New legislation came in to force on 21 July 2014 with the intention of granting entry to the Pension Protection Fund (the “PPF”) for those members of the Olympic Airlines SA Pension and Life Assurance Scheme (the “Scheme”). The members of the Scheme had previously been denied entry as a result of a Court of Appeal decision in the case of the Trustees of the Olympic Airlines SA Pension and Life Assurance Scheme v Olympic Airlines SA.
The PPF entry rules require a qualifying insolvency event to be suffered by a pension scheme’s statutory employer in order for the scheme to enter a PPF assessment period. Further to our last update in July 2013 on the case, Olympic Airlines SA (“Olympic”) as principal employer of the Scheme, was an overseas employer which went in to special liquidation in Greece in 2009. For the purposes of the PPF entry rules an overseas insolvency is not a qualifying insolvency event. Instead, secondary proceedings in England (as opposed to the primary proceedings overseas) are required to be brought in order for a qualifying insolvency event to take place. However, secondary proceedings can only take place if an “establishment” (for the purposes of European Union insolvency laws) exists in England as a secondary jurisdiction.
At the time the Trustees of the Scheme brought secondary proceedings, Olympic had wound down much of its UK business. The decision at first instance found that there remained an “establishment” in the UK and made a winding up order which triggered a qualifying insolvency event. However, this decision was reversed by the Court of Appeal in the judgement handed down in June 2013. The effect of this judgement had been to put the scheme’s entry to the PPF in jeopardy, despite the PPF having already issued a determination notice. The Trustees of the scheme subsequently applied to the Supreme Court to challenge the Court of Appeal’s decision on a number of grounds.
However, the Department for Work and Pensions (the “DWP”) has now acted to legislate for the entry of the Olympic Scheme in to the PPF by creating a new qualifying insolvency event. The new Pension Protection Fund (Entry Rules) (Amendment) Regulations 2014 provide a detailed set of factual circumstances which must apply to a scheme in order for it to gain entry to the PPF through this route.
These factual scenarios can only ever apply to the Olympic Scheme. For instance, the principal employer must have suffered an insolvency event prior to 21 July and must have had a first instance decision followed by a decision in the Court of Appeal overturning that first instance decision.
It is therefore highly doubtful, if not impossible, that any other scheme with an overseas employer is capable or will be capable of using the Regulations, especially as the Regulations are drafted to lapse in 3 years’ time. Indeed it appears to be the intention of the DWP that no other scheme should have the benefit of these Regulations. The explanatory memo that accompanies the Regulations states that there is no wider policy being made by these Regulations to allow schemes with an overseas employer to have a direct route for PPF entry. Instead, Trustees will be required to bring secondary proceedings and prove that the principal employer has a UK “establishment”.
This should be a concern for trustees of schemes with overseas employers as it is clearly possible to run down the UK trading arm of a business without suffering a primary insolvency event in its home jurisdiction. There are steps that trustees can take to protect their position, but the legislation has not helped.
As for the members of the Olympic Scheme, there will inevitably be an assessment date arising in October 2014 and entry to the PPF appears assured. However the Supreme Court appeal has not been dropped and it remains to be seen whether the UK and EU insolvency laws will be subject to a challenge as a result of the trustees pursuing the claim, which could potentially deliver a May 2012 assessment date for their members.