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Nortel pensioners protest outside the courthouse in Toronto on May 12, 2014, where the Nortel bankruptcy trial was being held. Pensioners have seen their pensions cut by 30% to 50%.Fred Lum/The Globe and Mail

The judges deciding how to divide $7.3-billion (U.S.) of Nortel Networks Corp. assets must consider how claimants in each country – including 20,000 former employees and pensioners in Canada – will be affected if most of the defunct company's money is allocated to European and U.S. claims, a lawyer for Canadian workers said Tuesday.

Paul Steep, who is representing former Nortel employees in Canada whose claims total $3-billion, said only a tiny fraction of Canadian claims would be repaid if judges side with arguments by European and U.S. lawyers who say most of the remaining cash should go to their jurisdictions.

He said the division of assets proposed by lawyers for Nortel's U.S. subsidiary would leave Canadian creditors with just 10.6 per cent of the assets, while the split proposed by European entities would give Canadian creditors just 11.4 per cent.

The massive joint U.S.-Canadian trial has seen lawyers for the defunct company's foreign subsidiaries line up against the Canadian parent to fight over how much of Nortel's remaining assets will go to each of its component companies. The trial is being held before two judges in courtrooms in Toronto and Wilmington, Del.

While the judges can only decide how the money will be allocated among Nortel's "estates," or geographic units, and will not rule on how the funds will then be split among individual groups of creditors in each location, Mr. Steep said Tuesday they must not "compartmentalize" their jobs and lose sight of the bigger issue of how their ruling will affect individual creditor groups.

"The point of the [geographic] allocation is to ultimately satisfy the claims," he said. "To have regard to what the outcome will be for the estates is not by any means an inappropriate factor."

Lawyers representing the Canadian parent company have argued that most of the $4.5-billion received from the company's massive patent selloff in 2011 should remain in Canada because the patents were owned by the parent company and only held under license by the other subsidiaries.

Lawyers for U.S. and European divisions, however, have proposed different methods for allocating the funds. European entities want the judges to decide the allocation based on how much each unit contributed to the development of the research that lay behind the patents, while U.S. lawyers have argued the money should largely go to the U.S. division because it owned the rights to the most valuable patents that were sold.

Some lawyers charged that Ernst & Young, the court-appointed monitor in Nortel's Canadian restructuring, should have told the U.S. and Canadian courts before the 2011 patent sales were approved that Nortel's position would be that the money would go entirely to the Canadian parent.

On Tuesday, Sheila Block, a Canadian lawyer acting for Nortel's U.S. wing, called the Canadian position "a litigation argument invented three years after" the sales.

But Ken Coleman, a lawyer for the Canadian parent, speaking in the U.S. courtroom, called some of the comments about the monitor "unseemly" and urged the judges to ignore them.

"The gamesmanship, the personalized attacks need to be put aside," Mr. Coleman said, arguing that the U.S. subsidiary and bondholders also did not reveal their position on what to do with the cash from the patent sales until last year, as the parties had agreed to put such questions aside.

The U.S. position, he said, is that 90 per cent of the case from the selloff of Nortel's assets should go to its ‎United States subsidiary.

"There's a bit of kettle-pot syndrome going on here, your Honour," Mr. Coleman said.

‎Earlier, a U.S. lawyer for Nortel's U.S. subsidiary, James Bromley, argued the $7.3-billion should be distributed based on "fair-market value" for the assets that were sold off. Using his formula, Nortel's Canadian parent would get just $770-million, while the U.S. would get $5.3-billion.

‎Lawyers and spokesmen for Nortel's pensioners have contrasted the plight of the company's aging former employees with bondholders and "vulture" funds who bought risky Nortel bonds after the company went into insolvency and are looking for profits. On the trial's first day, a group of Canadian pensioners gathered in front of the courthouse, wearing T-shirts with the slogan "Bondholders Profit! Nortel Pensioners Suffer!"

‎But Andrew LeBlanc, an American lawyer for the Nortel's U.S. bondholders, told court that ‎U.S. law has always held that courts should not consider how much bondholders paid for a bond.

"It is not at all relevant what they paid for the claim," Mr. LeBlanc said. "It may be relevant when you stand on the courtroom steps, talking to the press. But it is not relevant in the courtroom."