For instance, most foreign jurisdictions require a claimant to opt-in to a group litigation claim if they wish to recover a portion of a judgement. Therefore, investors need to consider carefully all the various factors that can influence the outcome of litigation when it occurs in a non-U.S. jurisdiction.
International Litigation Factors for Institutional Investors to Consider
One of the main factors to consider is whether a case involves a question of law that has never arisen before in any previous cases. These types of cases are called “cases of first impression.” They can arise in countries where group litigation laws governing private action for securities law violations are still new in that particular jurisdiction. When the claim being brought is a case of first impression, estimating the length of time it takes for the case to be resolved can be more difficult, and it may be more difficult to evaluate whether a particular action will be successful.
Other factors for institutional investors to consider when filing a claim in non-U.S. jurisdiction include:
The Type of Legal System of the Country
The type of legal system that is applicable in a jurisdiction can have significant impacts on the way that a case is litigated. Some differences include:
- Federal vs. centralized government: Laws may differ by province or state in a federal system. In a country that has a centralized government, the laws and their applications will generally be uniform throughout the country.
- Common law vs. civil law: In a common law system, courts typically base their judgements on the outcome of previous cases that are similar to the one at hand (case precedent). The judge’s role may be limited in these cases. Meanwhile, judges can play much more active roles in civil law systems, where they typically rely more on legislation and regulation, rather than case precedent, to determine a case’s outcome.
Costs and Attorney’s Fees
In some non-U.S. jurisdictions, attorneys may be prohibited from collecting a contingent fee on a case (they only recover a fee if litigation is successful). However, it is often possible for law firms to create litigation strategies that can allow a case to move forward despite these types of restrictive rules.
An example of this is in the synthesized approach involved in the recent Fortis case, structured by Kessler Topaz Meltzer & Check and Grant & Eisenhofer. In this case, the two U.S.-based firms obtained financing from a hedge fund that specialized in third-party funding. This allowed the case to proceed while still conforming to European jurisdictional rules, which bar lawyers, but not third parties, from collecting contingent fees.
When third-party funding is utilized, it is important that there be appropriate disclosure of, and consent to, the funding arrangements involved in the case.
Finally, many non-U.S. jurisdictions operate under “loser pays” systems; this means that if the claimants are unsuccessful in litigation, they may be required to pay attorney’s fees and other expenses incurred by the opposing party. Australia is an example of a jurisdiction operating under such rules.
Procedures for gathering evidence can differ widely by country, as may the types of evidence that can be presented in court. It is important for institutional investors to understand how much energy and resources they can expend on discovery in a non-U.S. jurisdiction.
For instance, unlike in the U.S., Japan does not currently have a formal system of pretrial discovery. Attorneys in Japan cannot compel production of documents or witness testimony; as such, they must rely either on court intervention or voluntary cooperation. Germany has a limited discovery system, although German courts may order parties or third parties to produce documents under specific circumstances. U.S.-style discovery is not permitted under the German Civil Procedure Code, and as such is inadmissible in German courts. Understanding these types of differences in discovery requirements by country can be challenging, as each country can have widely differing rules on discovery.
Other Factors to Consider
Other factors that institutional investors should consider in connection with global litigation options include:
- Differences in Language: Language differences in a non-U.S. jurisdiction can contribute to the overall cost of proceedings, as it is sometimes necessary to hire interpreters and obtain translations of documents.
- Differences in Time Zones: Communication with counsel, courts, and opposing parties can be difficult if a jurisdiction is located in a different time zone than the institutional investor. Additionally, parties may be required to travel to the jurisdiction.
- Availability of Arbitration Options: Arbitration can sometimes be an alternative option for institutional investors seeking to recover losses; this option can often depend on the availability of suitable international arbitration venues.
A law firm that is actively and continuously engaged in the global shareholder litigation field is able to offer the most comprehensive representation for investors who are pursuing litigation outside of the U.S. A litigation team that researches and follows legal developments around the world will be able to assist investors in evaluating the possibilities for non-U.S. litigation. If you have any question with regards to global shareholder litigation, contact us today at Kessler Topaz. Our team is experienced in prosecuting shareholder litigation around the world, and understands the risks and benefits of global litigation.