US/EUROPE - US class action law firms have been engaging in fierce competition in order to get business from European pension funds in recent years.
Initial contact with UK pension funds started six to seven years ago and activity has now grown to such an extent that larger firms have developed their presence outside the US and compete to represent foreign institutional investors.
Labaton Sucharow's senior partner Thomas Dubbs said non-US schemes are "increasingly aware of how they might positively impact scheme members by obtaining compensation as well as obtaining corporate governance reforms involving executive compensations and other issues" by participating in US class actions.
USS co-head of responsible investment Daniel Summerfield said USS had been participating in lawsuits and class actions for the last seven years. Its trustees have taken the view that simply claiming USS's share of any class action settlement would be non contentious.
Most law firms agree the initial strong competition often turns into forced co-operation once the class action is at a most advanced development phase.
Coughlin Stoia Geller Rudman and Robbins (CSGRR) partner Patrick Daniels said: "The cases are big, complex and the reality is that we are better off cooperating in many instances than we are ruthlessly competing."
However, recent developments may cast strong doubts on the possibility for non-US pension funds to be admitted to US class actions. A judgment on a case of alleged fraud pending before the US Supreme Court involving National Australia Bank is widely acknowledged as a potential turning point on this matter.
The courts said although the actions to prepare the fraud may have occurred in the US, the decisions to what disclosures to make to the shareholders were made by the Australian headquarters of the company. Therefore, the actual fraud happened in Australia.
Several European schemes, as well as law firms, are said to be closely watching the evolution of this case as participation to US class actions could become much more difficult for them in the future, given this precedent.
As a result, Coughlin Stoia Geller Rudman and Robbins partner Patrick Daniels said some pension funds would have a better chance at recovering losses if they filed individual suits in their own countries.(Global Pensions, December 14, 2009)
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Malcolm Mclean says getting the channels of communication right and engaging more openly is a good starting point