The following article by ISS' Ted Allen first appeared in the June 2005 SCAS Alert.  Surprisingly (to me, at least), for all of the recent sound and fury about "international securities class actions," the article found that:

"In fact, a review by SCAS Alert found just one significant securities class settlement, a 2003 accord obtained by GIO Australia Holdings investors."

Interest in Class Actions Grows Outside the U.S.

By Ted Allen, Managing Editor

Institutional investors around the world are supporting legislative efforts to allow securities class-action lawsuits in their own national courts.

However, these foreign lawsuits are rare and many legal barriers remain. In fact, a review by SCAS Alert found just one significant securities class settlement, a 2003 accord obtained by GIO Australia Holdings investors.

This growing interest in securities lawsuits outside the United States reflects a recognition by lawmakers and investors that national regulators need the help of private litigation to help ferret out and deter corporate misstatements and fraud. The accounting scandals at Parmalat Finanziara, Royal Ahold and other companies have led shareholders to ask why they can't sue these firms in their own national courts--just like American investors can.

The lack of comparable class-action laws can leave these foreign investors at a great disadvantage. For instance, Deutsche Telecom agreed in January to pay $120 million to resolve U.S. shareholder lawsuits claiming that executives made misleading statements about company assets before a share offering in 2000. According to Bloomberg News, the company has refused to settle similar claims by 15,000 investors in Germany, which doesn't permit class actions. Consequently, investors are pursuing their claims for more than 100 million Euros through 2,100 separate lawsuits that may take years to litigate.

Marc Gottridge, a securities lawyer in the New York office of Lovells who represents defendants, said the Deutsche Telecom case is a good example of the lack of leverage that investors have outside of U.S. courts. "As long as the defendant is willing to pay its legal fees, it can let these cases drag out at a bone-crushing pace and not pay a penny to investors," Gottridge told SCAS Alert.

Investors have limited rights in Australia and Canada to bring securities claims under existing laws that allow class suits over product defects, asbestos exposure and price-fixing. Dutch lawmakers are expected this month to approve legislation to allow class plaintiffs to seek monetary damages. Germany is considering draft securities legislation, while Norway, Sweden, Spain, Russia and Ukraine already allow groups to sue together. French President Jacques Chirac has called for legislation to allow consumer class-action lawsuits.

Even if all these nations adopt some form of securities class-action legislation, investors still will face financial and procedural barriers before they can start obtaining multi-billion settlements like Cendant and WorldCom investors have in the U.S. Unlike investors in American courts, they face the risk of having to pay defense legal fees if they lose and typically will have to fund litigation expenses without the help of contingency fee arrangements. For the foreseeable future, international institutional investors will continue to bring virtually all of their securities claims in U.S. courts.

Australia
Outside of the U.S., Australia has been the most accommodating nation to shareholder class lawsuits. Perhaps that is a reflection of the fact that 55 percent of Australians own shares, either directly or through managed funds. That level of stock ownership is the highest in the world, according to the Australian Stock Exchange.

Class-action lawsuits have been permitted since 1992. At first, most of the class suits focused on mass disasters or product failures. More recently, high-profile corporate scandals, such as those in the U.S. and the failure of Australia's HIH Insurance Ltd., have spurred investors to use class lawsuits to pursue corporate governance goals, according to a recent article by Jason Betts, a lawyer with Freehills, an Australian law firm.

The most notable case so far was the A$ 97 million settlement obtained by more than 22,000 GIO investors. Investors claimed that GIO executives made misleading and negligent statements in 1998 while defending against a hostile takeover bid by AMP Ltd. The settlement, the largest in Australian history, was approved by an Australian federal court in August 2003. Shareholders recovered an estimated 60 percent of their losses. Investor lawyers hailed the settlement as "a landmark for improved accountability to small investors and better corporate governance in Australia."

Investors recently filed lawsuits against Media World Communications over its market penetration predications. Last year, shareholders sued Concept Sports, alleging that the sports merchandise company issued a misleading prospectus.

As Betts noted, class-action lawsuits have been welcomed by some regulators and academic observers" to supplement the often slow-moving cogs of government enforcement with much speedier private actions."

To bring these class lawsuits, investors had to overcome a traditional Australian legal principle that the company, not shareholders, is the proper plaintiff to bring claims on behalf of investors. In recent rulings, courts have allowed shareholders to bring claims based on the loss of share value.