Australian Class Actions Outpace Other Non-U.S. Jurisdictions Financial Recovery Technologies (FRT) research shows a record number of new securities actions in Australia – accounting for nearly 30% of the opt-in actions filed globally.
Sydney, Australia, October 24, 2017 — Australia is among the most active jurisdictions for securities litigation efforts outside of the U.S. and Canada, breaking records for actions and taking a leadership role in the maturation of non-U.S. securities class actions.
According to research from Financial Recovery Technologies (“FRT”), there have been nearly 40 class actions filed in Australia since 2010, and in 2015, Australian class actions accounted for nearly one third of all new international securities cases. In 2016, we saw a record number of opt-in actions filed globally – a 56% increase from the previous year – and Australia represented 30% of that pool. To date, these actions have recovered more than $1.86 billion for investors.
These successful outcomes have increased the competition between, and quantity of, organisers and third-party litigation funders. Additionally, there has been a shift towards open classes resembling those in the U.S. to encompass more investors, who are participating more given the low associated risks.
“Compared to other international jurisdictions, the Australian process is straightforward and comparatively risk free,” says Steven Longley, SVP of Corporate Development at FRT. “The Australian system has evolved to the point where the cost and burdens to class members is comparable to those in the U.S. Investors can participate on a no win-no cost basis, and be essentially anonymous and passive, without discovery or other burdens.”
Rise of third-party litigation funders
According to FRT, third-party litigation funders have played a key role in the development of class litigation in Australia.
These entities pay counsel fees regardless of outcome enabling investors to participate in securities lawsuits without the risk of compounding their trading losses with litigation expenses. Now, investors who wish to pursue claims typically enter into contractual agreements with funders. In exchange for this risk mitigation, funders receive a percentage of the payout if cases prove successful – generally 25-40%.
With multiple law firms and funders increasingly competing to lead and file open classes, FRT expects the Australian courts to develop procedures for coordinating multiple, overlapping suits, designating certain law firms as lead counsel, approving co-lead counsel structures, and/or staying some actions in favour of others.
“Increased competition among case organizers is moving these litigations toward the ‘opt-out’ class action system in the U.S.,” says Mike Lange, Securities Litigation Counsel at FRT. “We expect more ‘open’ class cases to be filed in the future, making it even more important for fiduciaries to implement claim submission processes as they have for U.S. suits.”
For these reasons, many institutions are seizing the opportunity to join opt-in cases in Australia if they have any losses whatsoever.
Longley says: “We’re seeing more parties get involved, new and inventive causes of action, and an increasing number of cases, fueled by local lawyers, international recovery firms, risk-hedging funders, and U.S. law firms exporting their knowledge and capital.”
However, growth introduces new challenges. Funders typically require a minimum level of institutional losses to be ‘registered’ before committing to finance litigation. As institutional investor interest gets spread across more competing organisers it becomes harder for each of them to hit their funding thresholds. As a result, cases can take longer to be launched. This trend could be further exacerbated if more institutions fail to register up-front in open class cases, choosing instead to wait for claims submission processes.
Adds Lange: “We’re seeing some organisers fail to file, or join forces with others to start cases.”
The Road Ahead
FRT expects the litigation landscape in Australia to further evolve as the industry continues to mature and regulations change as a result.
Already, the Victorian Attorney-General has asked the Victorian Law Reform Commission to review some aspects of the law and court procedures concerning cases financed by litigation funders and class actions. Amongst other issues, they are investigating ways to make the system fairer and less risky and debating the merits of contingency fees, litigation funding, and other cost structures that may provide access to more investors.
The Commission has prepared a consultation paper entitled Access to Justice – Litigation Funding and Group Proceedings, and has been asked to report back to the Attorney-General by 31 March 2018.
About Financial Recovery Technologies
Founded in 2008, Financial Recovery Technologies (FRT) is a leading technology-based services firm that helps the investment community identify eligibility, file claims and collect funds made available in securities class action settlements. Offering the most comprehensive range of claim filing and monitoring services available, we provide best-in-class eligibility analysis, disbursement auditing and client reporting, and deliver the highest level of accuracy, accountability and transparency available. Financial Recovery Technologies is a Cross Country Group company (http://www.ccgroup.com). For more information, go to www.frtservices.com.
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