EUROPE - US law firm Cohen, Milstein, Hausfeld & Toll is setting up an office in London in mid-January to advise European institutional investors on litigation against corporates.
"There seems to be an increasing awareness and activity on behalf of a number of investors, not only in the UK but also in other countries throughout the EU, in recovering losses in investments they made, where losses were caused by violations of the law by a company," Michael Hausfeld, managing partner of the new London office, told IPE.
The firm currently represents European institutions from the UK, Austria, Belgium, France and Italy in various proceedings against companies. One of the main cases is against the Italian dairy producer Parmalat.
As far as Hausfeld knows, his firm is the first from the US to commit to opening an office in Europe with the purpose of advising institutional investors on lawsuits. Furthermore, they are the first not to limit advice to court cases in the US.
"The object of the office is to look at claims that could be asserted against companies where there has been an allegation of fraudulent misconduct. Then we advise those investors where they have the best chance of maximising and succeeding in a recovery," Hausfeld said.
"Right now, it clearly appears that the best recoveries for European investors, at least for companies that are carried on US exchanges, would be in the US. But as the law develops that may change and other jurisdictions might make equal, if not more sense. We want to be in the position to provide that advice to our clients and to follow through with that recommendation if and when it makes sense," he added.
Asked why European pension funds seem to be warming to the idea of claiming compensation from corporates, Hausfeld said: "To some extent it is a general issue of continuing awareness and comfort with the understanding that investors in other nations are receiving recoveries, and that there is no shame in pursuing investors' rights."
"The response of European institutional investors that ‘we just don't do that sort of thing in Europe' raises questions as to whether they are being derelict in their duties of loyalty and care," Daniel Summerfield, adviser to the Universities Superannuation Scheme, and two co-authors wrote in a paper on shareholder litigation quoted in IPE's October issue.
Hausfeld is convinced that these lawsuits are "extremely successful in changing the governing in companies in cases in which the company has been caught in their wrongdoing."
The firn will not only advise on class actions. "The office will handle all litigations of any type that occurs at least in the context of mass wrongs. So if large investors want to pursue a single case just on behalf of that small group of investors then that is part of the function of the London office," Hausfeld said.