“Unfortunately, the Federal Government has once again left Australian businesses open to falling prey to foreign-funded class action speculators.
“Far from striking a balance and allowing room for legitimate class action litigation, the scales have once again tipped against Australian businesses and it was inevitable that legitimate foreign speculators would return.”
Pogast Goodhead, a UK-based law firm that describes itself as an environmental justice firm, moved in in February but its apparent intention to target local multinationals has left directors and chief executives uneasy.
“Let's fight for justice”
PG has already filed a $70 billion class action lawsuit in the UK courts against Samarco, the Brazilian mining company 50% owned by BHP. It is the UK's largest opt-in class action, representing 720,000 plaintiffs arising from the collapse of the Fundao tailings dam at the Samarco Mariana mine.
The company has also filed more than 10 lawsuits on behalf of 1 million customers of 14 automakers implicated in the Dieselgate scandal.
“We are based in BHP's backyard to leave no stone unturned in the fight for justice for victims of the world's worst environmental disaster,” PG global managing partner Tom Goodhead said in February, adding that PG was already investigating several cases in Australia.
“The opening of our Sydney office sends a warning to Australian companies that we are prepared to hold them to account.”
But there has been skepticism about PG's operating model, with partners potentially earning between 10 million and 20 million pounds ($19 million) each and new lawyers making between 1 million and 2 million pounds in their first three years.
Goodhead said: Times In February, he said he aimed to bring his firm's best lawyers' compensation “in line with their colleagues at other hedge funds and investment banks.”
PG's new local president, Amy Crichton, said in a statement Thursday that in response to concerns raised by business groups in particular, the law firm is considering a range of actions, including those that impact marginalized individuals and communities.
“To do this effectively, we will not allow some of the world's largest, most powerful and well-funded companies to use the tools available to them to level a wildly unfair playing field,” she said.
“Without this, violating companies will continue to act with impunity and without taking responsibility for the impact of their actions on the communities in which they operate.”
Gramercy-backed expansion
Australian Financial Review We are not suggesting that the criticisms raised in relation to the class action lawsuit are accurate or specifically reflect the actions of Pogast Goodhead.
PG's expansion into Australia and globally is backed by a 450 million pound ($867 million) investment from Gramercy, a Connecticut-based emerging markets hedge fund announced last October. The money is also being used to fund litigation against Samarco and automakers around the world.
PG's deal with Gramercy marks the largest investment in legal practice history.
Gramercy manages more than $6 billion in assets on behalf of pension funds, sovereign wealth funds, endowments, foundations and high net worth individuals.
by Financial Times The company is best known for its investments in the emerging markets of Russia and Argentina.
John Emmerig, a partner at global law firm Jones Day, said litigation funding has evolved in recent years from self-funded firms to specialist litigation funders and now hedge funds and private equity.
“With lawyers now able to charge contingency fees and raise capital from new sources such as private equity and hedge funds, it is inevitable that we will see a significant increase in the number of class action lawsuits in the future,” Emmerig said.
“And this puts a clear focus on whether a new debate on funding regulation is needed.
“The risk otherwise in a substantially unregulated funding market is that the court system will be warped into a money-making tool for funders, and there are significant policy questions about that.”
Willox said Australian law leaves such deals largely unregulated, allowing “foreign speculators” to infiltrate the legal system.
“Australian businesses have enough challenges to deal with in a volatile, costly and highly regulated economy without worrying that foreign companies will once again launch speculative class action lawsuits in the name of profit,” he said.
In 2020, Mr Frydenberg removed long-standing caveats that exempted litigation funders from holding Australian financial services licences and from registering funder-backed class actions as managed investment schemes.
The decision was overturned
The warning was introduced by Labor following a Federal Court ruling in 2010. Brookfield F.C., The judgement held that class actions backed by litigation funders were investment schemes within the meaning of companies law.
But when the Federal Court overturns that ruling shortly after the 2022 federal election, Jones indicated that not only do they not intend to regulate around the ruling, but they also intend to remove all other obstacles to litigation funder class action lawsuits that the Coalition had put in place.
A bill that would impose a 30% cap on settlement and damages payments to litigation funders also made no headway.
Business Council of Australia chief executive Bran Black said any compensation or settlement money from class action lawsuits should go directly to those affected, not to line the pockets of overseas investors.
“Australian companies are naturally held to the highest standards in the world and operate in a highly regulated environment,” he said.
“Australians will be concerned that hedge fund-backed law firms are targeting Australian companies to profit from litigation that should be helping people in need.”
Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the arrival of companies like Pogust Goodhead was concerning.
“These litigation funders are truly a distortion of the legal system and are motivated by profit,” McKellar said, adding that some of the lawsuits sometimes amount to extortion.
“This is likely to result in significant costs and risks for shareholders. It will disincentivise legitimate business investment and pose an added risk to future investment in Australia. Further Americanisation of our legal system is not necessary.”
