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Securities Class Actions: American Phenomenon Goes Global

At present, the bulk of securities class actions are filed in the United States. According to Cornerstone Research, plaintiffs filed 189 new federal securities class actions in the United States in 2015. But the tide is shifting. Countries outside the U.S. are implementing class action systems, and it is becoming increasingly important for issuers to pay attention to this evolving landscape given the increasing likelihood of parallel securities claims brought both in the United States and abroad. In considering securities class action defense, defendants should focus on the class action regimes in all potentially relevant venues in developing a defense strategy.

The Morrison v. National Australia Bank Ltd. Decision

In June 2010, the U.S. Supreme Court definitively rejected the securities class action plaintiffs bar’s request to permit foreign securities claims with tenuous connections to the U.S. to be litigated in the U.S. in Morrison v. National Australia Bank. In Morrison, plaintiffs brought suit in the Southern District of New York against National Australia Bank, an Australian company with common stock traded on the Australia Stock Exchange and certain other foreign exchanges, but not on any U.S. exchange. The plaintiffs alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and U.S. Securities and Exchange Commission Rule 10b-5 following a multibillion dollar write-down of the company’s asset values and a concomitant decrease in its stock price. In deciding the case, the Supreme Court examined “whether § 10(b) of the Securities Exchange Act of 1934 provides a cause of action to foreign plaintiffs suing foreign and American defendants for misconduct in connection with securities traded on foreign exchanges.” [1]

In the landmark decision, the court concluded that Section 10(b) did not apply extraterritorially because “[o]n its face, § 10(b) contains nothing to suggest it applies abroad.” Rather, “we think that the focus of the Exchange Act is not upon the place where the deception originated, but upon purchases and sales of securities in the United States. Section 10(b) does not punish deceptive conduct, but only deceptive conduct in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered .... And it is in our view only transactions in securities listed on domestic exchanges, and domestic transactions in other securities, to which § 10(b) applies.”

After Morrison, plaintiffs had to find alternative venues for international-based securities class actions that lack a meaningful nexus with the U.S. Securities class action defendants must likewise be prepared to retain counsel with knowledge of class action rules around the globe and experience in coordinating parallel litigation in multiple countries.

Paths to Shareholder Claims Outside the United States

Morrison hastened the export of securities class actions to other jurisdictions that otherwise may have been brought in the United States. Though it was filed before Morrison was decided, the case of Swiss reinsurance firm Converium Holding (Switzerland) AG is instructive, as it provides an example of shareholder litigation proceeding in multiple international fora.

Converium suffered a decline in stock price following allegations of fraud tied to public announcements of an increase in its financial reserves, and shareholders filed a securities class action in the Southern District of New York.[2] Although the parties in that suit reached a settlement, the court declined to certify the class to the extent that it comprised foreign investors who purchased shares on a foreign exchange. The effect of the decision was a de facto severance of non-U.S. claims from the case. The result was that U.S. purchasers proceeded with their settlement before the New York court, while non-U.S. purchasers turned to an alternative forum: the Netherlands.

The non-U.S. purchasers ultimately submitted a settlement of their claims to the Dutch courts for approval under a recently adopted Act on Collective Settlement of Mass Damages Claims. Under that act, the non-U.S. purchasers were able to achieve a court-approved settlement on an opt-out basis that should have preclusive effect throughout much of Europe.

The increase in litigation abroad means that companies should focus on retaining counsel with an understanding of the class action environment in other key jurisdictions in the financial space. For example, developments in Canada, the Netherlands, Israel and Japan are likely to make those jurisdictions more attractive to plaintiffs, while the United Kingdom, Germany and China look to be presenting greater challenges for potential class action plaintiffs. Although the law continues to evolve, a brief summary of the legal landscapes in key jurisdictions follows.


  • Canada maintains a class action regime that is similar to that of the United States.
  • In 2015, there were four new securities class actions filed; 13 were filed in 2014. Two of the four 2015 actions involved parallel litigation in the United States. As of December 2015, there were 52 pending securities class actions representing more than $55 billion in total claims.[3]


  • China’s civil procedure code provides for “representative actions,” which allows the People’s Court to issue a notice explaining the claims and allowing interested parties to get involved in the case.
  • Although there were a small number of securities representative actions in the past, China has since prohibited contingency fees for attorneys in representative actions. This has rendered the forum unfavorable for plaintiffs attorneys looking to bring securities class actions.


  • Germany is considering the adoption of a collective redress mechanism, which would make class actions easier to maintain. At present, German law allows for joinder of claims or the consolidation of parallel proceedings.
  • The venue has not yet proven to be particularly popular because it does not have a class action mechanism like the United States.


  • In passing the Class Actions Law in 2006, Israel adopted a uniform procedure for class action litigation, including with respect to securities claims.
  • Class actions filings have increased significantly thereafter; more than 800 class actions were filed in Israel in 2012, though only a very small fraction involved securities claims.


  • As discussed above, the Netherlands has recently adopted an Act on Collective Settlement of Mass Damages Claims, which permits legally binding collective settlements on an opt-out basis. This act has made the Netherlands a newly popular forum for class actions.
  • In addition to the Converium settlement discussed above, in 2009, Royal Dutch Shell settled claims alleging misrepresentations concerning its oil and gas reserves for approximately $450 million. Notably, Royal Dutch Shell was originally sued in the United States. After the adoption of class settlement procedures in the Netherlands, however, the plaintiffs focused their attention on reaching a settlement in the Netherlands instead.


  • In 2004, Japan’s Securities and Exchange Law was amended to reduce the burden of proof for plaintiffs and create a presumptive rule for damages in securities cases.
  • In 2013, Japan enacted the Act on Special Provisions of Civil Procedure for Collective Recovery of Property Damage of consumers, which provides a more formalized class action procedure.
  • Electronics maker Olympus Corp. recently announced a $92 million out-of-court settlement in Japan in a securities case brought by institutional investors alleging accounting fraud.

United Kingdom (England and Wales)

  • Shareholders may sue issuers in cases of alleged fraud under the Financial Services and Markets Act. But, unlike in the United States, shareholders must affirmatively opt in to a case.[4]
  • Litigation funders are playing a large role in English class action litigation. For example, Stewarts Law sued Tesco in England after Bentham Ventures BV agreed to finance the litigation. Stewarts Law also initiated claims against the Royal Bank of Scotland after such claims were dismissed in U.S. courts for lack of connection to the U.S.

—By Jay P. Lefkowitz, Matthew Solum and Adam T. Humann, Kirkland & Ellis LLP, and former Kirkland associate Eric Merin

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] 561 U.S. 247 (2010) (all internal quotes and citations omitted).

[2] 1:04-cv-7897-DLC (S.D.N.Y.)

[3] Trends in Canadian Securities Class Actions: 2015 Update,

[4] It is unclear whether an opt-in regime will remain in place in the long term. On Oct. 1, 2015, the Consumer Rights Act came into force in England and Wales, which provides for opt-out class actions with respect to consumer antitrust claims.