£368m in class action wins to be left on the table

The Goal Group – a class action service provider – estimated that if current UK schemes’ participation rates to class actions do not improve, some UK schemes will not benefit from their right to offset part of their losses suffered on US investments in 2008.

Out of the £51bn lost by Northern European pension funds, around £21bn is thought to be attributable to UK schemes.

The firm said over the next few years £1.4bn will be recouped by UK funds participating in US collective lawsuits. And more class actions could be launched in the next months.

Stephen Everard, managing director of the Goal Group, said: “As credit crisis borne cases continue to be brought through 2010, filings are likely to give way to Ponzi scheme allegation cases and standard securities actions.

“Fund managers should therefore be proactively filing and participating in class actions now, if they are to be included in what are likely to be the most sizeable settlements over the next three to five years – those emerging from the economic crisis.”

However, some UK schemes have some reservations on US class actions.

Speaking at the National Association of Pension Funds annual conference at the beginning of the month, Philip Read, chairman of British Coal Staff Superannuation Scheme, described class actions as “ethically wrong” .

And other schemes’ representatives agreed with him that while class actions allow schemes to get money which will ultimately benefit their members, they are also likely to cause a drop in share value detrimental to schemes’ finance.

In the last years some high-profile cases involving UK schemes have raised awareness of the opportunities for UK players to seek redress in the US.

In March 2009, Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a US securities class action against Royal Bank of Scotland (RBS).

Other examples include Lothian Pension Fund and the Northern Ireland Local Government Officer Superannuation Committee (NILGOSC), which were both granted co-lead plaintiff status in August 2008 against Lehman Brothers over their mortgage-backed securities.

However, a recent US Supreme Court decision is likely to make it more difficult for non-US schemes to be included in US class actions in the future.

The June ruling in Morrison v National Australia Bank established that claims brought in the US courts by foreign investors who purchased securities in foreign companies on foreign exchanges (known as F-cubed actions) would not be allowed to proceed.