Newspaper article The Evening Standard (London, England)

Cherie, RBS and How We Can Learn a Lot from US Justice

Newspaper article The Evening Standard (London, England)

Cherie, RBS and How We Can Learn a Lot from US Justice

Article excerpt

Byline: JOSHUA ROZENBERG LEGAL ANALYSIS

CHERIE Blair's decision to act for investors who lost money when shares in Royal Bank of Scotland collapsed reminds us how effective the US courts can be in cases such as this.

Lawyers from the California firm Coughlin Stoia launched a class action last month in New York, where Royal Bank of Scotland shares were traded.

They accused the bank of falsely reassuring investors that it was well capitalised at a time when it was effectively insolvent, an alleged breach of US securities legislation.

By securing the former Prime Minister's wife to co-ordinate potential UK claimants, Coughlin Stoia may hope they have a better chance of becoming "lead counsel" in the US class action.

But other US lawyers argue that inves- tors in British companies would be better off if they could bring similar claims without having to go abroad.

"The securities class-action mechanism is appropriately responding in a time of crisis to try to obtain fair compensation for defrauded investors," says Thomas Dubbs, senior partner at the

New York firm Labaton Sucharow.

"Unfortunately, such a mechanism does not presently exist under UK law." Class actions -- where one person brings a test case on behalf of an entire class of claimants -- can already be brought in England and Wales. Crucially, though, everyone who wants to take advantage of a successful outcome must opt into the claim.

US cases operate on an opt-out basis, covering all members of the class except those who deliberately remove themselves from the list -- perhaps because they want to sue independently.

A claim covering every possible victim of a fraudulent investment fund or financial intermediary is bound to be worth more than one representing only those who have chosen to come forward.

Coupled with a contingency fee system that allows lawyers to take a percentage of the sum recovered, US-style class actions represent a serious threat to companies that -- unlike Madoff -- are still trading.

Dubbs gives the example of AIG, the world's biggest insurer, which received more than [pounds sterling]100 billion from the US government this month to stave off collapse. …

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