Knowledge Hub
Join the Conversation!
Impartial and independent, ThoughtLeaders4 Competition Knowledge Hub hosts cutting edge industry content and insight.
Email maddi@thoughtleaders4.com to submit content.
Collective actions in England and Wales: Emerging trends and insights for the year ahead
Date: 30/01/2023 Type: Articles Topic: Competition | Law | Litigation |
Market volatility, exponential growth in third-party litigation funding, legal reforms and increasing scrutiny of corporates by consumers, investors and activists have all contributed to a proliferation of class actions in England and Wales in recent years. In particular, the collective proceedings regime in the Competition Appeal Tribunal (“CAT”) has seen a surge in cases, with 10 of the 27 applications for a Collective Proceedings Order commenced since 2015 being brought in 2022 alone.
We expect this trend to continue and that areas such as product liability, competition law, ESG and data protection will continue to be a focus for claimants and claimant law firms bringing class actions in England and Wales. However, in this blog post we reflect on some of the more unique features of 2022 that may inform potential trends in the year ahead.
Crypto
Since its high in 2021, the cryptocurrency market has had a tumultuous year. The fall in cryptocurrencies’ value and the high-profile collapse of FTX have cast a shadow over the market and, for the millions of UK investors in crypto assets, this is likely to give rise to a wave of litigation.
There have long been concerns that the largely unregulated crypto market presents a significant risk of market manipulation and mis-selling. In the U.S., a class action was commenced in 2022 against one of the world’s largest crypto-trading platforms, on the basis that it is alleged to have misled investors to believe that cryptocurrencies were low-risk investments (Lockhart v. BAM Trading Services Inc. et al., (case number 3:22-cv-03461 in the U.S. District Court for the Northern District of California). These issues are similarly likely to come to the fore in the UK as investors who have lost out in the downturn pursue claims against crypto exchanges and financial advisors.
2022 also saw the UK’s first crypto-related collective proceeding, in the case of BSV Claims Limited v Bittylicious Limited & Others (CAT Case No. 1523/7/7/22). In this case, the proposed class representative alleges that, in 2019, various cryptocurrency exchanges colluded to de-list Bitcoin Satoshi Vision and that this caused UK holders to suffer losses estimated at £9.9 billion. We expect to see more crypto-related claims in the UK as crypto assets come under increasing scrutiny and investors carefully examine events in recent years to assess bases for redress.
Going forward, UK claimants may be assisted by:
- a jurisdictional gateway introduced in October 2022 to assist victims of cryptocurrency fraud in overcoming jurisdictional issues in bringing claims (Civil Procedure Rules, Practice Direction 6B);
- a reported increasing interest by litigation funders in crypto collective proceedings, potentially given the potential quantum of damages payable to a high number of retail crypto investors; and
- greater regulatory oversight and scrutiny of the cryptocurrency industry, for example via regulations anticipated to be introduced via amendments to the Financial Services and Markets Act 2000. (For example, an amendment to the Financial Services and Markets Bill, which is currently making its way through Parliament, clarifies that powers relating to financial promotion and regulated activities can be relied on to regulate cryptoassets and activities relating to cryptoassets. In addition, there are plans in the UK for a suite of rules to regulate the cryptocurrency industry.)
Securities
Against a backdrop of considerable market volatility and increasing shareholder activism, it seems likely that the securities class actions landscape will become a more significant feature in England and Wales.
One of the most challenging hurdles for shareholders successfully to bring a claim under section 90 or 90A Financial Services and Markets Act 2000 (“FSMA”) (concerning, broadly, liability for untrue or misleading statements or omissions in published information relating to securities) has been the need for shareholders to prove that they relied on the issuer’s misleading statements or omissions. For example, the courts in Autonomy Corporation Limited and others v Lynch and another [2022] EWHC 1178 and SL Claimants v Tesco plc; MLB Claimants v Tesco plc [2019] EWHC 3315 made it clear that claimants must show specifically which misleading statement or omission they relied on; they cannot say that they relied upon the truthfulness of a document as a whole.
Whilst not a class action claim, the 2022 High Court judgment finding defendants liable for a breach of section 90A FSMA in ACL Netherlands BV & Ors v Lynch & Anor ([2022] EWHC 1178) provides helpful analysis and guiding principles for future claims, including that there may be a presumption of reliance in circumstances where the statement is material and likely to induce the claimant to make the investment decision. Furthermore, the increasingly stringent ESG-disclosure obligations imposed on companies and the rise of ESG-focussed investors, who may be better able to evidence that untrue or misleading disclosures or omissions in a companies’ published information were in fact relied upon for their investment decisions, may also provide an avenue for securities class actions in England and Wales in the coming year.
ESG
In recent years, there has been a significant increase (globally) in litigation and regulatory enforcement in the ESG space. In 2022, “greenwashing” was a priority issue in many jurisdictions and, as discussed above, it remains to be seen whether this focus on alleged corporate misstatements in relation to ESG matters will provide a basis for securities class actions under the UK’s FSMA regime.
However, a number of significant ESG class actions are already underway in the English courts, assisted by a considerable influx of funding for ESG claims. 2022 delivered some significant (and favourable) outcomes for claimants, including one of the largest ever mass tort claims, which was given a new lease of life when the Court of Appeal overturned the High Court’s decision to strike-out the claim on (amongst others) abuse of process grounds. (See our blog post on Município de Mariana & others v BHP Group (UK) Ltd & another.)
ESG in particular is an area where claimants, sometimes pursuing claims more for strategic than financial reasons, are frequently testing the boundaries of recognised legal duties and pursuing novel legal arguments. Indeed, as announced by Leigh Day on 24 November 2022, the latest proposed opt-out standalone competition damages claim in the CAT is against water and waste management companies in England, arising from the companies’ alleged unlawful discharges of wastewater and untreated sewage. The claim is being brought by Professor Carolyn Roberts on behalf of UK bill-paying households and is expected to be based on the water companies’ alleged abuse of their dominant position in the relevant market. The CAT’s reaction to this attempted application of the CPO regime to environmental litigation will be pivotal for the future of similar claims.
Authors:
Christa Band, Litigation Partner at Linklaters - christa.band@linklaters.com
James Hennah, Dispute Resolution Partner at Linklaters - james.hennah@linklaters.com
Rachel Metcalf, Dispute Resolution Managing Associate at Linklaters - rachel.metcalf@linklaters.com
David Thomas, Dispute Resolution Managing Associate at Linklaters - david.e.thomas@linklaters.com
Tara Janus, Associate at Linklaters - tara.janus@linklaters.com
This article was first published by Linklaters on their website.
Share
Author
Our Competition Corporate Partners
