Securities class-action litigation is rising in the UK
Trends in class actions mean UK litigation culture may increasingly resemble that of the US.
In 2017, several of the biggest cases before the English High Court were collective actions brought by large groups of claimants against listed companies and financial institutions. These actions have increased in recent years, with several developments triggering their growth.
First, legislative changes in the UK have introduced the mechanisms to enable these actions to be brought forward. For example, since 2015, an opt-out class-action mechanism has been available in competition cases. And in the securities context, statutory causes of action are now available to those who claim to have suffered loss as a result of misleading information contained in prospectuses or other information published by issuers of listed securities.
Second, previously restrictive rules on third-party litigation funding have been relaxed over time, leading to a dramatic increase in the number of third-party funders present on the market and the availability of litigation funding.
And third, to capture the opportunities the preceding developments present, specialist claimant law firms have emerged and built up the know-how required to pursue claims on behalf of large groups of claimants.
To mitigate the risk of being exposed to collective actions in the UK, companies should consider three steps:
- Ensure effective systems and controls are in place. Claims often stem from failures in systems and controls; companies that can prevent such failures in the first place will reduce the risk of associated litigation.
- Have an eye to privilege. Many of the collective actions seen before the courts to date have been triggered by events that have been the subject of an internal investigation. Organizations should be alert to the risk of creating contemporaneous paper trails that are non-privileged (most notably, unguarded emails).
- Consider arbitration. To avoid the risk of multiple actions, organizations can consider providing for arbitration in relevant agreements, and potentially their constitutional documents.