Shareholder Litigation Against Foreign Companies on the Rise

According to PricewaterhouseCoopers 2003 Foreign Securities Litigation Study and a review of cases filed to date in 2004, the number of shareholder class actions filed against foreign registrants is on the rise. Through September 15, 2004, 21 foreign companies listed on U.S. exchanges have been sued in securities class actions. The 21 cases easily surpass the complete 2003 total of 15 such cases and are likely to eclipse the previous high of 23 foreign companies sued in 2002. In addition to the growing list of foreign companies sued by shareholders, several foreign financial institutions have been implicated in the mutual fund scandal.

There has been a general increase in cases filed against foreign registrants since 1998. Over the past two years, we have seen the emergence of the mega-corporate scandal in Europe. High profile cases include:

Parmalat, Royal Ahold, Royal Dutch/Shell and Nortel Networks, among others.

Cases have been filed against companies from a variety of countries such as Australia, China, Finland, Germany, Iceland, Israel, Russia, Switzerland and The Netherlands.

The PricewaterhouseCoopers Study and research also finds that over 65% of the cases filed against foreign companies over the past two years have been accounting related. In addition to the private shareholder litigation, at least eight of these companies are also the subject of investigations by both the Securities and Exchange Commission and the Department of Justice.

"The number of securities litigation cases filed against non-U.S. companies listed on U.S. markets will most likely continue to increase. Closer cooperation between U.S. and foreign regulators, and more frequent reviews of foreign filings as required by Sarbanes-Oxley, will result in increased exposure for companies," said Grace Lamont, Securities Litigation partner, PricewaterhouseCoopers and author of the study. "The unknown consequences of reporting on internal controls under Sarbanes-Oxley Section 404 and the conversion throughout Europe to International Financial Reporting Standards in the next year represent other potential areas of risk where companies could fall foul of laws and regulations. Larger settlement values can also be anticipated in the future."

In 2003, average settlement value for all U.S. securities litigation (involving both U.S. and foreign companies) increased by 20 percent to $23.2 million. The increase was fueled in large part by six settlements topping $100 million each, including three settlements of $300 million or greater, with one of those settlements topping $500 million. Joining this group of "blockbuster" settlements was foreign registrant DaimlerChrysler AG, whose $300 million settlement was the largest ever by a foreign registrant.

The 2003 PricewaterhouseCoopers Foreign Securities Litigation Study and the 2003 PricewaterhouseCoopers Securities Litigation Study are posted at

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