Academic journal article Business Law International

Fortis's Settlement: A Comparative Case Study of Securities Class Action Mechanisms in Europe and the United States

Academic journal article Business Law International

Fortis's Settlement: A Comparative Case Study of Securities Class Action Mechanisms in Europe and the United States

Article excerpt

Introduction

On 14 March 2016, Ageas - a Belgian insurance company formed out of the rump of collapsed financial group Fortis - announced a settlement proposal (under the Dutch mass claims settlement procedure) with respect to all civil legal proceedings initiated by various shareholders' organisations following the events that led to the fall of the company during the 2008 global financial crisis.

This settlement - according to which Ageas agreed to pay €1.2bn to its former shareholders - is the most recent (but certainly not the last) development in the emergence of European jurisdictions (the Netherlands in particular) as gateways for the litigation and settlement of international securities mass claims.

Historically, the US had always been fertile soil for collective actions. In 2010, however, the US Supreme Court in Morrison v National Australia Bank1 significantly restricted the US courts' jurisdiction over securities 'F-cubed' claims (ie, claims brought in the US by foreign investors, trading foreign securities, on foreign exchanges).

Morrison v National Australia Bank limited the extraterritorial reach of US federal securities law, finding that the anti-fraud provisions of section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5 did not extend to securities transactions outside the US. The US Supreme Court ruled that section 10(b) of the Securities Exchange Act of 1934 only applied to fraudulent acts or omissions in connection with the purchase or sale of securities listed on a US stock exchange and the purchase or sale of any other security in the US. The US Supreme Court therefore rejected over four decades of case law embracing the well-established 'conduct and effects' tests pursuant to which a double test had to be fulfilled in order to pursue a securities case in the US. Under this test, the plaintiffhad to show that:

1. the alleged fraudulent conduct had been 'conceived' and 'executed' in the US (the 'conduct test'); and

2. the fraudulent conduct had a 'sufficiently serious effect' in the US to warrant assertion of jurisdiction (the 'effects test').2

The decision of the US Supreme Court in Morrison v National Australia Bank resulted in the fact that '[w]hereas before Morrison there was always the possibility that U.S. law might also apply to some transactions outside the United States, after Morrison transacting parties [could] be confident that U.S. law will not apply in private suits provided their transactions are definitely outside the United States'.3

An indirect consequence of the Supreme Court decision in Morrison and of the curtailment of the reach of US securities laws was the expansion of other jurisdictions 'to compete with U.S. securities law by providing their own combination of legal rules, private rights of action, and government enforcement mechanisms'.4

The European jurisdictions have been at the front line of this potential forum competition with the US. Those jurisdictions indeed offered the perfect alternative forum as:

1. 'a judgment obtained against a defendant in one EU Member State [could] be enforced anywhere in the European Union'5 (by virtue of the Brussels I Regulation6 and the Brussels Recast Regulation7); and

2. class actions mechanisms had started to be adopted in European countries.

In light of the Fortis/Ageas case, this article therefore aims at examining and illustrating the rise of European jurisdictions as alternative fora for mass claims proceedings.

We will start our analysis by examining the basic features and differences between US class actions, on one hand, and European collective redress mechanisms, on the other hand. The Fortis case will help us illustrate those differences in the third section of the article. Finally, we will conclude our analysis with possible future developments and ways forward concerning collective redress mechanisms in Europe.

Basic features of US class actions and European collective redress mechanisms

Class action suits are legal devices that allow an individual or a small group of individuals to proceed in court 'on behalf of a much larger, unnamed group of individuals who share common claims'. …

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