgment or has some other basis under a statute or treaty permitting such enforcement of the foreign judgment" (Judgment at [64]).

Enforcement of Court judgments vs arbitral awards 

It is worth noting that the Court of Appeal only considered the viability of relying on a foreign court judgment to present a petition and did not address whether the same rule applied to petitions presented on the basis of unrecognised arbitral awards. Given the Court's focus on arguments of sovereignty, it may be that a creditor's standing to petition in reliance on a foreign arbitral award remains unaffected. There is also express authority in some jurisdictions which confirms a petitioner's right to rely on an unrecognised arbitral award.  

The impact of Drelle in offshore jurisdictions

British Virgin Islands 

The BVI is one such jurisdiction in which the Court confirmed that there is no statutory requirement for petitioners to seek recognition of a foreign arbitral award before it can found insolvency proceedings. The Privy Council (in Vendort Traders Inc v Evrostroy Grupp LLC [2016] UKPC 15) upheld the ECSC Court of Appeal's decision, and opined that: "… the [arbitral] award gave rise to an enforceable debt as soon as it was issued. Moreover, it was conclusive evidence as between the parties that an enforceable debt was due in respect of the price of the shares. The only relevance of an order under section 28 is that it makes available the court's procedural facilities for satisfying that debt. The order recognises the enforceability of the debt, but the source of its enforceability in not the order but the contract."

There are no written BVI cases considering the position in relation to unenforced foreign judgments. It will be interesting post-Drelle to see how the BVI Court treats the enforceability of such debts and whether it distinguishes the treatment of non-domesticated foreign judgments and foreign arbitral awards. 

Cayman Islands

There is Grand Court authority dating back to 1996 (In re Lhasa Investments Ltd [1996] CILR N-3) in which the Court found that a company which has failed to satisfy a foreign judgment debt is "unable to pay its debts" within the meaning of the Companies Act and may be wound up accordingly. The judgment creditor is a creditor "to whom the company is indebted at law or in equity" within the meaning of section 94(a) of the Companies Act. Similarly in In the matter of Guoan International Limited (Unreported, Kawaley J 29 October 2021) concluded that a petitioner was entitled to a winding up order as of right following service of a statutory demand in reliance on an undomesticated Hong Kong judgment. Kawaley J was satisfied that "the general principles according to which a final foreign judgment on the merits cannot be challenged by a party bound by it applied in the winding-up context". He specifically declined to follow Bermuda authority in which a petition was dismissed on the grounds that the foreign judgment had to be locally enforced before reliance could be placed upon it. It is not clear whether, in light of the reasoning in Drelle, the Court may adopt a different reasoning if the question comes before it again.  

More recently, in the context of a winding up petition presented in reliance on an unrecognised arbitral award, the Court in Sin Capital (Cayman) Ltd [2025] CIGC (FSD) 18 drew the petitioner's attention to the Drelle decision but ultimately proceeded to make the winding up order. 

Jersey 

In order to have effect in Jersey, a foreign judgment must be recognised or registered, which is typically done either under the Judgments (Reciprocal Enforcement) (Jersey) Law 1990, or by bringing fresh proceedings in Jersey at common law, suing on the judgment debt. The Royal Court has consistently held that an unrecognised foreign judgment is only evidence of a debt and therefore is not itself directly enforceable.   

In HWA 555 Owners, LLC v Redox Plc SA (formerly Regus PLC) [2023] JCA085) (HWA), the Jersey Court of Appeal made it clear that it does not regard the presentation of a winding up petition as a process of execution or enforcement (contrary to what was said by the English Court of Appeal in Drelle) because it is for the benefit of all creditors. Instead, the Court referred to it as a 'class remedy'. In HWA, the creditor relied on a foreign costs order in support of its application to wind up the debtor and it was not required to first have that judgment recognised. The foreign order was accepted as evidence of the debtor's liability to the creditor. 

The Jersey creditors winding up scheme is still relatively new, however, with some limited authority on the interpretation of the requirements of Article 157A. While some concepts of Jersey insolvency law have been informed by the insolvency law of the United Kingdom, the provisions of the Jersey creditor's winding up scheme borrow heavily from the Bankruptcy (Desastre) (Jersey) Law 1990. Therefore, there are differences in the statutory schemes that operate in each jurisdiction, the wording of the respective statutes that provide the basis for such applications, and the legislative context in which the Jersey provisions were introduced.

There can be no doubt as to the persuasive value of judgments emanating from the English Courts with the possibility that Drelle may be followed in Jersey. However, these differences are such that, before applying the reasoning in Drelle too quickly to a case in Jersey, careful consideration will need to be given to the differences in structure of the two schemes and the legislative context in which the Jersey scheme was introduced.

Guernsey

Under section 407 of the Companies (Guernsey) Law, 2008 (Guernsey Companies Law) a winding up application in Guernsey may be brought if the debtor fails to satisfy a statutory demand within 21 days of service of the same or otherwise if it proved to the satisfaction of the Royal Court that the debtor company fails the statutory solvency test under section 527 of the Guernsey Companies Law. It fails this test if it is cash flow or balance sheet insolvent. Similarly, an application for an administration order in respect of a Guernsey company can only be brought if the debtor company fails the same solvency test. As with other jurisdictions, foreign judgments have often been used as the basis upon which to form a view that the debtor company is insolvent, without having first to convert them to local judgments (either under the Judgments (Reciprocal Enforcements) (Guernsey) Law, 1957 or under the common law).

However, in the context of insolvency and company law, Guernsey is a common law jurisdiction and its law is likely to develop alongside the common law emanating from other jurisdictions, especially England and Wales. Accordingly, because there is no existing Guernsey law authority on the specific point, it is likely that the English Court of Appeal's decision in Drelle would be of significant persuasive value in the Royal Court and would almost certainly be followed. This is especially so where the Court of Appeal relied heavily on commentary in Dicey, Morris and Collins which is based, of itself, on established common law principles.

Ireland  

Ireland is a party to the Brussels Recast Regulation (Regulation No. 1215/2012) (the Regulation). Under the Regulation, judgments obtained in EU Member States (save for Denmark) are automatically recognised and enforceable in Ireland, save for exceptional circumstances. In light of this, a bankruptcy petition and a creditors' winding petition, can be presented against a debtor on foot of a judgment obtained in an EU Member State in Ireland, without the requirement for the judgment to be recognised first.  

Since Brexit, the Regulation does not apply to UK judgments and prior to 1 July 2025, the only way to enforce a UK judgment in Ireland was to have it recognised first, pursuant to common law. This meant that only once the UK judgment was recognised in Ireland could a bankruptcy petition or a winding up application be made. However, on 1 July 2025, the UK implemented the 2019 Hague Convention (the Convention). The Convention allows a contracting party to enforce a judgment given by a court of another contracting party provided that certain requirements are met. The implementation of the Convention by the UK therefore allows the bringing of a bankruptcy petition or a winding up application in Ireland, without the necessity for the UK judgment to be recognised first, except in exceptional circumstances. 

Notably, the Russian Federation has signed the Convention but has not yet ratified it which means that in order for a Russian judgment to be enforced in Ireland by way of a bankruptcy petition or creditors' winding up petition the Russian judgment will have to be recognised in Ireland first pursuant to common law. This common law process also applies to all other countries who are not a party to the Regulation, the Convention or any other international conventions governing the mutual recognition and enforcement of judgments with Ireland. 

How can Ogier help?

Ogier's Dispute Resolution team regularly advises creditors in a range of common law offshore jurisdictions. For more information or to find out how Ogier can advise you in this area, please contact the authors of this article.

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This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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