Client money & assets update - Scheme of Arrangement - Jurisdiction Hearing Judgment - 21/08/2009

This update concerns the application to the High Court concerning the jurisdiction of the court to sanction a scheme of arrangement with respect to certain client assets held by LBIE (the "Application"). Further background to the Application is set out in our update of 15 July 2009, which can be accessed here.

As mentioned in our update of 15 July 2009, a public hearing of the Application took place before Mr Justice Blackburne at the Royal Courts of Justice on 29 and 30 July 2009. Counsel for LBIE and the Joint Administrators and Counsel for GLG Partners LP, as a representative of the scheme working group of creditors, made representations in support of the Application. Counsel for the London Investment Banking Association made representations in opposition to the Application.

Mr Justice Blackburne gave judgement on the Application on 21 August 2009.  Please see the press release below for further information. 

21/08/2009 11:05

The UK High Court today handed down its judgement in relation to the application made by the Joint Administrators of Lehman Brothers International (Europe) ("LBIE") to establish whether the court had jurisdiction to sanction the proposed scheme of arrangement under Part 26 of the Companies Act 2006.

The scheme of arrangement, as currently proposed, seeks to modify certain rights of clients whose property is held on trust by LBIE and the judge held that the court has no jurisdiction to sanction a scheme which modifies affected clients in this manner.

This ruling impacts the ability of LBIE's administrators to implement the proposed scheme in its current form and could further delay the administrators' ability to return assets to many of LBIE's clients.

Steven Pearson, Joint Administrator, PricewaterhouseCoopers LLP, said:

"The proposed scheme sought to significantly reduce the period clients have to wait before they get their assets back. This judgement is disappointing as it could create further delay for many of LBIE's clients. Together with our legal advisors and creditor working group, we will carefully analyse this judgement to assess whether to make an appeal. We will also be considering the extent to which the structure of the scheme can be modified to address the issues highlighted by the ruling."

In July this year the Joint Administrators advised clients that in the absence of a scheme it could take some years to return all assets to clients. Over the past nine months some $13bn of assets has already been returned as a result of bilateral negotiations and those efforts will continue unaffected, in parallel with development of the scheme initiative.

Steven Pearson, Joint Administrator, PricewaterhouseCoopers LLP, said:

"While this is a setback, I am determined to find a way to get these assets back to clients as soon as possible."

Please direct any questions you have to schemeofarrangement@lbia-eu.com .