Although the US is still the most developed and dominant centre for securities class actions filings, there has been a growing pressure of global class action cases looking for a home in a legislature that is able to define and prosecute a global class.
Although the US is still the most developed and dominant centre for securities class actions filings, there has been a growing pressure of global class action cases looking for a home in a legislature that is able to define and prosecute a global class. The 2010 Morisson versus NAB ruling now prevents non-US shareholders, whose stock was purchased on a non-US exchange, from suing a non-US company through a US court. Having initiated class action legislation at the beginning of the 21st century, Sweden presented itself as a European forerunner. Goal Group’s analysis of its class actions knowledge base predicts that by 2020, annual securities class action settlements in Europe will reach almost $4 billion.
The Swedish Group Proceedings Act (2003) was enacted to allow for two types of actions to be processed: private opt-in class actions and representative actions. The act formed one of the earliest pieces of class action legislation in Europe and it can be applied to any type of claim. It is fair to assume that the breaking of the 2002 ABB corporate scandal, dubbed ‘the Swedish version of Enron’, was the key motivation for allowing private rights of action for securities disputes.
A private opt-in class action is the appropriate mechanism for filing securities class actions in Sweden and it can be initiated by an individual or legal entity. Those wishing to join as members of the group must actively opt-in by informing the court, and are required to have a similar claim to the plaintiff who initiated the filing. The initiating plaintiff leads the case but must hear the opinions, and represent the interests of the other members.
The court monitors the lead plaintiff and if it deems them to be inappropriate for the role, it then controls the leadership of the class action. Opting-in binds the group members to any decision that is made, but if one should miss the deadline to opt-in, it is still possible to bring a claim over the same misconduct in the future. The court is required to approve a settlement.
With such a long-standing history of securities class actions, it is quite possible that Sweden could become a regional centre for the prosecution of such cases, especially since the 2010 Morisson versus NAB ruling in the US. This has therefore presented an opportunity to other jurisdictions to process the cases. There are some limitations that face Sweden at present, however, as it currently adopts the ‘loser pays’ system whereby members of the class are at risk of paying the defendant’s costs should the lawsuit fail. This, combined with an ‘opt-in’ as opposed to ‘opt-out’ mechanism, may deter the use of class actions.
A Goal Group study forecasts that by the end of the decade, $2.02 billion of investors’ rightful returns will be left unreclaimed each year. Despite some limitations, Swedish investors and fiduciaries should act vigilantly and make use of the ability to file securities class actions, especially as responsibility for the identification and participation in securities class actions is increasingly being included in the contracts of custodians. As Krister Azelius of Swedish law firm Advokatfirman Vinge highlights, there has been “a growing number of disputes … where the claimant alleges that the consultant has been reckless in giving advice.”
Not only should Swedish opportunities be monitored, all parties should acknowledge cross-border opportunities to file a securities class action to reclaim rightful damages. Keeping track of international opportunities and the claims process can be daunting. However, there are now specialist service providers that can automate the complex process of class action participation across international legislatures.
