Evolution of Global Litigation: The Rise of Non-U.S. Passive Participation
As we have previously discussed, excluding Taiwan, more than 75% of securities litigation recovery opportunities outside the U.S. and Canada are in countries with risk profiles comparable to the U.S., where eligible persons submit proof of claim forms with trading details in order to share in settlement monies. Given this trend, institutional investors can automate their claim filing activity for the vast majority of global matters.
LEGAL GROUP MECHANISMS USED IN GLOBAL SHAREHOLDER GROUP ACTIONS
Successfully navigating securities litigation outside of the U.S. requires a comprehensive understanding of the varying legal mechanisms for handling group actions in different global jurisdictions. The primary mechanisms can be broken down into the following categories:
- Passive Registration / Claims Filing: This U.S.-style, passive registration or claims filing involves investors filing participation agreements or proof-of-claims forms with court-appointed administrators or litigation organizers. This approach allows investors to recover losses without having to actively participate in litigation.
- Active Litigation – Low, Moderate and High: Active Litigation requires prospective claimants to affirmatively sign up (or register) with the organizing law firms and litigation funders. Classes are expressly defined and limited to investors who (a) purchased shares, (b) suffered losses, and (c) thereafter registered by signing the attorney engagement and funding agreement.
NON-U.S. PASSIVE PARTICIPATION FEATURES
Non-U.S. passive participation situations have several features similar to U.S. class actions:
- They involve registration or claim submission processes principally focused on filer information and transaction histories;
- They do not obligate participants to become active litigants or serve as lead or representative plaintiffs; and
- They do not entail any out-of-pocket expense or impose risk of adverse-party cost shifting.
PASSIVE JURISDICTIONS: AUSTRALIA, DUTCH FOUNDATIONS, COMPENSATION SCHEMES
Australia has moved to an open class action system where, as in the U.S., persons who bought securities during the time of the alleged fraud are included in the class unless they opt-out or exclude themselves. However, class actions in the two countries differ with respect to when claimants submit and the related paperwork.
With respect to timing, in the US the litigating parties negotiate a settlement, put funds in escrow, and then request preliminary court approval of their agreement. If granted, court approved notices are sent to prospective class members who participate in the settlement by filing proof of claim forms with their trading details. By contrast, in Australia, courts set claim registration deadlines before the parties begin their settlement talks. In this way the court and parties have a handle on class damages before they make a deal and, as a result, the percentage recoveries in Australia are many times higher than in the US.
From a paperwork perspective, Australia has two periods for claim registration. The first occurs before litigation is commenced and is commonly called the book build process. This initial registration entails singing complex contracts with the funder and counsel. The second registration occurs after the court designates lead counsel(s), often enters common fund orders, and the parties have litigated the case for some time. When the parties are ready to try negotiating a resolution or go to trial, the court sets a registration deadline and approves notice to class members. At this juncture, the registration paperwork appears to be getting simpler. Rather than contracts, registration forms appear to be evolving to resemble US claim forms, focusing principally on filer and trading information. See, for example, the Sirtex Class Action Class Member Registration Form available on the Maurice Blackburn website, which does not contain any of the complexity or legal terms of the earlier registration agreements.
We’ve also seen settlement administrations and claim forms like those in U.S. class actions in other recent non-US matters including the Tesco Compensation Scheme and Fortis Dutch Foundation settlement. Non-U.S. passive claim situations currently accepting registrations or claim submissions include:
- CIMIC – deadline October 2, 2018
- Dick Smith – deadline October 8, 2018
- Discovery – deadline October 12, 2018
- Sirtex – deadline November 1, 2018
- Fortis – deadline July 28, 2019 (early disbursement deadline December 31, 2018)
In sum, we expect this trend to continue, allowing institutional investors to further adopt automated workflows like those for U.S. securities class actions.
For more details on non-U.S. passive participation opportunities including FRT’s Global Group Litigation service, please contact your FRT representative or email us at email@example.com.
U.S. CLAIMS I GLOBAL GROUP LITIGATION I ANTITRUST I LITIGATION MONITORING I BUYOUTS
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 and other 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. For more information, go to www.frtservices.com.
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