The UK Supreme Court has ruled against the trustees of the Olympic Airline SA Pension Scheme on allowing an insolvency event, but members are still set to take advantage of the Pension Protection Fund (PPF).
The case relates to the 2009 insolvency of Olympic Airlines, a Greek carrier, which entered insolvency in Greece while having UK-based operations and a defined benefit (DB) pension scheme but not a subsidiary firm.
Legal wrangling has been on-going since 2010, with the trustees of the UK pension fund looking to secure the benefits of members via the PPF.
The scheme carried a £16m (€22.3m) deficit at the time of its Greek sponsor’s insolvency.
However, a trustee petition to UK courts to create a ‘qualifying insolvency event’ to allow the scheme to enter the PPF came too late – with operations wound down – leaving the scheme in limbo.
Trustees continued to argue and petition courts for legal insolvency of the UK operations but failed in both the Court of Appeals and now the Supreme Court after yesterday’s ruling.
After the Court of Appeals ruling and in anticipation of trustee failure in the Supreme Court, the UK government intervened to protect the scheme by changing the legal framework for PPF entry.
The scheme is now expected to continue its PPF assessment but with uncertainty over who will cover pension payments and costs since the 2010 insolvency, as the scheme only entered assessment after legal changes made by the Department for Work and Pensions (DWP).
Had it won yesterday’s judgment, the PPF could have assumed assessment began in 2010, thus providing financial assistance to pension payments from that date.
This legal challenge, however, provides little clarity on the future outcome of similar potential insolvencies of EU parent firms with UK operations but no legal subsidiary.
The regulation amendments passed by pensions minister Steve Webb after the Court of Appeal decision in 2014 may not aid other EU-based firms in similar circumstances.
Martin Scott, partner at law firm Mayer Brown, said the legislation was done in such a way that it was almost inconceivable to see how it could apply to another pension scheme.
“This is probably only going to help the Olympic Airlines case and will not help any similar EU company in a similar situation,” he said.
“The decision provides a timely reminder that when an employer is based in the EU but is providing UK final salary pension schemes, it remains difficult to benefit from PPF protection.
“It may prove crucial, once the local EU proceedings are underway, to start appropriate English insolvency proceedings as quickly as possible.”
The ruling caps a long list of cases involving sponsor support and PPF protection for UK DB schemes.
Last month, the Box Clever vs ITV case reached a new stage after the UK Court of Appeal referred it back to the Upper Tribunal after disputes over evidence.
The Pensions Regulator and Box Clever trustees had been chasing ITV for s75 contributions for the failed digital venture’s scheme.