Law Times

Law Times • march 20, 2017 Page 11 www.lawtimesnews.com What can be learned from Nortel case? BY MICHAEL MCKIERNAN For Law Times T he Nortel bankruptcy demonstrates the need for an international in- solvency treaty to settle jurisdictional issues when cross- border companies go under, ac- cording to a lawyer involved in the case. A joint hearing of the On- tario Superior Court and the U.S. Bankruptcy Court in Dela- ware on Jan. 24 finally dragged the Nortel case over the finish line when judges in both courts gave their blessing to a settle- ment to distribute the one-time telecommunications giant's last $7.3 billion in assets among creditors. That amount was a just a frac- tion of the company's peak value in the early 21st century, when Nortel or its subsidiaries em- ployed almost 100,000 people in around 75 different countries. At one point, its market capital- ization soared to an estimated $250 billion amid reported an- nual revenues of $30 billion. The court approval in Re Nortel Networks Corporation et al came some eight years af- ter Nortel filed for bankruptcy simultaneously in Canada, the U.S. and the U.K. and nearly two years after the same judges delivered their verdict on how to divide the company's remaining cash following a 21-day cross- border trial. "I think that there should be an international treaty to deal with jurisdictional issues so that cross-border insolvencies can be dealt with in a more effi- cient way," says Ken Rosenberg, a partner at Toronto litigation boutique Paliare Roland Rosen- berg Rothstein LLP, who acted for the Canadian Creditors' Committee. "If you sue someone in an- other OECD country, we have treaties on how to compel wit- nesses and collect evidence, yet we don't have anything like that for insolvencies. "Ultimately, this case appears to have resolved over a very long period, but courts and interna- tional treaties haven't kept up with the times," he adds. Joseph Pasquariello, a part- ner at Goodmans LLP, and counsel to the court-appointed monitor in the Nortel case, says he would welcome the creation of an international body, but he says that even without prog- ress on that front, the eight-year proceeding has provided a good roadmap for lawyers working on similar future matters. "The working relationship has become very good between Canadian and U.S. courts, and I could see that happening again on a bilateral basis. "If you can't get a body, then at least some guidelines would be useful, many of which could be drawn from this particular experience," Pasquariello says. "We shouldn't lose sight of what was accomplished here on a bilateral basis. "It was huge in terms of com- plexity, the number of parties, depositions and experts, and we were establishing the rules of the game for the first time here. "That is no small feat in and of itself." In any case, his co-counsel, Benjamin Zarnett, says Nortel may end up being a one-off. "It has rightly been described as unprecedented in terms of the complexity, length and chal- lenge it gave to everyone in- volved," he says. "I'm not sure we will ever see anything like it again. "We certainly hadn't seen anything like it up until now." Another unique feature of the Nortel bankruptcy has been the cost. Diane Urquhart, a fi- nancial analyst who has tracked the worldwide professional fees and disbursements spent on the matter using reports filed in court, says that by late 2016, the total came in just short of $2.6 billion. U.K.-based legal and other professionals claimed the largest slice of the pie, at just less than $1 billion, followed by the U.S. with around $900 million in billings. Professionals' fees in Canada over the course of the bankrupt- cy were about $700 million by late 2016. "I think it's unacceptably high and offensive," Urquhart says. "The process enables it, be- cause the money is coming out of the estate assets and there are limited incentives for restraint. "It does not look good at all for the legal profession. "They need to look at the pro- cess, and at the very least, some- thing has to be done so that costs are not allowed to be this uncon- trolled in the future. "Otherwise, they will have to live with the consequences to their reputation," she adds. According to Rosenberg, a cross-jurisdictional body could have helped cut the professional costs associated with the Nortel case. "If we knew what system we were following, rather than filing in three countries and spend- ing two years fighting over the process, that would have made For questions and group rates, please contact: Toll-Free: 1-877-298-5868 • Direct: 416-609-5868 Fax: 416-609-5841 • Website: cpdcentre.ca Email: lexpert.questions@thomsonreuters.com Register online at www.lexpert.ca/cpdcentre 5th Annual Anti-Bribery and Corruption Compliance Navigating Muddy Waters Course Leader: John W. Boscariol, Partner, McCarthy Tétrault LLP Toronto & Webinar | April 25 5th Annual Canadian Construction Insurance Law: An Update on Strategies Construction Liabilities: A Shifting Landscape Course Leaders: David Miachika, Partner, Borden Ladner Gervais LLP Sharon Vogel, Partner, Borden Ladner Gervais LLP Vancouver | May 25 2nd Annual Food & Beverage Industry in Canada: A Regulatory Update The Dawn of a New Era: What to Expect in 2017 Course Leaders: Wendy Baker QC, Partner Miller Thomson LLP Catherine Bate, Partner Miller Thomson LLP Toronto & Webinar | May 31 2nd Annual Duties of Good Faith: "O6QEBUFPO-BX Maintaining Honesty in Today's World Course Leader: Eli Lederman, Partner, Lenczner Slaght Royce Smith Griffin LLP Toronto & Webinar | June 14 Executive Professional Development FULLY ACCREDITED IN-CLASS PROGRAMS & LIVE WEBINARS Untitled-2 1 2017-03-16 2:27 PM FOCUS Ben Zarnett says he wishes a court- appointed monitor's work in the Nortel case could have been done 'without as much complexity and cost,' but then it could not have fulfilled its role as an officer of the court. See Fees, page 12 If you sue someone in another OECD country, we have treaties on how to compel witnesses and collect evidence, yet we don't have anything like that for insolvencies. Ken Rosenberg

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