Linklaters, Travers Smith, Weil in £184m PwC Lehman pensions settlement

Dentons, Linklaters, Travers Smith and Weil Gotshal & Manges have settled a £184m battle between the Pensions Regulator and Lehman Brothers administrators PricewaterhouseCoopers (PwC).

The settlement will mean that pension scheme members will receive benefits due to them and ends a six-year battle between the administrators, the Pensions Regulator and the scheme trustees.

The £184m settlement includes amounts due to almost 2,500 ex-employees during the six years since the bank collapsed as well as the £120m owed at the time of collapse.

The dispute’s conclusion is a success for the regulator’s in-house lawyer Marcus Laughton, and Travers partners Susie Daykin and Peter Esam who acted for the trustee of the pension fund. It is the largest ever sum wrested from a company as a result of an order by the 10-year old Pensions Regulator and sets an important precedent.

The dramatic collapse of Lehman in 2008 left a pension scheme deficit in the UK of £120m. The regulator was granted powers to issue financial support directions (FSDs) when it was founded in 2004, requiring sister or related companies to support pension schemes following a collapse.

The regulator pursued PwC in a 2010 Determination Panel for payment but proceedings were stayed in order for the High Court to determine whether FSDs issued after insolvency were administration expenses or debts. The difference is key to what class of creditor the pension scheme counts as, and when it is repaid.

The High Court and Court of Appeal found that FSDs should be paid prior to distributions to unsecured creditors but the Supreme Court overturned that ruling in July last year (24 July 2013). The court ruled that FSDs could be applied to administrators but should rank as an unsecured creditor.

The final piece of the jigsaw fell into place yesterday when the Upper Tribunal gave consent to stay further proceedings, sealing the £184m settlement.

Linklaters partner Euan Clarke advised PwC as administrators of Lehman Brothers International (Europe) and Lehman Brothers Europe throughout the battle, instructing Wilberforce Chambers’ Paul Newman QC and James Walmsley.

Weil pensions head Joanne Etherton represented Lehman’s US parent company as well as Neuberger Berman Europe, which managed to avoid insolvency during the Lehman collapse. Weil instructed Outer Temple Chambers’ Andrew Spink QC and Saul Margo.

Outer Temple’s Nick Stallworthy QC was instructed for the Lehman Brothers Pension Scheme trustees by Travers.

The regulator turned to Erskine Chambers’ Raquel Agnello QC, Wilberforce Chambers’ Jonathan Hilliard and 11 Stone Buildings’ Tom Robinson.

Dentons fielded partner Elmer Doonan and Nigel Barnett for a separate list of other Lehman-related companies. Doonan and Barnett instructed 5 Stone Buildings’ Andrew Simmonds QC and Andrew Goldsmith.