Speaking of litigation, here is some interesting news from the UK. Shareholder litigation there is on the rise as investors use two provisions in the UK’s Financial Services and Markets Act 2000 (FSMA) to bring cases against companies related to ESG disclosures. Sections 90 and 90A of the law create liability for companies that misrepresent or omit facts in public findings if those misrepresentations or omissions lead to a loss for shareholders. A recent Bloomberg article discusses the lawsuit trend stating:
“Under the UK’s FSMA provisions, 13 cases were lodged in the past decade. Four were brought last year, including governance or social related cases against Standard Chartered, BT Group and Glencore. So far, there’s been a limited number of substantive judgments in this area. Four of the 13 cases were settled out of court, seven are ongoing, one claim failed, and one succeeded, according to [Bryan Cave Leighton Paisner]. They’ve all been on governance or social issues, but lawyers say it’s a matter of time before an environmental case is brought.”
While thirteen cases in ten years may not seem like much, they each contribute to the growing body of FSMA case law. And keep in mind that the UK is nowhere near as litigious as the US.
As that law develops, some see opportunities to get in on the action. Third-party litigation funders are taking an interest in FSMA cases – an indication of their view of the future in the UK. These parties provide upfront capital to plaintiffs to fund litigation in return for a share of the recovery if the case succeeds. The interest of these investors seems to signal a belief that FSMA cases are viable and ripe for litigation. As ESG disclosure regimes proliferate, so does legal exposure from regulators and shareholders. To mitigate this risk, companies should be regularly conducting materiality assessments and ensuring that disclosures around material issues are complete and accurate – now paying more attention to UK litigation trends.