Looming class action boom threatens business

In-house lawyers see an increase in class actions as the biggest future threat to their companies, new research has revealed.

The most significant future threat for companies is the rise in the number of class actions, according to an international survey of over 800 corporate counsels across 26 countries conducted by Norton Rose Fulbright.

Six percent of Australian survey respondents and a quarter of respondents globally, said a class action has been brought against the company they work for in the last twelve months. 

While Australia has a relatively low percentage of class actions compared to the US, which tipped the scale with a whopping 80 percent of class actions reported by survey respondents, the increasing trend in the US is likely to create a domino effect Down Under. 

“Consistent with their global counterparts, Australian respondents cited an increase in class actions as their greatest future threat. Apart from class actions, Australian companies also fear the burden of dealing with a generally more litigious environment,” said Tom Jarvis, who heads up Norton Rose Fulbright’s Dispute Resolution and Litigation practice in Australia.

“What the respondents tell us, which is backed up by our regular conversations with boards and other business leaders of Australian companies, is that class actions have become so front of mind that even those who haven’t had a direct recent experience still recognise these disputes as potentially very damaging, expensive and disruptive to their organisations. This view will no doubt be informed by experience in the US,” he said.

Jarvis added that as Australian companies generally have a smaller legal team, they tend to rely more heavily on external legal advice than companies in Europe or the US.

“One interesting trend emerging from the survey is that while companies across the world are dealing with more regulatory and investigation activity, Australian companies are more likely to rely on outside counsel for advice in these matters,” he said.  “Globally, companies cite consistency, single point of contact, logistics, efficiency of service and cost effectiveness as the major reasons why they prefer to retain one firm for cross-border disputes or investigations.”

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