The TEXPERS Blog

Three Key Things to know About Foreign Jurisdictions

Photo: Okan Caliskan/Pixabay

By Mike Lange, Guest Contributor

The global shareholder litigation landscape outside the U.S. continues to rapidly grow and evolve. With nearly 50 cases filed or book-building during 2018, investors must now consider many more factors when deciding whether to get active and which recovery efforts to join.

Here are some essential things you need to know about Foreign Jurisdictions when deciding whether to participate in filings outside of North America:

What is the difference between Passive and Active Litigation?

Passive Registration is the U.S.-style, claims filing which 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) 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. This approach requires understanding the risks and costs associated with each jurisdiction.

What factors are necessary to determine a country's risk level?

A country’s risk level impacts an investor’s decision on whether to participate in a filing. Each country has different laws, rules, and ways of dealing with cases, but the common factors that are evaluated to understand the risks associated are Costs, Discovery and Anonymity. 

• Costs - Who will pay the lawyers and court costs and what are the risks of adverse costs?

• Discovery - How much participation will be required?

• Anonymity - How much anonymity will be maintained for those who decide to join?

As legislative changes provide new vehicles for recovery, the answers to these questions will continue to change. Therefore, staying on top of this evolving landscape is crucial to maximizing recovery opportunities.

Which jurisdictions are relevant to shareholder ligation?

Outside of North America, filings in Australia and Taiwan dominate. Excluding the U.S. and Canada, over the past three and a half years more than 70% of global filings have come from Australia and Taiwan. 

The process in Australia is similar to the U.S.; Taiwan uses class actions but has limited participation by institutions and limited eligibility among FRT clients.

Globally, matters are largely passive and low risk jurisdictions, however leveraging FRT's jurisdiction risk profiles will simplify opt-in decisions:

• Australia
• Denmark
• United Kingdom
• Taiwan

Click image to enlarge.

There are more companies getting sued, more funders entering the market, and increased competition for investor registrations. While each jurisdiction has its own particular nuances in how it allows its class action regime to operate, contrary to popular belief, the majority of shareholder litigation matters outside North America involve opt-out class actions or jurisdiction risk profiles comparable to U.S. passive claim filing.

The views expressed are those of Financial Recovery Technologies and are subject to change. These opinions are not intended to be a forecast of future events, a guarantee of results, or investment advice.

Mike Lange

About the Author:

Mike Lange, securities litigation counsel at Financial Recovery Technologies, is the senior member of the firm's Legal & Research team responsible for global, direct, and antitrust case analysis and legal research. During his more than 20 years of practice, he has built a rich network of relationships around the world including corporations, government agencies, lawyers and other professions, which he brings to bear for FRT clients. Before joining FRT, Lange was a Partner at Berman DeValerio & Pease, one of the country’s leading law firms prosecuting securities, consumer, and antitrust litigation. He personally identified and initiated cases recovering more than $200 million for investors.