Brexit plays a part in an application by the Joint Administrators of Nortel Networks UK Limited and others to extend the Administrators' terms of office as uncertainty lies over what, if any recognition will be given to the Administrators by the courts of the EU Member States after 29 March 2019.
Nortel Networks UK Limited ("NNUK") and 18 other companies in the Nortel Group of companies ("the EMEA Companies") formed part of the Nortel group of companies operating in Europe, the Middle East and Africa. The EMEA Companies were incorporated across Europe, the Middle East and Africa, but each had its Centre of Main Interests in the UK and therefore entered into an English Administration. The Canadian parent company of the Nortel group and certain other Canadian and US Companies were placed into coordinated insolvency procedures in January 2009.
The Administrators’ terms of office have been extended four times previously, with the most recent extension being until 13 January 2018.
Snowden J accepted it was appropriate for NNUK, Nortel Finland and Nortel Romania to remain in Administration for the time being to enable the proof and distribution process to be completed. He further noted that the Administrators continued to have a role to play in dealing with the remaining companies where distributions to creditors are effected by the CVA Supervisors (who are also the Administrators). If any of the companies were to move into Liquidation at this stage, further costs and delay would inevitably be incurred, which would not be in the interests of the companies' creditors.
An interesting aspect of the application was that the Administrators did not seek a longer extension mainly due to the UK government's notice of the UK’s intention to withdraw from the European Union ('Brexit'), which is expected to take effect on 29 March 2019.
Uncertainty arises because the Administrations and existing CVAs of the companies are main proceedings for the purposes of Council Regulation (EC) No. 1346/2000 on Insolvency Proceedings, and any CVA in respect of Nortel Networks S.A. would be a main proceeding for the purposes of Regulation (EU) No. 2015/848 of the European Parliament and of the Council on Insolvency Proceedings (Recast).
It is unclear following Brexit whether the Recast Insolvency Regulation will apply to the Administrations of the companies or the CVAs and what, if any, recognition will be given to the Administrators or the CVA Supervisors by the courts of the EU Member States after 29 March 2019.
If adequate legislation is not introduced prior to Brexit, it will leave the UK with company Administrations and CVAs which are not automatically recognised within the EU member states. It remains to be seen how Brexit negotiations will address these issues and it would appear that officeholders and the court are taking a cautionary approach to review the situation closer to the exit date.
This article was written by Alan Bennett.