Class Actions against UK Listed Companies

There has been significant growth in securities class actions threatened or brought against UK listed companies in recent years. 

This is particularly under section 90A of the Financial Services and Markets Act 2000, which allows shareholders to sue issuers for losses arising from false or misleading statements, or dishonest omissions, in information published to the market. 

These claims tend to follow where there has been an adverse finding by a regulator, or action taken by a law enforcement agency, which has led to a drop in company share price. Claimant law firms and funders will then review the company’s published information to identify statements that may be seen as false or misleading in the light of subsequent events. This trend seems set to continue, including for ESG-related claims where “greenwashing” may be alleged based on overly optimistic statements about a company's environmental credentials. 

In addition, we continue to see claims brought in the English courts against UK-based parent companies, based on alleged environmental or human rights failings by their subsidiary companies abroad, or companies in their overseas supply chains. Cases in recent years have demonstrated how difficult it is to strike these claims out early on the basis that the UK company didn’t owe a duty of care to the claimants. 

Product liability is also an important area, given the potential for a defect in a major pharmaceutical or other consumer product to affect large numbers of individuals. The so-called pan-NOx litigation, brought against around a dozen global car manufacturers involves over a million claimants and more than 1,500 defendants. The court’s willingness to manage proactively the various cases together and set ambitious deadlines to trial may set a precedent for large class actions in future.

There has been a dramatic uptick in competition class actions in recent years, since a landmark Supreme Court judgment in December 2020 set a very low bar for certification of claims. These cases are brought under a separate regime which allows claims to be brought by a class representative on behalf of consumer or business claimants in the Competition Appeal Tribunal. Claims may be "follow-on", based on an existing decision by a competition regulator, or "standalone", without any underlying competition infringement decision. 

The regime for competition claims is particularly attractive to claimants, as it allows claims to be brought, in many cases, on an "opt-out" basis whereby claims can be brought on behalf of all affected persons without requiring individual participation, unless they choose to opt out. That contrasts with the main procedures for bringing class actions in the English courts, including the Group Litigation Order (GLO), which require individual claimants to issue claims that are then managed together by the court. The opt-out approach removes much upfront cost, as there is no need to spend money on advertising and persuading claimants to sign up. It also leads to much larger claims, since all those affected are included automatically. 

Outside the competition regime, there is a separate representative action procedure which allows claims to be brought, on an opt-out basis, on behalf of all those who have the "same interest". But it has proved challenging for claimants to get these cases off the ground, particularly due to uncertainties as to whether compensation can be awarded on a collective basis and whether amounts can be deducted to pay claimant law firms and funders. These questions were due to be considered at a hearing last year, but the relevant case settled – though, given the importance of these questions, they are likely to be tested in another case before very long. If the courts take a liberal approach on these issues, we can expect claimant firms and litigation funders to bring claims on this basis in many more cases. 

Important developments relating to the funding of class actions are also in the works. A Civil Justice Council report on the litigation funding sector last year recommended a new system of "light-touch" statutory regulation, including for example capital adequacy requirements. Additional requirements would apply to funding for consumers and class actions, including a requirement for independent legal advice, court approval of funding agreements, and restrictions on funders approaching potential claimants in respect of a claim. In response to the report, the government has said it will introduce "proportionate regulation" to "improve transparency and fairness for claimants", but has given no detail as to its plans or the extent to which they will implement the report's recommendations.

Conclusion

Class actions are an increasing and evolving risk for UK listed companies, fuelled by procedural developments, litigation funding and heightened ESG and regulatory scrutiny. With courts more receptive to large-scale collective claims, companies should focus on robust governance, careful disclosures and early risk management to mitigate exposure.