Maintaining flexibility and pragmatism in pan-European and global insolvencies—Re Nortel Networks UK Ltd

Maintaining flexibility and pragmatism in pan-European and global insolvencies—Re Nortel Networks UK Ltd

As the Nortel Networks saga continues, Fraser Ritson, partner, and Laura Newbery, associate, at Addleshaw Goddard LLP, remark on the court's approach in this pan-European insolvency decision

Original news

Re Nortel Networks UK Ltd and others [2015] EWHC 2506 (Ch), [2015] All ER (D) 05 (Sep)

The Chancery Division made several orders, following the filing for insolvency protection in 2009 by the companies in the Nortel Group, in respect of the net proceeds from the global sale which were being held in escrow pending agreement or court determination as to how the proceeds should be allocated among the parties. The orders in general permitted the administrators in the UK appointed pursuant to the Insolvency Act 1986 (IA 1986) and the Insolvency Rules 1986, SI 1986/1925 (IR 1986), to declare dividends to its unsecured non-preferential creditors and to promulgate company voluntary arrangements in respect of the relevant companies in the group.

What was the background to the hearing?

On 14 January 2009 the Nortel Group was placed into insolvency procedures in Canada, the US and England. The companies in administration in England were incorporated in jurisdictions across Europe, the Middle East and Africa (EMEA companies) but the centre of main interests of each was in the UK.

The business and assets of the Nortel Group were sold during 2009 and 2010. $7.3bn was paid into escrow (Lockbox) pending determination of how the proceeds should be shared among the group and its creditors.

Following a 21-day trial in the US, judgments were handed down directing how the money in the Lockbox was to be distributed.

Unlike their US and Canadian counterparts, the administrators of the EMEA companies (the administrators) had not formally adjudicated creditor claims, having no authority to do so under English law until funds were available for distribution.

As adjudication of claims had commenced in the US and Canada, the administrators applied for directions to institute fair and efficient procedures for requiring creditors of the EMEA companies to submit their claims, so as to allow them to share in the allocation of the monies in the Lockbox.

The application was complicated by the need to recognise assurances the administrators had given in their proposals that local creditors would not be prejudiced by not having commenc

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About the author:
Eleanor qualified in 1998 into the insolvency team at ASB law. She became a partner in 2005, and went on to head up the Recovery & Insolvency team. Whilst traditionally specialising mainly in contentious corporate insolvency matters, in recent years she has moved into the non contentious arena, in particular specialising in company administrations.