UK - Sea Containers LTD has lodged a formal appeal against the decision by The Pensions Regulator (TPR) to impose a Financial Support Direction (FSD) on the firm regarding its pension schemes.

The Bermuda-registered company had the right to file an appeal against a decision by TPR's Determination Panel in June 2007, requiring it act to shore up its UK-based 1983 and 1990 pension schemes as they are in deficit to the tune of £132.6m.

TPR issued a Financial Support Directive (FSD) on June 28 because it had an agreement in place to support its UK subsidiary's pension until it reneged on the agreement in June 2006.

However, Sea Containers Ltd (SCL) said in its latest statement it does not consider it "reasonable" of the panel to issue an FSD in light of its Chapter 11 bankruptcy proceedings and suggests it "appears contrary to public policy for the Regulator to give the Trustees support which may disadvantage other creditors in a formal restructuring process".

SCL said its expectation was any restructuring would be subject to the Pensions Regulator's Clearance procedure and had made this clear to the Regulator and Trustees.

Furthermore, SCL claimed it believes the existing Service Agreement is an adequate form of support and is confident it will reach an appropriate conclusion the matter without the FSD intervention as it is in a dispute resolution procedure to agree the scope and effect of the agreement as it "takes its pensions obligations very seriously".

It also suggests because compliance with the FSD would be subject to the ap[proval of the US bankruptcy Court, the matter was not in its own control and merely led to "greater complexity and interjurisdictional litigation".

The legal profession has picked up on SCL's reference to questions about the balance between pension funding and other responsible as Jane Marshall, pensions partner at Macfarlanes law firm, suggests the arguments relate to the wider development of pensions law and practice.

"Two of the grounds cited deal with the balancing of the company's pensions obligations with obligations that the company has to other creditors," said Marshall.

"Trying to ensure that a proper share of a company's resources is used for its pensions obligations is a key issue that surfaces each time there is an acquisition or a negotiation about ongoing funding between the company and the trustees.

What has not yet been resolved is where the balance lies between what is a proper and what is a disproportionate share of the available resources, having regard to companies' overall objectives and their obligations to multiple stakeholders.

Marshall also noted while it is of limited interest, the handling of this case is also being closely observed because it raises questions as to whether or not TPR's separate anti-avoidance and clearance teams should be working more closely together.

TPR now has until August 21 to respond to SCL's appeal, according to a spokeswoman for TPR, and the matter will then to go to the independent Pensions Regulator Tribunal.

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