Once upon a time in Mexico
12 November 2014
Mexico’s extended opt-in period is a significant departure from the procedures in the US, says Noah Wortman of Goal Group
Image: Shutterstock
Class actions cases are no longer solely focused on the US, but are now being filed in multiple legal systems around the world. 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 class action procedures in many different countries.
The ruling of the Morrison v National Australia Bank case in 2010 resulted in the US Supreme Court prohibiting f-cubed actions from taking place within the US. This means that a non-US shareholder, suing a non-US company, whose stock was purchased on a non-US exchange, is no longer able to bring their case in the US courts. Jurisdictions across the world have rapidly been developing legislation in response to a demand for securities class actions to be processed in alternative locations.
In 2010, Article 17 of the Political Constitution of the United Mexican States was amended, giving the country the ability to enact laws on collective actions, as well as giving Mexican federal courts exclusive jurisdiction over these types of proceedings. After these changes came into full effect in 2012, Mexico joined a growing list of Latin American countries that have developed legislation for class actions proceedings. Under the new laws, private plaintiffs, government entities and certain non-profit organisations may bring consumer, financial, anti-trust, and environmental claims as class, or collective lawsuits.
Through these cases, federal courts in Mexico are authorised to award class-wide damages and injunctive relief, including product recalls and orders to rectify environmental damage. These collective action procedures are codified in Book Five of Mexico’s Federal Code of Civil Procedure.
There are three types of collective action in Mexico. The first type is known as a ‘diffuse’ action, in which the rights prosecuted are indivisible and relate to an undetermined group of individuals. The second type is the ‘collective’ action in the strict sense, in which the rights are indivisible but the group is determined. The third type is the ‘homogenous individual’ action, in which the rights prosecuted are divisible and the group is made up of similarly situated individuals.
In diffuse actions, members of the collective may opt out of the process, but in collective and homogenous individual actions, members of the collective may instead opt in and obtain compensation within 18 months after final judgement on a case. This is a significant departure from the procedures in the US, where there is no extended opt-in period. It is important to acknowledge Mexico’s development of class actions legislation and the courts’ appreciation of the potential benefits of this kind of regulation. As a result of this, it is vital that Mexican investors remain vigilant about their ability to participate in class actions in Mexico and other jurisdictions around the globe.
With Mexican investors now investing $2 billion in foreign equity shares, up from $1.5 billion at the end of 2010 and $403 million in 2003, it is clear that there is a duty to monitor and participate in securities class action and collective redress opportunities in various countries around the world. Investment in the US in 2013 from Mexican investors was $570 million, $909 million in Luxembourg and $212 million in Spain.
Goal Group’s analysis of its class actions knowledge base predicts that by 2020 securities class action, group and collective redress settlements outside of the US will reach $8.3 billion annually. The analysis also predicts that an estimated $2.02 billion of global investors’ rightful returns will be left unclaimed each year by non-participation.
As a result, it is clear that there are still significant amounts being left unclaimed each year due to non-participation. It is at this point where it becomes the responsibility of fund managers and custodians to monitor and remain vigilant about international opportunities to prosecute securities class actions in order to reclaim losses.
Keeping track of opportunities to make a claim, and the processes required to do successfully can appear to be a complicated and daunting task. However, this is no longer the case, as there are now a number of specialist services available which automate the process of class actions participation. This significantly minimises the complexity and cost of recovery, and therefore there becomes no real or viable excuse for non-participation from fund managers and institutional investors.
As securities class actions and collective litigation mechanisms globalise, investors must remain vigilant and continue to monitor both home country and global class action participation prospects. Mexico must now be included as a legislature to watch, and is certainly a jurisdiction in which proceedings should be observed closely, especially as the process here is still relatively new. As a result, all parties should acknowledge cross-border class action opportunities in legislatures, such as Mexico, and reclaim the damages to which they are legally entitled.
The ruling of the Morrison v National Australia Bank case in 2010 resulted in the US Supreme Court prohibiting f-cubed actions from taking place within the US. This means that a non-US shareholder, suing a non-US company, whose stock was purchased on a non-US exchange, is no longer able to bring their case in the US courts. Jurisdictions across the world have rapidly been developing legislation in response to a demand for securities class actions to be processed in alternative locations.
In 2010, Article 17 of the Political Constitution of the United Mexican States was amended, giving the country the ability to enact laws on collective actions, as well as giving Mexican federal courts exclusive jurisdiction over these types of proceedings. After these changes came into full effect in 2012, Mexico joined a growing list of Latin American countries that have developed legislation for class actions proceedings. Under the new laws, private plaintiffs, government entities and certain non-profit organisations may bring consumer, financial, anti-trust, and environmental claims as class, or collective lawsuits.
Through these cases, federal courts in Mexico are authorised to award class-wide damages and injunctive relief, including product recalls and orders to rectify environmental damage. These collective action procedures are codified in Book Five of Mexico’s Federal Code of Civil Procedure.
There are three types of collective action in Mexico. The first type is known as a ‘diffuse’ action, in which the rights prosecuted are indivisible and relate to an undetermined group of individuals. The second type is the ‘collective’ action in the strict sense, in which the rights are indivisible but the group is determined. The third type is the ‘homogenous individual’ action, in which the rights prosecuted are divisible and the group is made up of similarly situated individuals.
In diffuse actions, members of the collective may opt out of the process, but in collective and homogenous individual actions, members of the collective may instead opt in and obtain compensation within 18 months after final judgement on a case. This is a significant departure from the procedures in the US, where there is no extended opt-in period. It is important to acknowledge Mexico’s development of class actions legislation and the courts’ appreciation of the potential benefits of this kind of regulation. As a result of this, it is vital that Mexican investors remain vigilant about their ability to participate in class actions in Mexico and other jurisdictions around the globe.
With Mexican investors now investing $2 billion in foreign equity shares, up from $1.5 billion at the end of 2010 and $403 million in 2003, it is clear that there is a duty to monitor and participate in securities class action and collective redress opportunities in various countries around the world. Investment in the US in 2013 from Mexican investors was $570 million, $909 million in Luxembourg and $212 million in Spain.
Goal Group’s analysis of its class actions knowledge base predicts that by 2020 securities class action, group and collective redress settlements outside of the US will reach $8.3 billion annually. The analysis also predicts that an estimated $2.02 billion of global investors’ rightful returns will be left unclaimed each year by non-participation.
As a result, it is clear that there are still significant amounts being left unclaimed each year due to non-participation. It is at this point where it becomes the responsibility of fund managers and custodians to monitor and remain vigilant about international opportunities to prosecute securities class actions in order to reclaim losses.
Keeping track of opportunities to make a claim, and the processes required to do successfully can appear to be a complicated and daunting task. However, this is no longer the case, as there are now a number of specialist services available which automate the process of class actions participation. This significantly minimises the complexity and cost of recovery, and therefore there becomes no real or viable excuse for non-participation from fund managers and institutional investors.
As securities class actions and collective litigation mechanisms globalise, investors must remain vigilant and continue to monitor both home country and global class action participation prospects. Mexico must now be included as a legislature to watch, and is certainly a jurisdiction in which proceedings should be observed closely, especially as the process here is still relatively new. As a result, all parties should acknowledge cross-border class action opportunities in legislatures, such as Mexico, and reclaim the damages to which they are legally entitled.
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