Europe’s institutional investors are losing out on billions of euros in compensation from class action suits, according to a lawyer involved in the area.
Investors might be entitled to the cash as a result of losing money on their investments in firms that artificially inflated their share price. Part of the problem is poor timing by investors and a lack of willingness to get involved.
“The message to European institutional investors is to make sure they protect their interests at the start of a class action so that they will receive a recovery at the conclusion of the class action,” said Eric Belfi, attorney at law with Murray Frank & Sailer, a New York-based law firm that visited Munich recently to explain the importance of class actions to investors.
Belfi cites a case in the US when investors won $300m (€246m)in an action against Daimler Chrysler in 2002. The court refused to include non-US investors in the case because no one had come forward to represent them and the $300m recovery was shared only by US investors.
“Some US plaintiffs do not want the Europeans to get involved because the compensation has to be shared among more claimants,” Belfi said.
“On the other hand, companies want all plaintiffs to be involved so that they can achieve a final resolution of all claims.”
Investors are also missing out on compensation because they fail to complete the required paperwork. “Of $5bn of settlements in 2004, $1bn went unclaimed,” Belfi said.
“I estimate that $2bn was left unclaimed last year,” said Belfi. “This year we are already well on the way to exceeding last year’s total settlements.”