On 17 September, the Pension Regulator's Determinations Panel announced that it had issued a determination that six companies within the Lehman Brothers group (including the group's main operating companies in the UK as well as the US parent Lehman Brothers Holding Inc.) should provide financial support to the Lehman Brothers Pension Scheme. This followed a hearing on 8-9 September 2010.

However, the Panel confirmed that it did not uphold a request to seek a financial support direction (FSD) from several other smaller UK group subsidiaries. The Panel has not yet published its detailed reasons.

An FSD may be issued where the employer in relation to a defined benefit pension scheme is a service company or is insufficiently resourced, within the terms of the Pensions Act 2004. They may be issued to an employer and anyone connected or associated with the employer (but not to individuals). There is no immediate requirement to pay cash into the scheme; the direction is to “support” the scheme (through, perhaps, a guarantee or an order that certain group companies become jointly and severally liable for the scheme). The Regulator must also consider the extent to which it is reasonable to impose liability under an FSD, having regard to the reasonableness of the party's actions in the circumstances of the case.

The FSD determination in Lehman follows those made in the Nortel and Sea Containers cases. As in Nortel, there are issues as to whether the Regulator can enforce the FSD in overseas jurisdictions, especially where the companies are subject to an ongoing insolvency process in those jurisdictions.

Action required: None. Lehman further demonstrates an apparent increased willingness on the part of the Regulator to use its moral hazard sanctions (following on from the Bonas contribution notice (see our bulletin) and the Nortel determination.