19 December 2008 – The US Bankruptcy Court has approved the settlement in the high-profile Chapter 11 case involving Sea Containers Ltd.

The hearing was of specific interest, from a pensions perspective, as it involved the Pension’s Regulator's first, and only, Financial Support Directions (FSDs) to date. FSDs can be issued if tPR is of the opinion that the employer, in relation to the scheme, is a service company or is insufficiently resourced.

Mayer Brown’s Head of Pensions, Anna Rogers, said
: “It looked uncertain how far tPR's powers would be effective against an overseas entity, let alone one already in US bankruptcy proceedings. Trustees of UK pension schemes may be heartened to see that the US courts have so far been supportive. The company argued that issuing FSDs violated the US Bankruptcy Code provisions providing for an automatic stay, but the Judge expressly rejected that. This has removed one of the obstacles to making a company which is the subject of US Chapter 11 proceedings the target of an FSD.

“As we approach almost four years of regulation under tPR these remain the only FSDs to have been issued. It will be interesting to observe whether tPR's strengthened moral hazard powers, set out in the Pensions Act 2008, will produce any increase in the level of formal anti avoidance activity.”

For further information:
Charlotte Ward
PR Manager, London
+44 20 7782 8547