Foreign-Judgment Bankruptcy Debts: No Heightened Threshold for Genuine Disputes About Judicial Predetermination

1. Introduction

This judgment clarifies how an insolvency court must assess a challenge to a foreign judgment underlying a bankruptcy petition. The central question was not whether the foreign judgment had conclusively been proved fraudulent or unfair, but whether the debtor had raised a genuine dispute on substantial grounds about its enforceability.

Servis-Terminal LLC, a Russian company in bankruptcy, sought to bankrupt its former director-general in England on the strength of a Russian judgment for RUB 2 billion. The debtor alleged that the Russian proceedings had been predetermined because of pressure associated with Gazprom Neft, the company’s largest creditor. His evidence combined a former finance director’s account of conversations about the anticipated outcome, expert evidence concerning political influence on Russian courts, and expert criticism of the Russian judgments.

The Court of Appeal held that the courts below had applied the wrong approach to that evidence. There is no special, heightened threshold merely because a debtor challenges a foreign judgment. Hearsay must not be discounted simply because it is hearsay, and evidence of judicial predetermination must be assessed cumulatively rather than in isolated compartments. Crucially, a debtor alleging actual predetermination need not also demonstrate that the resulting judgment was deliberately wrong.

2. Background and Procedural History

The Russian claim

In December 2011, Servis-Terminal advanced RUB 2 billion to Fort-Steiton LLC, supported by a personal guarantee from that company’s owner, who also controlled Russian Credit Bank. When the bank collapsed in 2015, Servis-Terminal lost approximately RUB 7.9 billion held in its accounts. Most of those funds had come from Gazprom Neft. The loan was never repaid.

Servis-Terminal entered bankruptcy in Russia in 2017. Acting through its trustee-in-bankruptcy, it brought proceedings in 2018 against its former director-general, alleging that he had acted unreasonably and in bad faith by arranging the loan.

The director defended the transaction as a legitimate commercial decision. Among other matters, he relied on the borrower’s apparent solvency, the guarantee, a history of earlier loans being repaid with interest, and shareholder approval. These arguments concerned the underlying merits; the English appeal did not decide whether the director had, in fact, breached his duties.

On 24 May 2019, the Arbitrazh Court of Yaroslavl Region ordered him to pay RUB 2 billion. Challenges before three further Russian courts were unsuccessful, culminating in the rejection of his application to the Supreme Court of the Russian Federation in February 2020.

The English insolvency proceedings

Servis-Terminal served a statutory demand under section 268(1)(a) of the Insolvency Act 1986 on 9 October 2020 and presented an expedited bankruptcy petition under section 270 four days later. The debtor sought to set aside the demand and opposed bankruptcy, alleging fraud, collusion, bias, breaches of natural justice and incompatibility with English public policy.

ICC Judge Burton rejected his challenge in [2023] EWHC 506 (Ch), concluding that the judgment debt was not disputed on genuine and substantial grounds. A bankruptcy order followed on 31 March 2023. Richards J dismissed the debtor’s appeal in [2024] EWHC 521 (Ch).

The earlier appellate decisions

The subsequent appeal initially succeeded on a separate legal issue. In [2025] EWCA Civ 62, the Court of Appeal held that an unrecognised foreign judgment could not supply the relevant petition debt. It therefore did not decide the remaining challenges concerning the evidence and appellate review.

The Supreme Court reversed that ruling in [2026] UKSC 29. It held that an obligation to pay money under the unrecognised Russian judgment was a debt within section 267 of the Insolvency Act 1986. It remitted the remaining grounds to the Court of Appeal.

The present judgment concerns those remitted grounds. It does not reopen the Supreme Court’s ruling. Separately, Servis-Terminal had begun recognition proceedings under CPR Part 7 in April 2025; those proceedings were stayed by agreement pending the insolvency litigation.

3. Summary of the Decision

Lord Justice Miles delivered the principal judgment, with which Lady Justice Falk and Lord Justice Newey agreed. The court allowed the appeal on grounds concerning the treatment of the factual and expert evidence and set aside the bankruptcy order.

The principal conclusions were:

• No heightened insolvency threshold: the question remained whether the debt was disputed on genuine and substantial grounds, notwithstanding that the dispute involved allegations against a foreign court.
• No heightened trial standard: a substantive challenge based on fraud, natural justice or related grounds is determined on the ordinary civil balance of probabilities.
• Hearsay is admissible: the former finance director’s evidence could support the truth of the matters reported. Its double-hearsay character affected weight, not admissibility.
• Predetermination is not the same as legal error: independent evidence of bias does not require additional proof that the judgment was deliberately wrong.
• The evidence required a global assessment: the factual account, expert evidence and surrounding circumstances together established a genuine and substantial dispute.
• Foreign appeals were relevant but not decisive: their reasoning could be considered, but the debtor did not have to establish that every Russian court had deliberately reached an incorrect decision.

The court did not finally determine that the Russian judgment was fraudulent, biased or unenforceable. It held that those issues required ordinary proceedings with the usual opportunities for disclosure and cross-examination.

4. Legal Reasoning

A. The insolvency court asks whether there is a real dispute

A bankruptcy or winding-up petition should not proceed where the underlying debt is disputed on genuine and substantial grounds. Insolvency proceedings are generally unsuitable for resolving substantial factual disputes: ordinarily there are no pleadings, disclosure or oral evidence, although such procedures can exceptionally be ordered. A petition also exerts pressure beyond that associated with an ordinary debt claim.

The court nevertheless has a screening function. A debtor cannot defeat a petition merely by asserting disagreement. The dispute must be real, rather than frivolous or remote, and the court may reject evidence that is inherently implausible or contradicted by documents.

The error below was to superimpose a further demand for “cogent evidence of a good arguable case”. The proper inquiry was a single one: whether, considering all the evidence and the seriousness of the allegations, there was a genuine and substantial dispute.

B. Serious allegations do not create a different standard of proof

The judgment distinguishes between the standard for deciding an allegation at trial and the threshold for preventing summary insolvency proceedings.

At trial, the standard is the balance of probabilities. Allegations of corruption, bias or procedural impropriety must be clearly identified and grounded in evidence. Their inherent probability or improbability forms part of the court’s evaluation. But their seriousness does not create a higher legal standard.

At the petition stage, the court does not finally resolve those allegations. It asks whether they give rise to a genuine dispute on substantial grounds. International comity does not justify replacing that ordinary test with a more demanding one.

C. Double hearsay cannot be treated as having no evidential value

The former finance director described a January 2019 meeting with a professional contact. According to her statement, the contact made inquiries of the chairman of the relevant regional court and returned with information that Gazprom Neft was driving the claim, that the director could not win, and that judgment would be entered against him for RUB 2 billion.

This involved two reported conversations: the chairman’s alleged statements to the intermediary, and the intermediary’s account to the witness. ICC Judge Burton characterised the account as double hearsay and stated that it was not evidence of the truth of the reported statements. That was legally incorrect.

Section 1 of the Civil Evidence Act 1995 prevents evidence in civil proceedings from being excluded merely because it is hearsay, whatever its degree. The court must therefore assess its actual strengths, weaknesses and weight. Calling evidence “double hearsay” does not perform that assessment.

Richards J had interpreted the first-instance judgment as containing a permissible evaluation of weight. The Court of Appeal disagreed: summarising evidence is not the same as evaluating it. Because the first-instance approach involved an error of law, appellate deference to an evaluative conclusion could not preserve the decision.

D. Independent evidence of predetermination changes the relevance of alleged legal errors

A major distinction concerned two different routes to alleging judicial bias:

1. Inferring bias solely because a judgment is exceptionally wrong or perverse.
2. Relying on separate factual evidence that the outcome was predetermined.

In the first category, ordinary legal mistakes are insufficient. The alleged errors must support an inference of bad faith rather than mere incompetence. But that reasoning does not impose a universal requirement to prove deliberate legal error whenever bias is alleged.

As Lord Justice Miles explained, a biased judge may seek to produce a legally correct and appeal-resistant judgment. The vice alleged is the absence of an open and impartial decision-making process, not necessarily an incorrect result. Thus, an apparently defensible judgment does not conclusively answer independent evidence of predetermination.

E. Why the evidence crossed the threshold

The Court of Appeal identified several mutually reinforcing features:

• The alleged source: read as a whole, the witness statement was reasonably capable of attributing the predicted outcome to the court chairman, rather than merely to the intermediary’s own opinion.
• The chairman’s alleged role: the evidence described regional court chairmen as involved in significant cases concerning major state-connected companies. It was therefore arguable that the reported statements reflected discussions with the trial judge.
• The timing: the conversation occurred on 26 January 2019. Further evidence remained possible, and the Russian court subsequently invited additional evidence on 19 March. The alleged prediction was not necessarily a comment made after the evidential process had ended.
• The specified outcome: the reported prediction of RUB 2 billion matched the eventual award. Although that was an available outcome, it was not the only possible one.
• The political-influence evidence: expert evidence described pressures on Russian judges in litigation involving important state-connected entities and explained Gazprom Neft’s position.
• Senior corporate interest: a letter from Gazprom Neft’s chief executive urging a criminal investigation supported the contention that claims against the director attracted attention at the company’s highest level. It was contextual support, not proof of interference in the civil proceedings.
• The Russian-law criticisms: alleged substantive and procedural flaws were insufficient by themselves to establish arguable bias, but remained relevant to the combined evidential picture.

The witness statement contained potential ambiguities. However, the alternative readings advanced against it were matters suitable for cross-examination, not decisive reasons to reject the debtor’s case summarily. The court expressly recognised that the hearsay character affected weight, yet considered the evidence significant at this procedural stage.

F. Foreign appellate decisions do not automatically cure the alleged defect

Servis-Terminal relied on the fact that the Russian judgment had survived three appellate stages and on features suggesting a measured adjudication: the award was below the sums claimed, some procedural applications had been decided in the director’s favour, and claims against co-defendants had been dismissed.

The court accepted that these matters carried weight. It rejected the debtor’s suggestion that the foreign judgments were wholly irrelevant. Their reasoning and treatment of the parties’ arguments were potentially important evidence.

However, those features did not make predetermination fanciful. A judge could be predisposed against a party on part of a case without deciding every issue against that party. Nor was there a legal requirement to show that all four Russian decisions were deliberately wrong.

The debtor’s failure to raise predetermination during the Russian appeals also had evidential significance, but did not extinguish the dispute. Whether the challenge ultimately succeeds remains for substantive determination.

5. Precedents Cited and Their Influence

A. The ordinary disputed-debt test

Bryce Ashworth v Newnote Limited [2007] EWCA 793 supplied the practical formulation of the insolvency threshold: the dispute must be real, rather than frivolous or remote. It also confirmed that courts need not accept inherently implausible evidence or evidence contradicted by the documents. The present judgment applies that ordinary screening exercise without adding a special foreign-judgment hurdle.

B. Written evidence and the prohibition on a mini-trial

Long v Farrer & Co [2004] BPIR 1218 established the important caution against disbelieving written witness evidence without cross-examination, subject to limited exceptions. Coyne v DRC Distribution Ltd [2008] EWCA Civ 488 applied the same principle. These authorities informed the debtor’s objection that the lower courts had improperly rejected untested evidence.

Allied Fort Insurance Services Ltd v Creation Consumer Finance Limited [2015] EWCA Civ 841 warned against conducting a mini-trial on a summary judgment application to resolve evidential conflicts. Its relevance was procedural: a court assessing whether a genuine dispute exists must not decide a contest that requires trial procedures.

Kireeva v Bedzhamov [2022] EWCA Civ 35, [2023] Ch 45 was particularly important when the Court of Appeal remade the decision. It supported the approach that written evidence should not be rejected unless manifestly incredible. Grounds for questioning an account do not necessarily justify rejecting it without cross-examination.

Griffiths v TUI (UK Ltd) [2023] UKSC 48, [2025] AC 374 explained one function of cross-examination: giving a witness an opportunity to explain an apparent problem or contradiction. Here, the supposed gaps in the witness statement might be useful questions at trial, but were not “knock-out” objections at the insolvency threshold stage.

C. International comity and allegations against foreign courts

Altimo Holdings v Kyrgyz Mobil Tel Ltd [2011] UKPC 7 concerned service out and the appropriate forum, including whether justice could realistically be obtained in Kyrgyzstan. Lord Collins explained that English and Manx courts may examine allegations of corruption or lack of independence in foreign courts. International comity calls for cogent evidence, not judicial refusal to examine the issue.

The Court of Appeal distinguished that setting from the present case. A forum decision involves a largely predictive assessment and determines jurisdiction once and for all. This appeal concerned whether evidence about an already delivered judgment raised a sufficiently substantial dispute to prevent bankruptcy.

Buttes Gas & Oil Co v Hammer and The Abidin Daver appeared within the passage quoted from Altimo. Their relevance was explanatory: the restraint discussed there rested on comity and evidential caution, not an absolute act-of-state or non-justiciability barrier preventing inquiry into foreign judicial corruption.

Yukos Capital Sarl v OJSC Rosneft Oil Co (No 2) [2012] EWCA Civ 855, [2014] QB 458 repeated the need for cogent evidence before describing a foreign decision as partial and dependent. But that statement arose in a discussion of issue estoppel concerning Dutch proceedings, rather than a determination of the applicable standard of proof. The present court therefore declined to treat it as establishing a heightened evidential standard.

D. Inferring bias from the contents of a judgment

Maximov v. Open Joint Stock Company Novolipetsky Metallurgichesky Kombinat [2017] EWHC 1911 (Comm), [2017] 2 C.L.C. 121 concerned enforcement of an arbitral award after Russian courts had set it aside. The challenge depended on inferring bias from the alleged extremity of the Russian courts’ errors. Although serious flaws existed, the decisions were not held so indefensible that only bad faith could explain them.

The present judgment confines that reasoning to its context. Where alleged errors are the sole basis for inferring bias, the distinction between incompetence and deliberate wrongdoing is central. Where independent evidence suggests predetermination, it is not necessary additionally to prove that the judgment was deliberately incorrect.

OJSC Bank of Moscow v Chernyakov [2016] EWHC 2583 (Comm) and Erste Group Bank AG (London) v JSC (VMZ Red October) [2013] EWHC 2926 (Comm) appeared in the passage quoted from Maximov. Their significance here was limited to supporting the proposition that manifest error or perversity alone does not necessarily establish bias; they were not separately analysed.

Koza Ltd v Koza Altin Isletmeleri AS (No 2) [2022] EWCA Civ 1284, [2023] 1 BCLC 617 had quoted the relevant proposition about decisions so wrong as to evidence bias. Lord Justice Miles noted that it had not endorsed the whole of the formulation in Maximov, including a universal requirement to prove deliberate wrongness.

E. The unitary civil standard

Bank of St Petersburg v Arkhangelsky [2020] EWCA Civ 408, [2020] 4 WLR 55 supported the central conclusion that there is one civil standard of proof: the balance of probabilities. Serious allegations require careful assessment against their inherent probabilities, but do not attract a different standard simply because they are serious or concern a foreign judgment.

F. Exhaustion of foreign remedies

Adams v Cape Industries Plc [1990] 1 Ch. 433 supported the proposition that a person alleging fraud in a foreign judgment need not first exhaust remedies in the foreign courts. The rule may also extend to at least some natural-justice challenges.

The court considered it sufficiently arguable that the alleged judicial predetermination fell within the fraud category. On that basis, failure to raise it in the Russian appeals was not a legal bar. Importantly, the court reserved the final classification of the allegation: judicial predetermination might instead, or additionally, be analysed as a breach of natural justice.

G. Appellate restraint and legal error

Malik v Henley Homes plc [2023] EWCA Civ 726 recognised that a conclusion about whether a defence has a real prospect of success can be an evaluative factual decision warranting appellate restraint. Richards J had relied on that approach.

The present court distinguished a permissible evaluation from a decision reached through legal error. The incorrect treatment of hearsay and the wrong threshold undermined the evaluation itself. The court did not need separately to determine ground (2), which challenged the appellate standard, but confirmed that the principles in Allied Fort Insurance Services Ltd v Creation Consumer Finance Limited and Malik v Henley Homes plc were not inconsistent.

6. Impact and Limits

Foreign judgment creditors retain access to insolvency proceedings

The Supreme Court’s ruling remains intact: prior English recognition is not necessary for the foreign monetary obligation to constitute a debt under section 267. The present decision qualifies the practical use of that route. Where enforceability is genuinely disputed on substantial grounds, insolvency cannot substitute for proper adjudication of the dispute.

Evidence must be evaluated cumulatively

The judgment is particularly important where alleged improper influence is supported by indirect evidence. A factual account, expert explanation of institutional pressures and identified irregularities may collectively establish a real dispute, even though none would suffice alone. Courts must avoid discarding the central factual evidence and then asking whether the remaining expert evidence independently proves the case.

Facial correctness is not conclusive evidence of impartiality

The decision separates procedural legitimacy from substantive correctness. A coherent judgment, favourable interlocutory rulings or partial success for a defendant may weaken an allegation of bias, but cannot automatically defeat independent evidence that the outcome was fixed in advance.

The safeguards against speculative challenges remain

The judgment does not establish a presumption against Russian judgments or judgments involving state-connected companies. Generalised allegations about a foreign judicial system remain unlikely to suffice. Nor does admissibility make hearsay automatically persuasive. Debtors must identify a concrete, evidentially supported dispute, and courts retain the ability to reject implausible or documentarily contradicted accounts.

Several substantive questions remain open

The recognition proceedings remain the proper setting for deciding credibility, the ultimate weight of the evidence, the correct classification of the alleged predetermination and the legal effect of any established defect. The Court of Appeal’s conclusion is procedural, not a final condemnation of the Russian adjudication.

7. Complex Concepts Simplified

Genuine and substantial dispute

A real disagreement supported by a proper evidential basis. The debtor need not prove the defence at the bankruptcy stage, but a bare assertion is insufficient.

Balance of probabilities

The ordinary civil trial standard: whether an allegation is more likely true than not. It is distinct from deciding whether an issue deserves a trial.

Hearsay and double hearsay

Hearsay reports what another person said; double hearsay adds another reporting layer. Both can be admitted in civil proceedings, although the reporting chain may reduce reliability and weight.

Judicial predetermination

Deciding the result before fairly considering the completed case. The problem is the closed decision-making process, even if the eventual result could otherwise be legally justified.

International comity

Respect between legal systems. It encourages care before criticising foreign courts, but does not prevent English courts from examining supported allegations of unfairness.

Natural justice

Basic procedural fairness, including a fair opportunity to present a case and determination by an impartial tribunal.

Recognition proceedings

Proceedings determining whether English law will give effect to a foreign judgment. They provide ordinary procedures for investigating disputed evidence.

Appellate deference

Restraint before overturning a lower court’s legitimate assessment. It does not protect an assessment founded on the wrong legal test.

8. Conclusion

The judgment establishes that challenges to foreign-judgment debts do not attract a special heightened insolvency threshold. Courts must assess admissible evidence fairly and collectively, distinguish independent evidence of bias from mere criticism of legal reasoning, and avoid deciding substantial factual disputes through bankruptcy proceedings.

The bankruptcy order was set aside because the debtor had established a genuine and substantial dispute—not because fraud or bias had finally been proved. The broader significance is a clear separation between access to insolvency proceedings and the proper adjudication of a contested foreign judgment.