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Derrick Tay, a senior partner at Ogilvy Renault LLP and head of the firm's insol- vency and restructuring practice, was retained by Nortel to lead the liquida- tion and bankruptcy proceedings. He acknowledges the matter is forging new territory for all of the lawyers involved, particularly due to its global span. "I've been practising for 30 years and this is probably the most complex thing I've ever done in my life," he says with can- dour. Yet he explains, "The reason is that multinational companies are never set up with a contemplation of what they would do if they went bankrupt, so everything we're doing is new. What you have here is a company that operated in about 70 years before the matter is resolved and off the desks of the lawyers involved simply due to the geographic span of the company. "The thing that happens when a company such as this becomes insolvent, the geographical lines become very important because these are all dif- ferent legal entities and each legal entity has its own creditors. Outside of North America or Europe, there are not many jurisdictions that recognize the concept of restructuring or bankruptcy," he says. In the U.K., he filed insolvency docu- ments for Nortel operations located in 19 other countries. On a somewhat more positive note, Tay says Nortel was able to pay its employee "The thing that happens when a company such as this becomes insolvent, the geographical lines become very important because these are all different legal entities and each legal entity has its own creditors." Derrick Tay, Ogilvy Renault LLP countries and for the most part, Nortel also outsourced most of its manufactur- ing. So there is a lot involved." Since the filing, Tay has also been over- seeing the sale of Nortel's assets, which has generated $3 billion through auctions for what he refers to as the "black box" bank account, and the company has also settled a $3-billion tax claim from the U.S. Internal Revenue Service. Most of Nortel's major assets have been sold by auction, one that was held over three days at Nortel's U.S. law firm in the fall of 2009 in New York City, which Tay attended. He says auctions are common in the U.S. as a resolution in a bankruptcy although the lawyers who attended from Canada and the U.K. had somewhat of a learning curve as neither country uses auctions in bankruptcies or insolvencies. In the end, he says, the asset sales have significantly boosted the company's ability to settle with its employees, pensioners, and cred- itors hopefully sooner than he expected. Still, he says it will be many more benefits for two years following the com- pany's insolvency and liquidation. "You will not find in the history of Canadian insolvency any other case where even after liquidation, people's benefits and health plans were paid for two years." The 19,000 former employees in Canada had lawyers paid for by Nortel, and Ernst & Young was named the court-appointed monitor of Nortel's Canadian proceed- ings to oversee the administration of the health and welfare trust (HWT) fund, which covers pensioners' medical, den- tal, and life insurance benefits, as well as income support for some groups such as those employees on long-term dis- ability leaves when the company went insolvent. As well, after the liquidation in 2009, Nortel established a hardship pro- gram for former employees who needed money and met a certain criteria, which Tay also says is unique as the law does not require employees to be treated better than other creditors. While there have been some positive developments in the matter in Canada, there are significant shortfalls in employ- ee HWT funds in other countries. In the U.K., employees are trying to access the Canadian HWT in lieu of the deficit in their country's Nortel fund. "That's another complicating factor and this could take a while to sort out," says Tay. The possibility of additional lawsuits will only serve to prolong the insolvency pro- cess. "If people actually come to a deal, it could take months but if people litigate, it will take even longer to resolve this." While some former employees are on board with receiving, perhaps, two years worth of benefits from the HWT, a group of 40 employees on long-term disability is challenging the distribution process sanctioned by the CCAA process. They have retained Joel Rochon, of Rochon Genova LLP in Toronto, who is work- ing on the matter on an unpaid retainer, while Mark Zigler of Koskie Minsky LLP in Toronto was appointed by the court to represent both Nortel's pensioners and former employees, including those on long-term disability. Zigler agrees the matter has been both protracted and complex and suggests that Canada needs to improve its insol- vency laws. "Our laws aren't very good when it comes to protecting pension- ers and employees in insolvencies," he says. "Nortel is much more complicated because it's an international company with all sorts of assets and obligations all over the world and although the parent company was in Canada, it only meant that a lot of the debt flowed back to Canada and a lot of the assets that are in other countries can't be accessed to ben- efit the creditors." As well, he says there isn't one single court that can decide everything in an international insolven- cy, which means the matter has to be brought to courts in Canada, the U.S., and the U.K. (Many of the proceedings between Canada and the U.S. have been connected with a video link.) Zigler says the pension and disability www.CANADIAN Lawyermag.com A PRIL 2011 31