Drelle Overturned in Latest UK Supreme Court Decision

BACKGROUND

In its previous decision in 2025, the English Court of Appeal had determined that a party was not entitled to bring a bankruptcy petition on the basis of a judgment debt, where the asserted debt was based on a foreign judgment that had not been the subject of separate recognition proceedings (i.e. by registration or by recognition at common law), and on that basis held that the bankruptcy petition brought by the petitioner (Servis-Terminal LLC) was not based on a valid debt. The petitioner appealed to the Supreme Court.

Without recounting the entirety of the background facts in detail, the three key underlying issues that required determination by the Supreme Court were:

1. What is the legal effect at common law, if any, of an unrecognised foreign judgment for a debt or definite sum of money?
2. Does such a foreign judgment give rise to a “debt” as defined in section 267 of the English Insolvency Act so as to permit a bankruptcy petition to be presented in reliance upon it?
3.  Does article 13 of the UNCITRAL Model Law on Cross-Border Insolvency (Model Law) have the effect that a “foreign creditor” under an unrecognised foreign judgment for a debt has the same rights as a creditor with an equivalent claim under English law?

The Supreme Court was in essence asked to provide its interpretation of one of the most important concepts in insolvency law – what is a debt? The Court of Appeal below had taken a more conservative and restrictive approach in reaching its position, holding that an unrecognised foreign judgment had no direct operation in England, and the presentation of a petition based on such a judgment amounted to impermissible enforcement or execution of it.

THE COURT’S DECISION

The Supreme Court set aside the decision of the Court of Appeal, and unanimously determined as follows:

1. At common law, the legal effect of an unrecognised foreign judgment for a debt or definite sum of money is that it gives rise to an obligation to pay the judgment sum.
2. Contrary to the conclusion of the Court of Appeal, an obligation to pay a sum of money under an unregistrable, unrecognised foreign judgment is a debt within the meaning of section 267 of the English Insolvency Act, and therefore can validly serve as the basis of a bankruptcy or winding up petition.
3. Wherever “foreign” is used in the Model Law, or at least where it is used in article 13, it is used as a descriptor of geographical location. The foreign creditor intended to be protected from discrimination on account of their foreignness is one who (or which) is located abroad, geographically speaking. For this purpose, the precise criterion for geographical location (nationality, ordinary residence or centre of main interests) is irrelevant.

RELEVANCE TO THE BVI

As highlighted above, in March 2026, the Court of Appeal’s (now-overturned) decision in Drelle CA was cited and relied upon heavily by the BVI Court in JJW Hotels to establish that a costs order that arose following a judgment in Guernsey could not be used as a sole basis upon which to establish a due and payable “debt” within the meaning of section 155 of the BVI’s Insolvency Act. As such, a statutory demand that was issued upon that basis was successfully set aside by the Applicant.  The Supreme Court decision in Drelle SC casts considerable doubt on whether JJW Hotels will now be followed in subsequent decisions in the BVI. In all likelihood, if JJW Hotels were decided again today, the application would not be successful.

Drelle SC also helpfully realigns the Supreme Court with the Privy Council’s approach in respect of arbitral awards in Vendort Traders Inc v Evrostroy Grupp LLC [2016] UKPC 15 (which was distinguished in JJW Hotels).

Overall, the Supreme Court’s decision in Drelle SC will no doubt come as very welcome news to creditors of BVI companies who had (for some time prior to JJW Hotels) been confidently seeking winding up orders on the basis of a debt without first issuing a statutory demand.

RELEVANCE TO THE CAYMAN ISLANDS

While the decision in Drelle CA has not been subject to any significant judicial consideration in the Cayman Islands (to date, it has only been obliquely referred to in a single judgment of the Grand Court in Re SIN Capital (Cayman) Ltd [2025] CIGC (FSD) 18), previous authorities from the Grand Court in the corporate insolvency context had already established that a winding up petition could be brought on the basis of a foreign judgment without requiring separate enforcement proceedings (see Re Guoan International Ltd [2021 (2) CILR 625]). Such authorities had given rise to a tentatively-accepted practice whereby creditors of Cayman Islands companies would issue statutory demands on the basis of unrecognised foreign judgments (as preludes to winding up petitions).

Accordingly, the approach under the Cayman Islands authorities in respect of unrecognised foreign judgments aligned with that in respect of foreign arbitral awards (see Re China Hospitals Inc [2018 (2) CILR 335]). That alignment appeared to be at risk following the English Court of Appeal’s decision in Drelle CA.

As in the BVI, the Supreme Court’s decision in Drelle SC will provide welcome clarity for judgment creditors of both Cayman Islands companies and individual debtors as to the availability of redress by way of insolvency proceedings in the Cayman Islands. Indeed, the impact in the Cayman Islands may be even more significant than in the BVI, given that Cayman Islands law has a far more limited scope for the registration of foreign judgments as of right (the Cayman Islands’ Foreign Judgments Reciprocal Enforcement Act presently allows for registration of judgments from Australian courts only).