Cross border judicial cooperation?

When Nortel auctioned off the wireless business in July the US and Canadian courts attempted to run the show jointly by working a video link between the two courtrooms in real time to approve the plan of action.

Both judges agreed to a simple script for the hearing. However, shortly after Nortel’s US lawyer explained the guidelines in Delaware, Judge Gross, the US judge, jumped the gun by approving the plan and ending the hearing.

Judge Morawetz and the assembled Canadian lawyers and creditors in Toronto were left with their mouths open wondering what happened.

A private telephone conversation between the two judges followed, after which the joint hearing was reopened, and that allowed Judge Morawetz to save some face and approve the plan.

As stated by one of the Canadian lawyers present, “It was embarrassing what happened that day,” and followed up by declaring that US lawyers view Canada “as a complete afterthought”.

For those of us who are Canadian creditors this does not bode well for the percentage of assets allocated to Canada after Nortel’s full liquidation. We will probably be short changed in terms of the money left to divide among Canadian creditors, after the US has taken its pound of flesh.

Since most of the cash is in the US entity this probably seems like a reasonable distribution, but given the fact that the company originated in Canada where all the ideas, designs, and strategies that led to its success were created, it’s a hard pill to swallow.