Creditors of Kwelm, the biggest ever insurance industry collapse, are due to meet in London on 9 June.
Kwelm, a group of five insolvent underwriting businesses once owned by London United Investments, collapsed owing an estimated $10 billion.
The group specialised in underwriting mainly US risks, particularly in the professional indemnity, pollution and health hazard sectors. Many US law firms were included in its PI client base.
Kwelm was put into a scheme of arrangement, drafted by Clifford Chance, in 1993 and is currently being run off.
The mammoth legal work rumbles on, handled by a Freshfields team which is headed by litigation partner Roger Enock for scheme
administrators Coopers & Lybrand.
“This case is certainly as complex as anything I've had to deal with,” says Enock.
“London has never seen anything like this before.”
A number of legal firsts have accompanied the case. Freshfields won an unprecedented House of Lords ruling that entitled the Policyholders' Protection Board (under the Policyholders' Protection Act) to pay out for foreign creditors.
So far, the PPB has paid out $300 million of an estimated $1 billion.
Clifford Chance's scheme of arrangement restructured the Kwelm liabilities, giving dividends to creditors – $550 million paid to date.
Freshfields succeeded in winning an injunction in the US bankruptcy courts to halt some 300 individual pieces of litigation taking place in the US, which were costing approximately $10 million per year in legal fees.
This was the first substantial use of the US courts' powers in such a case, says Enock.
The creditors' meeting takes place at the Merchant Centre, New Street Square, London EC4.