Must a foreign judgment be registered before being relied on as a petitioning debt? The position revisited

In our previous article, Must a foreign judgment be registered before being relied on as a petitioning debt?, we considered the decision of the Court of Appeal of England & Wales in Servis-Terminal LLC v Valeriy Ernestovich Drelle [2025] EWCA Civ 62 (“Drelle (CA)”) and its implications for the position in Hong Kong. By way of reminder, the English Court of Appeal held that an unrecognised foreign judgment could not be relied upon as the basis of insolvency proceedings unless and until it had first been recognised in England (meaning that it has been registered/recognised pursuant to a statutory procedure or by common law action)

Many felt this odd. It is a given that a foreign judgment should be registered before employing the usual enforcement mechanisms – such as sending the bailiff in or seeking a charging order. Such enforcement proceedings are for the benefit of one creditor over others, employing mechanisms so that this creditor might obtain payment of his debt. Those mechanisms also derive from legislation dealing with domestic judgments. However are insolvency proceedings – the commencement of winding up proceedings by the presentation of a petition – really enforcement proceedings? Rather, are they not a collective insolvency mechanism conducted for the general body of creditors, and others? Surely, a debt is a debt and it is therefore capable of forming the basis of a statutory demand or a petition?

That position contrasted with the position in Hong Kong. In Liu Yongliang v Bank of China Limited, Dongguan Branch [2021] HKCA 1048, the Hong Kong Court of Appeal (“HKCA”) upheld the dismissal of an application to set aside a statutory demand notwithstanding that the related Mainland judgments had not been registered in Hong Kong.

The apparent divergence seemed to be that England & Wales regarded the use of an unrecognised foreign judgment to found insolvency proceedings as impermissible without prior recognition, whereas the Hong Kong did not regard the commencement of bankruptcy proceedings as requiring prior registration. At the time of our article we concluded that there was “undoubtedly scope for further arguments on this issue”.

There have since been significant developments in both jurisdictions. The UK Supreme Court (“UKSC”) has unanimously overturned Drelle (CA) in Drelle v Servis-Terminal LLC (In Liquidation in the Russian Federation) [2026] UKSC 29 (“Drelle (SC)”). In Hong Kong, the Court of First Instance has considered Liu Yongliang in the context of a statutory demand founded directly on unregistered Mainland judgments and intended insolvency proceedings in China Financial Services Holdings Limited v Zou Muxin [2026] HKCFI 3837.

It is therefore appropriate to revisit the question whether a foreign judgment must be registered before being relied upon as a petitioning debt.

England & Wales

As explained in our previous article, Drelle (CA) concerned a Russian judgment obtained by Servis-Terminal LLC (the “Company”) against its former CEO and a shareholder, Valeriy Drelle, for 2 billion roubles (approx. US$20 million) (the “Russian Judgment”). The Company served a statutory demand and presented a bankruptcy petition based on the Russian Judgment.

The Russian Judgment had not been recognised in England and was not registrable under any applicable statutory regime. Whilst the Court of Appeal had held that, unless and until it was recognised, the Russian Judgment did not constitute a “debt” for the purposes of section 267 of the Insolvency Act 1986 and could not support a bankruptcy petition, the Supreme Court unanimously overturned that decision. It held that the Russian Judgment gave rise to an immediate common law obligation on Valeriy Drelle to pay the judgment debt and that this obligation constituted a “debt” for the purposes of section 267.

In reaching that conclusion, the Court returned to the common law “obligation principle”. Under that principle, a final and conclusive foreign judgment for a debt or definite sum of money, given by a court of competent jurisdiction, gives rise to a legal obligation on the judgment debtor to pay. Importantly, that obligation arises when the foreign judgment is given; “[t]hat obligation arises when the final and conclusive judgment is given. It does not depend upon recognition.”

The Supreme Court also considered whether the Company was nevertheless seeking to enforce the Russian Judgment by relying upon that debt to present a bankruptcy petition. This was significant because the lower Court had regarded bankruptcy proceedings as a form of “collective enforcement” (the emphasis is ours) and considered that the Company was seeking to use the unrecognised Russian Judgment as a “sword”.

The Supreme Court disagreed. At paragraph 86 of Drelle (SC), the Court stated “although bankruptcy (or winding up) proceedings are often loosely categorised as a means of collective enforcement of debts … they are in no relevant sense a means of enforcement of a judgment.”

The Supreme Court held that insolvency proceedings initiate a process under which the debtor’s assets are distributed pari passu amongst creditors, while individual enforcement and execution are restrained. In that sense, they are “the very antithesis of the enforcement of an individual creditor’s judgment”. The Court therefore concluded that an obligation to pay arising under an unrecognised and unregistrable foreign judgment could constitute a petitioning debt, notwithstanding that the judgment could not itself be directly enforced in England. So the Court allowed the Company’s appeal on this issue. It did not, however, finally determine whether a bankruptcy order should be made. Valeriy Drelle had separately argued that the Russian Judgment debt was disputed on bona fide and substantial grounds, and that was not decided here.

Hong Kong

The Supreme Court’s reasoning on the nature of insolvency proceedings is consistent with the approach previously adopted by the HKCA in Liu Yongliang.

As discussed in our previous article, Liu Yongliang concerned an application to set aside a statutory demand based on liability under a personal guarantee. Although the relevant Mainland judgments had not been registered in Hong Kong, the statutory demand was based on the debtor’s liability under the guarantee rather than the Mainland judgments themselves. The debtor argued that the creditor was nevertheless seeking indirectly to enforce the Mainland judgments without registration, contrary to section 22(2) of the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) (the “MJREO”).

The HKCA rejected that argument. At paragraph 52, it held that bankruptcy proceedings were not “proceedings for the recovery of a sum payable under a Mainland judgment”. In reaching that conclusion, the HKCA emphasised the collective nature of insolvency proceedings. It observed that a winding-up order, far from enabling an individual creditor’s judgment to be enforced, prevents individual enforcement and substitutes the creditor’s right to participate in the pari passu distribution of the debtor’s assets.

There is therefore a clear similarity between the reasoning in Liu Yongliang and that subsequently adopted by the UKSC in Drelle (SC). Both distinguish the commencement of a collective insolvency process from enforcement of a judgment by a judgment creditor for its benefit alone.

China Financial Services Holdings Limited v Zou Muxin

The Court of First Instance has since had an opportunity to consider Liu Yongliang in circumstances where the statutory demand was based directly on the unregistered Mainland judgments themselves, in China Financial Services Holdings Limited.

The case concerned two unregistered judgments of the Beijing Higher People’s Court. The creditor, Mr Zou, served a statutory demand on China Financial Services Holdings Limited (“CFSH”) based on the Mainland Judgments. CFSH commenced proceedings seeking to restrain the presentation of a winding-up petition, arguing, amongst other things, that the Mainland Judgments had not been registered under the MJREO.

The Mainland Judgments were subsequently paid in full and the substantive proceedings became academic, leaving the question of costs. In determining costs, Recorder Jin Pao SC considered the parties’ arguments on the merits.

CFSH sought to distinguish Liu Yongliang on the basis that the statutory demand in that case was founded on the underlying guarantee rather than the Mainland judgments themselves.

The Recorder rejected that distinction. The Recorder held that the HKCA’s ruling on the scope of section 22(2) of the MJREO was “of general application”. The Recorder also saw no reason why the HKCA’s reasoning, although given in the context of personal bankruptcy, should not apply to the winding up of companies. He was unable to accept CFSH’s submission that it was inappropriate for Mr Zou to rely on the Mainland Judgments as the foundation for the Statutory Demand merely because they had not been registered under the MJREO.

The Court’s reasoning therefore provides further first-instance support for the application of Liu Yongliang where a statutory demand is founded directly on unregistered Mainland judgments in contemplation of corporate winding-up proceedings.

Commentary

In our previous article, we concluded that there was “undoubtedly scope for further arguments on this issue”. The subsequent decisions in Drelle (SC) and China Financial Services have now provided further clear guidance.

In particular, Drelle (SC) confirms that an unrecognised and unregistrable foreign judgment can give rise to a debt capable of supporting insolvency proceedings without prior recognition. The UKSC’s treatment of bankruptcy and winding-up proceedings as being distinct from enforcement of a judgment is also consistent with the approach in Liu Yongliang.

China Financial Services develops the Hong Kong position further by clarifying Liu Yongliang applies where the statutory demand was founded directly on unregistered Mainland judgments and corporate winding-up proceedings were contemplated.

The recent developments provide welcome clarification of an issue on which there had previously been some uncertainty, and bring the English and Hong Kong approaches considerably closer together.

Ian De Witt, Robin Darton and Prisha Budhrani