Regulator triumphs at High Court as FSD declared insolvency "expense"

In a judgment handed down on Friday, Mr Justice Briggs concluded financial support directions (FSDs) should be considered an “expense” in the case of insolvent targets, giving their payment a higher priority in administration.

Jonathon Land, a partner at PricewaterhouseCoopers, which advises the Nortel scheme, said there could be a further mediation next year to decide the amount of financial support.

This follows the secret mediation between regulators and companies in New York, revealed by schemeXpert.com last week .

“We were in discussion with the US parties, and this judgment will help. If we could sort it at a mediation, that would be great,” Land said.

 “We would like to get the fair amount back for the UK pensioner.”

Mr Justice Briggs admitted his conclusion an FSD constitutes an expense – rather than being simply “provable” or having no claim at all – was likely to be “an impediment” to rescue culture.

But he said the problem would be solved through the decision of a High Court, or a parliamentary amendment, to clear up the “legislative mess” around FSDs and insolvency.

The parties are likely to rejoin at the Court of Appeal early next year, although a source close to the case has told schemeXpert.com it will be inevitable that the Supreme Court will ultimately be called upon to adjudicate in the matter. 

The regulator welcomed the judgement, and Ernst & Young and PwC - the administrators for the insolvent subsidiaries - were not immediately available for comment.