Lehman Brothers' European creditors have suffered a blow after the High Court rejected a proposed scheme of arrangement which would have seen a timetable put in place for the return of assets.

Linklaters is advising Lehman's administrator PricewaterhouseCoopers (PwC), which made an application to the High Court in relation to the proposed scheme at the beginning of August when presiding judge Mr Justice Blackburne decided to reserve his judgment.

The proposed scheme aimed to see more than 1,000 creditors reunited with their assets – largely hedge funds and trust assets – by sorting them into three distinct classes to ease the process of returning billions of pounds of assets.

Blackburne decided that the court had no jurisdiction to sanction the scheme, leaving the Linklaters team – headed up by David Ereira and Simon Firth – to consider alternative arrangements.

Steven Pearson, joint administrator at PwC, commented: "The proposed scheme sought to significantly reduce the period clients have to wait before they get their assets back. This judgment is disappointing as it could create further delay for many of Lehman Brothers International Europe's clients."

PwC has been given permission to appeal the judgment but it is not known whether the firm will do so. If the scheme had been approved, creditors would have begun to see their assets returned at the beginning of next year.

Kirkland & Ellis European restructuring head Lyndon Norley said: "What they were trying to do was commendable as it was a means to cutting through the complexity of returning assets. The fundamental flaw though was that that they were trying to deal with assets that were not the assets of the company."

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