Nortel Networks SA, Re

Administrators may seek secondary insolvency proceedings in another European jurisdiction where that step advances the proper purposes of the administration and is in the company’s best interests. The court may authorise cooperation with the foreign office-holder and the transfer of assets, subject to conditions protecting the proper payment or security of English administration expenses and liabilities arising in the secondary proceedings.

A restriction on inspection of an insolvency court file under the Insolvency Rules 1986 is not an absolute bar. It prevents inspection without the court’s permission, leaving the court to decide whether disclosure is appropriate, including where commercially sensitive information requires protection.

The administrators of Nortel Networks SA, which was subject to an English administration as part of a wider international restructuring, applied for authority to seek secondary insolvency proceedings in France under Article 29A of the EC Regulation of Insolvency Proceedings 2000.

They also sought authority to enter into a protocol with the French insolvency office-holder and, subject to protective conditions, to transfer assets under their control for use in the French proceedings. A further application concerned restricting inspection of a witness statement and exhibit on grounds of commercial sensitivity. The court considered whether it had jurisdiction and whether the orders were consistent with the proper purposes and best interests of the administration.

1. The applications were granted. The court held that it had jurisdiction and that it was appropriate to exercise its discretion in favour of the orders sought.

2. Secondary proceedings in France could properly be pursued while the English administration remained the main insolvency proceeding. The relevant considerations included advancing the purposes of the administration, achieving the restructuring efficiently, and acting in the best interests of the company and its creditors.

3. The administrators could enter into the proposed protocol with the French insolvency office-holder. They could also apply assets under their control to the French proceedings, subject to conditions ensuring that English administration expenses and liabilities connected with the secondary proceedings were paid from, or adequately secured against, the relevant assets.

4. In reaching that conclusion, the court relied on the powers in paragraph 13 of Schedule 1 and paragraph 66 of Schedule B1 to the Insolvency Act 1986, and had regard to Collins v Aikman (Europe) SA & Others [2007] 1 BCLC 182.

5. Under Rule 7.31 of the Insolvency Rules 1986, an order restricting inspection does not impose a complete prohibition. Inspection may take place with the court’s permission. In this case, the witness statement and exhibit were protected because they contained commercially sensitive material, while the possibility of later disclosure remained available.

First-instance decision. No prior appellate decision is stated in the judgment.