Nortel had sought to have the ruling overturned as it meant the claims of its pension scheme trustees had priority over the claims of its other creditors, even ones in the US and Canada.
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The defunct Canadian networking vendor, together with failed financial services house Lehman Brothers, argued that pension deficits should not be counted as an administration expense.
Nortel's supporters believe that the precedent set by the ruling could negatively impact the UK's economic recovery, having ramifications for other pension schemes and potentially causing lenders to reassess the credit arrangements of currently solvent companies to protect themselves should the worst happen.
Following the original judgment last year, the judge, Justice Briggs implied that the Financial Support Direction (FSD) legislation under which The Pensions Regulator had made its claim against Nortel was not fit for purpose and suggested an appeal court should look to overturn his verdict.
However, today presiding judge Justice Lloyd said: "The legislation has a valuable and realistic purpose if it enables some redistribution of assets in such a situation, where otherwise the creditors of [Nortel] would be able to share in a greater volume of assets partly as a result of having the benefits of the services (including employees) provided by the employer but without having to pay in full for the provision of those services, in particular without having to contribute appropriately to the pension liabilities in respect of its employees."
Stephen Soper, executive director for defined benefit funding at The Pensions Regulator, said: "We welcome the clarity that this ruling brings in respect of our power to issue a financial support direction to insolvent as well as solvent companies. In particular, this ruling further supports the claims of the Nortel and Lehman pension trustees in their respective administrations.
"It is important to note that this judgment does not change our approach to seeking financial support for a pension scheme. We are required by law to act reasonably and have regard to the interests of those directly affected by our powers.
"We recognise the importance of the UK having an effective restructuring and rescue process and have no intention of frustrating its proper workings."
Nortel is likely to take the fight to the Supreme Court.