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Global Securities Litigation Trends

July 2019 Update

As companies expand globally and securities markets become increasingly inter-connected, multinational corporations must prepare for a new era of global securities litigation and enforcement. This sea change is at the forefront of potential risks for multinational corporations and how they navigate the securities litigation process.

Dechert securities litigation trends report

The U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank Ltd. set the stage for the current legal landscape, extinguishing access to U.S. courts for “F-cubed” cases (foreign investors, suing a foreign issuer, trading on foreign exchanges). But since its publication, lower courts have grappled with the scope of its holding and its effects on international law have been far reaching and substantial.

To understand and prepare for this sea change, multinational defendants facing securities litigation around the globe should be aware of jurisdictions in which they could be sued, as well as those in which they may be able to obtain global relief.  While class actions are commonplace in U.S. securities litigation, jurisprudence in several countries is developing to respond to these emerging issues.

   

Securities Litigation Filing Trends By Region

European Union   |   Netherlands   |   United Kingdom   |   Germany   |   Italy   |   Spain   |   Canada   |   Australia   |   Japan

  

European Union

  • The EU has recently experienced a rapid proliferation of collective actions. While the EU has offered guidance as to what features countries should consider and adopt when constructing the procedural systems governing collective actions, the EU recommendations are not enforced and not followed in their entirety.
  • The EU launched its draft directive called the “New Deal for Consumers” on April 11, 2018, which brings the possibility of seeking monetary damages in consumer class actions, but it is unclear whether this will impact investor suits.
     

Netherlands

  • The Netherlands is the EU member state at the forefront of the globalization of securities litigation as globally-watched cases, like the $1.3 billion Fortis settlement, showcase the venue’s popularity.
  • With a bill awaiting passage in the Senate that will allow money damages and implement other provisions aimed at making the collective action mechanism more efficient and effective, the Netherlands may soon have a new opt-out regime that could attract more claimants to the Netherlands.  However, Dutch courts still require a sufficient connection between the jurisdiction and the alleged harm.
     

United Kingdom

  • The UK’s Financial Services and Markets Act (FSMA) contains claims that resemble Section 11 and 12(a)(2) of the Securities Act and Section 10(b) of the Exchange Act.
  • Claims against companies such as the Royal Bank of Scotland and Tesco have set the stage for investor collective actions in the UK, perhaps signaling that collective securities litigation actions will become more commonplace in the future.
     

Germany

  • While Germany does not have a formal procedure to permit multiple claims to be tried as a class action, Germany’s model case system, KapMuG, allows securities claimants to access the courts to jointly resolve common legal issues.
  • In 2018, the Volkswagen investor trial began, whereby plaintiffs are suing for €9 billion and must show that Volkswagen’s public disclosures were inadequate or untimely and that senior management deliberately concealed this information.
     

Italy

  • The Senate is considering an additional amendment to Article 140, which is the statutory basis for collective actions in Italy and would add a new section to the Italian Civil Procedure Code providing clear requirements for each phase of the class action.
  • In November 2018, the Court of Milan dismissed the Saipem investor case for failure to demonstrate ownership of Saipem shares during the class period.
     

Spain

  • While Spain does not have a specific procedure governing collective actions, Spain regulates what are known as “group claims.”
  • In November 2018, several amendments were approved to the Spanish Securities Market Act, including an amendment that clarifies the definition of “inside information.”
     

Canada

  • Unlike the U.S., Canada’s securities regulation is decentralized such that each of Canada’s thirteen jurisdictions have established laws and agencies that govern the purchase and sale of Canadian securities.
  • While Canada is working towards a national securities regulatory system, securities class actions in the country have lagged, with only eight new securities class actions filed in Canada in 2018.
     

Australia

  • Australia has recognized the concept of collective proceedings for decades, but has recently permitted third-party funding.
  • The Australian Law Reform Commission (ALRC) recently published a Final Report with recommendations to reform certain class action proceedings.
     

Japan

  • In late 2016, Japan first implemented a formal collective action procedure.
  • Because Japan’s securities class action mechanisms are relatively new, only a few cases have been litigated under the recently-adopted system.

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