The Supreme Court has today ruled against the trustees of the Olympic Airlines pension scheme, finding there was no establishment in the UK during insolvency proceedings to allow it entry into the Pension Protection Fund.

On 20 July 2010, following the wind down of Olympic Airlines in Greece, the UK employees made an appeal to the Court of Appeal to bring secondary insolvency proceedings in the UK so that their scheme would fall under the administration of the PPF.

However, the Court of Appeal judge Lord Sumption ruled it was ineligible to enter the PPF, based on the fact it was not carrying business activity at its head office on 20 July 2010 and therefore did not have an “establishment” in the UK at that date.

The case makes a significant mark for trustees, highlighting how easy it can be for schemes to be denied entry into the PPF dependent upon their location during the time of insolvency.

Lawyers were previously hoping the case would broaden the potential for other schemes in a similar situation to make an application for a qualifying insolvency event and to gain access to the PPF.

However, given the ruling against the trustees, Charles Russell Speechlys head of pensions Penny Cogher said it means schemes in “analogous situations still suffer a significant risk of failing to gain access to the PPF”.

“They need to consider putting steps in place to receive appropriate notifications about potential non UK insolvencies to be able to make an application quickly if necessary,” Cogher added.

Mayer Brown restructing partner Devi Shah also said the guidance will have “broad implications” for pension schemes, insolvency practitioners and creditors alike.

“The ruling will help creditors and insolvency professionals by providing greater clarity at Supreme Court level on what will be required for EU companies with a UK presence to enter into insolvency proceedings in the UK,” Shah said.

“Where a company is winding down its affairs, it will need to show that it is still trading at least to a degree, and once it has ceased to trade the opportunity for insolvency proceedings may be lost.”

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