TPR enforcement of US contribution orders questioned

Former IBM trustee director Brian Marks said while he was a trustee he was concerned IBM's US parent company could let the UK company go bust with big debts to the pension fund - which would leave the UK company relying on the regulator to get money back.

Marks said: "My understanding is that there is doubt about whether the regulator could enforce its contribution orders against US companies.

"It would seem unwise for trustees or the regulator to rely on parent strength if actually getting the money is unenforceable."

Marks was speaking in reaction to Punter Southall's warning that companies' Pension Protection Fund levies could increase if their parent companies were considered to be at significant risk (PP Online, January 20).

A TPR spokeswoman said: "The circumstances under which we would use our anti-avoidance powers - issuing a contribution notice or a financial support direction
- are individual to each case.

"As yet we have not issued a contribution notice on a company outside of the UK. However, in the case of Sea Containers (PP Online, June 19, 2007) an FSD was successfully imposed upon a non-UK company."

Baker & McKenzie partner Robert West said: "Part of the mechanism for ensuring the PPF parent company guarantee works with a non UK company is there must be certification under the relevant local law that the guarantee is enforceable.

"In principle, as long as that advice is right, the guarantee should be enforceable but the enforceability of financial support directions and contribution notices offshore will depend very much on the jurisdiction."

Freshfields Bruckhaus Deringer senior associate Charles Magoffin said it was an "unresolved area" and there was a "big question mark as to the extent of the regulator's powers to reach overseas".

He said in the Sea Containers case the regulator's powers were never fully contested by the party because eventually they settled.