US litigation boutique Quinn Emanuel Urquhart & Sullivan has won a UK court victory that could potentially reshape the traditional creditor hierarchy in insolvency proceedings.

The case concerned a challenge on behalf of junior creditors HHY Luxembourg and AMP Capital Investors against a proposal made during the restructuring of European Directories – a data and online search business – that would have wiped out the creditors' investment in the company.

The senior lenders, comprising a consortium of banks, had attempted to sideline HHY and AMP by directing Barclays – as security trustee – to exercise powers of transfer and release over European Directories. This measure is intended to allow creditors to enforce their security and sell the company debt-free to a third party or refinance on a debt-free basis.

However, Quinn Emanuel, which advised the junior creditors with a team led by London managing partner Richard East (pictured), was able to convince the court that this provision did not apply.

East commented: "We were able to convince the judge that Barclays had no power to effect a group-wide release of subsidiary companies. These types of restructuring are about both value and rights, not just about value."

The High Court judgment has been cited by Quinn Emanuel as a strong endorsement of the rights of junior creditors in complex insolvencies.

However, one partner at another firm advising on the matter argued that the judgment was a "pyrrhic victory" as the senior lenders intended to pursue other means to reorganise the company's debt that would wipe out the junior creditors.

Allen & Overy restructuring partner Ian Field acted on behalf of Barclays, while Kirkland & Ellis restructuring partner Kon Asimacopoulos was instructed by European Directories. The senior banks were advised by Linklaters banking partner Rebecca Jarvis.

One partner said: "This illustrates the weaknesses of the panel system, where banks use the same old firms that have little incentive to raise these sorts of issues against each other."

The judgment is currently being appealed.