By Kirstin Ridley
LONDON (Reuters) – Large companies and fund managers in Britain looking to sue banks over foreign exchange rigging are eyeing a fresh route to seeking damages, as a new law ushers in U.S.-style class actions for antitrust cases on Thursday.
Litigators are hoping to replicate from Britain the success of U.S. class action claims against banks such as Goldman Sachs (GS.N), HSBC (HSBA.L) and Barclays (BARC.L), that have yielded more than $2.0 billion for investors in settlements to date.
With around 40 percent of the $5.3 trillion-per-day foreign exchange market traded in London, lawyers are jostling for position. UK firms that have traditionally brought group claims here, such as Stewarts Law, are seeing U.S. rivals such as Hausfeld launch hiring sprees and others opening shop in London.
An official at one London-based fund manager, who declined to be named, said: “We are talking about it (a claim) internally and with our custodians. If we think it is in clients’ interest, we would certainly consider being part of a class action.”
Britain’s new Consumer Rights Act introduces the first “opt-out” class actions for breaches of UK or EU competition law from Oct. 1. In such cases, UK-based members of a defined group will automatically be bound into legal action unless they opt out, saving on hefty advertising costs. Overseas-based claimants, however, will still have to actively sign up.
The regime is designed to offer a more effective route to compensation for consumers and businesses who fall victim to anti-competitive conduct. It will be overseen by Britain’s freshly-empowered Competition Appeal Tribunal (CAT).
Critics say opt-out regimes can fuel claims without merit. Others argue victims too often go uncompensated for injustice. Countries from Belgium and Italy to Australia and China are proposing and introducing similar systems.
The banking industry, in the spotlight since the financial crisis, has paid more than $235 billion in fines and compensation over the last seven years.
SIGNING UP CLAIMANTS
Some lawyers admit to being tempted to grab the limelight with Britain’s maiden class action lawsuit. But European antitrust authorities have yet to conclude their forex probe, law firms would need significant resources to litigate and early CAT cases could get bogged down in interlocutory fights about shaping the new regime, experts are warning.
“We are in active conversations with a number of multinational companies and we have some who have already signed up to bringing this case,” says Belinda Hollway, a London-based partner at U.S.-based law firm Scott and Scott, setting up shop in London after leading successful U.S. forex claims.
“But the simplest and quickest route to obtaining compensation at this stage is a conventional (opt-in, group) action in the High Court,” she added. A forex claim might not be launched in Britain until early 2016, she said.
The work that precedes even a High Court case should not be underestimated – especially as the losing side foots the combined legal bill, said Stewart Law’s Clive Zietman.
“There is a very real possibility of claims. But claimants have to be pretty determined with rock solid facts,” he said.
Whichever route claimants take, lenders are braced.
They have set aside billions of dollars to cover civil lawsuits after U.S. and UK authorities described how traders gathered in chatrooms with names such as “The Cartel”. Seven lenders were fined around $10 billion and four banks have pleaded guilty to attempted market manipulation.
Britain’s former “opt-in” regime for antitrust cases, where each claimant has to be individually identified, has inspired only one claim: a football kit price-fixing case won by consumer organization ‘Which?’ a decade ago. It proved complex and costly to organize and few claimed the compensation won.
But if the new regime is successful, it could be expanded to allow class actions on grounds such as product liability and securities fraud.
Such claims drove the landmark U.S. tobacco settlement over cigarette-related public health claims in 1998, set at around $200 billion over 25 years, and the $7.2 billion Enron settlement with shareholders after the energy giant’s collapse in 2008.