Weil Gotshal & Manges and KPMG have reached a groundbreaking agreement in the MF Global administration that will see money returned to clients without the need for a court order.

Weil Gotshal is advising administrator KPMG on the high-profile insolvency proceedings, which kicked off late last year and are the first under the UK's new 'special administration' regime set up last year to protect market stability in the wake of Lehman Brothers' 2008 collapse.

The unusual move will see Weil Gotshal and KPMG return some MF Global client money without resorting to a court order, which could significantly delay the process. The decision was taken after the parties concluded that 26% of the estate could safely be returned to clients.

The new regime places an emphasis on the prompt return of client assets, but the issue has been complicated by a pending Supreme Court ruling over the handling of client monies in the Lehman Brothers case.

Weil Gotshal lead partner Adam Plainer commented: "This is an unusual case as it is the first special administration. We sat down with KPMG and worked out the legal risks of returning client money and concluded that this is the amount the special administrators could safely hand out without making a formal application to court. The usual route would be to apply to court to obtain an order protecting the special administrators.

"To compare, in the Lehman Brothers bankruptcy, client money claimants have received no dividends after three and a half years of protracted 
court proceedings."

Allen & Overy restructuring partner Jennifer Marshall, who is acting for a number of creditors on the Lehman case, added: "This is an unexpected move. We were expecting that the [MF Global] administrators would await the Supreme Court ruling in the Lehman case before making decisions on client money, given that there is still so much uncertainty."

Weil Gotshal has instructed Martin Pascoe QC, Antony Zacaroli QC and Daniel Bayfield of South Square as counsel.

The Financial Services Authority, which has supported the interim payout, was represented by Glen Davis QC and Georgina Peters of 
South Square.