CD: How would you describe recent shareholder litigation activity? What overarching trends have you seen in the past 12-18 months?

Walker: Shareholder claims continue to arise in respect of private companies in all sectors – for example, where shareholders have sought to renegotiate their respective commercial positions in a changed market environment. Where a shareholder has financial difficulties, other shareholders may take advantage and push them out or reduce their interest. Threatened or actual litigation remains a tool for leverage despite it being potentially a ‘nuclear’ option, capable of destroying the company itself, although shareholders still hesitate to take their disputes all the way to trial. In relation to public companies, shareholder action groups have threatened proceedings for some years and there has been litigation in the US, a more promising jurisdiction for potential claimants. There are signs that 2008 credit crunch-related actions have now finally received funding, though claims may be driven more by limitation issues than an enhanced enthusiasm for litigation. High profile shareholder action is being brought in the English High Court by RBS shareholders concerning a 2008 rights issue. There has been a recent burst of publicity and recruitment of members to shareholder action groups, though such actions are still not on the scale seen in the US.

Madden: There has been a marked increase in the volume and value of shareholder claims arising out of bespoke shareholders agreements governing joint ventures in emerging markets, particularly in the telecoms, mining and oil and gas industry sectors. These claims are usually subject to international arbitration. We have also seen a rise in the number of shareholder arbitration claims against foreign states under investment treaties for wrongful interference in overseas subsidiaries. The amounts claimed – and awarded – in such cases has also increased, as illustrated by the ground-breaking award of US$50bn against Russia in the recent Yukos award. Closer to home, the jurisdiction of the English court continues to be invoked to determine foreign shareholder disputes that often have little nexus to England and Wales, and disputes are increasingly multi-jurisdictional, and often include a regulatory angle. We have also seen a greater inclination by minority shareholders to hold companies and directors liable for stock market losses. 

Oct-Dec 2014 issue

Clyde & Co LLP

Debevoise & Plimpton LLP

Gibson, Dunn & Crutcher LLP

Skadden, Arps, Slate, Meagher & Flom LLP