International vigilance
11 June 2014
Settlements for the Asia Pacific market will reach $3.44 billion by 2020, according to Jonathan Hu of Goal Group
Image: Shutterstock
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 stock exchange, and who is bringing a case in a US federal court—have effectively been banned by the Supreme Court’s 2010 ruling in Morrison v National Australia Bank.
As a result, class action cases are no longer solely focused on the US, but group litigations are being filed in multiple legal systems throughout the world, including Japan. This international diversification of class actions can be attributed to a combination of restrictions on jurisdiction definitions in US federal courts, along with a growing desire to develop domestic collective redress procedures in many countries around the globe.
Although the US is still the most dominant judiciary, aggrieved investors 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 legal systems that are able to define and prosecute a global class.
Japan has presented itself as a leader in group actions in Asia. Currently in Japan, a group of related securities claims can be brought in the form of a ‘joint suit’ or by an ‘appointed party’ under the Code of Civil Procedure. The procedure allows a number of persons who share a common interest to appoint a representative who will then act on their behalf in conducting the court proceedings. Joint proceedings and appointed party proceedings may be brought by residents from other jurisdictions.
Under the Code of Civil Procedure, the court’s decision is binding for the appointed representative, the defendant, and those who appointed and authorised the representative. How damages are calculated depends on the method of proof used by the claimant. In cases where it is clear that damages were incurred but the demonstration of their amount is very difficult, the court can award the amount of damages that it considers appropriate. Quantification on damages is done separately for each victim.
The existing class action system does not allow a class of consumers to seek monetary compensation. The Japanese government has recently been looking to introduce a new consumer class action litigation system to make it easier for consumers to claim damages. It is expected to take effect in 2016 and demonstrates Japan’s acknowledgment of the benefits of class actions. Increased accessibility to securities class actions may also be seen as a result.
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.
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 develops and spreads within the Asia Pacific region, fiduciaries should remain vigilant about international opportunities to pursue legal redress, whether it be in the form of group, collective, class or direct actions, in order to reclaim investment losses as result of alleged corporate wrongdoing.
Although keeping track of the opportunities to make a claim, and the processes required to do so successfully can appear a complicated and daunting task, 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.
As a result, class action cases are no longer solely focused on the US, but group litigations are being filed in multiple legal systems throughout the world, including Japan. This international diversification of class actions can be attributed to a combination of restrictions on jurisdiction definitions in US federal courts, along with a growing desire to develop domestic collective redress procedures in many countries around the globe.
Although the US is still the most dominant judiciary, aggrieved investors 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 legal systems that are able to define and prosecute a global class.
Japan has presented itself as a leader in group actions in Asia. Currently in Japan, a group of related securities claims can be brought in the form of a ‘joint suit’ or by an ‘appointed party’ under the Code of Civil Procedure. The procedure allows a number of persons who share a common interest to appoint a representative who will then act on their behalf in conducting the court proceedings. Joint proceedings and appointed party proceedings may be brought by residents from other jurisdictions.
Under the Code of Civil Procedure, the court’s decision is binding for the appointed representative, the defendant, and those who appointed and authorised the representative. How damages are calculated depends on the method of proof used by the claimant. In cases where it is clear that damages were incurred but the demonstration of their amount is very difficult, the court can award the amount of damages that it considers appropriate. Quantification on damages is done separately for each victim.
The existing class action system does not allow a class of consumers to seek monetary compensation. The Japanese government has recently been looking to introduce a new consumer class action litigation system to make it easier for consumers to claim damages. It is expected to take effect in 2016 and demonstrates Japan’s acknowledgment of the benefits of class actions. Increased accessibility to securities class actions may also be seen as a result.
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.
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 develops and spreads within the Asia Pacific region, fiduciaries should remain vigilant about international opportunities to pursue legal redress, whether it be in the form of group, collective, class or direct actions, in order to reclaim investment losses as result of alleged corporate wrongdoing.
Although keeping track of the opportunities to make a claim, and the processes required to do so successfully can appear a complicated and daunting task, 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.
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