LONDON (Within The Law) - The Coronavirus pandemic will lead to an increase in securities-related lawsuits. That’s the findings of a new report from international law firm Dechert. According to the Global Legal Post, a chaotic year will see a rise in cases and a rapid rise in asset prices.
Dechert’s Global Securities Litigation Trends report shows that the number and scale of settlements outside of the US is growing.
“The landscape of global securities litigation is continuing to evolve rapidly… multinational companies must continue to brace for a new era of global securities litigation as they may be forced to defend against securities class actions not only in the United States but also around the world, as collective action mechanisms continue to evolve,” states the report.
The US Supreme Court recently decided to prevent plaintiffs from bringing so-called ‘F Cubed’ cases to the US, in which foreign investors sue a foreign issuer based on security traded on a foreign stock exchange. The decision, says the report, means shareholders are likely to look at other jurisdictions to pursue cases.
Australia has already seen securities litigation surge after allowing third-party litigation funding. It now accounts for 17 of the 25 largest settlements outside of America.
Differences among collective active proceedings in different countries, says the report, may result in certain jurisdictions becoming more attractive for litigants.
Without a universal jurisdiction, said the report, issuers could face identical litigation in multiple jurisdictions. Thanks to different opt-out and opt-in structures across jurisdictions, even if an issuer settles in one country, they may still be liable elsewhere.
According to Dechert, the rise of third-party litigation funders is fuelling the increase in collective action suits. They have been eager to fund claims thanks to the large payouts potentially available.
“Without proper restrictions on how much control third party funders may have over the conduct of the litigation, the practice continues to be susceptible to abuse,” Dechert wrote in the report.
In September, 12 litigation funders teamed up to set up the International Legal Finance Association (ILFA), which aims to represent litigation funders in their dealings with governments, regulators, international associations, as well as professional legal bodies.
Australia’s federal government announced in May that litigation funders will be subject to stringent new regulatory requirements. The move came in the same week that a parliamentary select committee announced an inquiry into litigation funding saying the booming industry was leading to poor justice outcomes.
(Written by Tom Cropper, Edited by Klaudia Fior)