Vol 21 (2024) - Issue 5

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In the matter of Valeriy Ernestovich Drelle [2024] EWHC 521 (Ch), or How to Chase Foreign Debtors in England based on Unrecognised Foreign Debt

Synopsis
The case of Valeriy Ernestovich Drelle [2024] EWHC 521 (Ch) presents an interesting English precedent from the
High Court of Justice on appeal that can be availed of by foreign creditors when considering debt recovery
options and prospects of chasing their debtors in England by commencing bankruptcy proceedings based on a foreign money judgment which has not been previously 'validated' via recognition in the targeted 'enforcing' urisdiction.
The key matter it deals with is the interpretation of 'debt' for the purposes of s267 of the Insolvency Act 1986, and particularly whether a foreign judgment that hasn't undergone recognition proceedings can underpin a bankruptcy petition in England.
Important takeaway of this case is drawing a distinction between 'enforcement' and 'bankruptcy' and concluding that presentation of a bankruptcy petition does not constitute 'enforcement' of the foreign judgment, and thus recognition, which is usually needed to use (enforce) a foreign debt 'as a sword', should not be a requirement for bankruptcy petition purposes, as long as the prerequisites of 'debt' are met.
Therefore, unrecognised foreign judgment is deemed not to prevent the judgment constituting a 'debt'.
Rather, the absence of recognition only presents a barrier to enforcement of the judgment in the particular
jurisdiction that is no different in nature to the barrier to enforcement that faces a creditor who has an English trade debt, but no judgment.
At the same time, it is accepted that a bankruptcy petition cannot successfully be founded on a debt, based
on a foreign judgment, that is subject to a bona fide dispute on substantial grounds. Thus, in the absence of
recognition proceedings, should there be grounds to infer that the foreign judgment may be impeachable on grounds of fraud, being contrary to public policy or opposed to natural justice, the impeachability of the foreign debt judgment would have to be subject to consideration within recognition proceedings.