Unrecognised overseas judgments are not capable of providing the basis for a bankruptcy petition (Servis-Terminal Llc v Drelle)
Restructuring & Insolvency analysis: The Court of Appeal reversed the decision of the lower courts and set aside a bankruptcy order made on the petition of a creditor holding an overseas judgment which had not been recognised by the English court. A foreign judgment has no direct operation in England and so until it is registered, or separate proceedings are brought in the English courts, there is no debt capable of being enforced and as a result there is no liquidated sum payable as required by the Insolvency Act 1986 (IA 1986) before a bankruptcy petition can be presented. The overseas judgment had, in this case, created a debt (as a result of a claim for breach of duty) as opposed to simply confirming an underlying debt. Had there been a liquidated sum payable, without a judgment, the creditor would have been able to serve a statutory demand and then, unless that was successfully challenged, present a petition for bankruptcy. Written by Mark Sands, head of Insolvency at Apex Litigation Finance.