EUROPE - Europe could still be some way off from regularly handling local class action suits unless a pan-European legal foundation can be established matching US standards, according to legal experts.
Mark Willis, partner of international securities at US law firm Cohen Milstein Hausfeld & Toll, told IPE the European pensions and institutional market has shown significantly increased interest in playing an active role in shareholder class action suits over the last 12 months.
That said, the lack of any legal framework spanning the whole of Europe, such as some form of pan-European legal foundation, means investors are unlikely to be taken seriously by defending firms unless suits are also filed in the US.
More specifically, Willis has suggested any attempt to replicate the settlement success of the Shell reserve scandal in April - which saw the Royal Dutch oil giant pay shareholders $352m (€255m) in an out-of-court settlement for overstating oil reserves - is only likely to be treated seriously by potential defendants if it is clear plaintiffs are filing claims in the US too.
"The reason this [European] Shell settlement was possible was the defendants knew they had this claim facing them in the US so it had to be taken seriously," said Willis.
"As a result, they decided it may be better for everybody if they faced it in Europe. But if they had not faced these individual actions in the US it would probably not have dealt with the settlement. It would also have been less likely they would have settled in Europe if it had also been a US defendant," added Willis.
Willis' main contention is without a recognised pan-European legal framework applicable to plaintiffs in all countries, investors will be better off in the interim if they continue to file claims in the US where strong legal standards are already established.
This is in part because there are no agreements between the US and other countries giving one jurisdiction precedence over another, suggested Willis, so any attempt to filing case in Europe rather than the US would have to prove the claims would face equivalent scrutiny.
Willis noted, for example, the Netherlands Court of Appeal was an appropriate location for the Shell case action filing because a largely Netherlands-based foundation was created, including Dutch pensions giants ABP and PGGM.
But with no common legal framework across Europe, a new form of legal ‘foundation' would need to be created where class actions from any country could be managed on an equal footing.
"We would have to have settlement where the US court doesn't have jurisdiction or is willing to give up its jurisdiction. US courts may feel they do have jurisdiction because there is no European class action device," continued Willis.
"In order to make it work, the range of countries has to be wider than a handful such as the Netherlands, France, Germany and the UK. But I do think it is potentially feasible," he added.