Class action cases are no longer solely focused on the US but are being filed in multiple legal systems throughout the world.
Class action cases are no longer solely focused on the US but are being filed in multiple legal systems throughout the world. This international diversification of class actions can be attributed to a combination of restrictions on jurisdiction definitions in the US federal courts, along with a growing desire to develop domestic class action procedures in many countries around the globe. In the US, F-cubed actions—which involve a non-US shareholder suing a non-US company, whose stock was purchased on a non-US exchange, and who is bringing a case in a US court—have effectively been banned by the 2010 Morrison versus NAB Supreme Court ruling.
Although the US is still the most dominant legislature, plaintiffs are now instigating litigation in more flexible jurisdictions globally. International companies listed on multiple exchanges must now defend themselves against securities class actions in multiple jurisdictions, and there is a growing pressure of global class action cases looking for a home in legislatures that are able to define and prosecute a global class.
Alongside this development, greater emphasis has been placed on the importance of fiduciary duty and corporate governance reform where malfeasance or negligence leads to a significant loss in investment value. Fiduciary duty increasingly includes responsibility for identifying and ensuring participation in relevant securities class actions to enable clients to reclaim rightful returns where the value of investments has been wrongly damaged. Failure to engage in class actions can leave billions in unreclaimed settlements, compromise fiduciary integrity and portfolio returns, and prejudice clients’ potential entitlement to legal redress.
The Netherlands and Australia, for example, already have class action legislation and a framework in place to allow non-US investors in shares listed on a non-US exchange, to pursue securities class actions in their courts. In east Asia, Japan has a lively legislature processing securities class actions cases, and China is likely to introduce more stringent corporate governance and securities standards in the near term. In South Korea, securities class actions were given a kick start with a filing in 2009 that breathed life into the Securities Class Action Act which had until then not been exercised.
It is quite possible that Hong Kong could become one of the next Asian legislatures to allow global securities class actions. In May 2012 the Hong Kong securities regulator proposed introducing legislation, however, this new regulation would initially only apply to product liability and consumer fraud cases, and not to purchasers of securities. Nevertheless, the announcement heralds definite progress in a legislature where investors seeking damages are often deterred from litigation as losing parties must cover their opponent’s legal fees.
One Hong Kong based financial services regulatory lawyer has commented that allowing class actions in Hong Kong could drive a change in mindset and behaviour in the market, as it would encourage higher standards of corporate governance and management behaviour.
The Shareholder Protection and Corporate Governance forum, held in Amsterdam on the 30 January, has highlighted a need for stronger corporate governance across Asia. A talk by Michael Woodford, a former president of Olympus, who exposed fraud within the corporation and therefore prompted reform, highlighted the probability that more accountability is needed in corporate Japan. In addition, the latest NERA Economic Consulting data presented by Robert Patton showed that, in 2013, almost half of US filings against non-US companies were against Chinese corporations.
Class actions frameworks are being introduced at a rapid rate. Fiduciaries will be faced with a growing risk of being sued if they do not ensure their investors are included in class actions across the globe. Being able to participate in a class action within one’s own jurisdiction is important; however Singapore is an example of how, despite securities class actions being allowed, it has never been more important for investors and fiduciaries to successfully monitor securities class action opportunities throughout the world.
GIC and Temasek are corporations owned by the Singapore government and are the two largest sovereign wealth funds in the world. They effectively invest the livelihood of Singaporeans because their funds provide Singaporean pensions. According to its website, GIC has over 44 percent of its investments in Americas and 25 percent in Europe where class actions are vibrant. Similarly, Temasek has a combined 25 percent of its investment in North America, Europe, Australia and New Zealand.
Goal Group has calculated that securities class action settlements for the Asia-Pacific market will reach $3.44 billion by 2020. As securities class action legislation flourishes within the Asia-Pacific region with legislatures such as Hong Kong looking to expand the cases it allows, it is still important to remain vigilant about international opportunities to prosecute securities class actions in order to reclaim losses.
Keeping track of the opportunities to make a claim, and the processes required to do so successfully can appear a complicated and daunting task, however. Institutional investors have, in some cases, believed that the cost and time involved is likely to outweigh the benefits. Although this is often not true, it perhaps explains why nearly a quarter of claims that could be filed by entitled parties, are left unprocessed.
Specialist service providers can now automate the complex process of class action participation across international legislatures at a relatively low cost. On this basis, any argument that complexity, cost and time should be a reason for not making a claim would appear to be very weak indeed.
