Post-Morrison: The Global Journey Towards Asset Recovery By the NAPPA Morrison Working Group June 2016 INTRODUCTION Six years ago the Supreme Court of the United States, by its decision in Morrison v. National Australia Bank, Ltd., 561 U.S. 247 (2010), launched the institutional investor’s odyssey into the developing world of non-U.S. securities law and regulation. Understanding the implications of Morrison on an investor’s ability to recover assets lost due to the malfeasance of others, NAPPA membership began to develop the tools and identify the resources necessary to conduct appropriate risk/reward analysis with respect to the uncharted waters of foreign securities litigation. NAPPA’s working group: Securities Litigation, Including Remedies Outside the U.S. published, “Living in a Post- Morrison World: How To Protect Your Assets Against Securities Fraud” in June of 2012, which served as a first of its kind guide (the “Morrison White Paper”). As institutional investors continue to look for opportunities to invest globally, and given the post-Morrison world, it is critical for institutions -- particularly those of us who are fiduciaries and consider a litigation to be an asset of the fund to be treated just like any other asset of the fund in terms of risk, cost and return -- to have a plan in place to consider how best to approach recovery of assets in the event of a loss. Institutional investors have witnessed an increase in foreign group actions abroad for purposes of asset recovery. A number of NAPPA members have participated in these cases. With the first of the post-Morrison foreign cases announcing settlements in very recent times, the working group thought this would be a good time to update the Morrison White Paper. The Working Group has created this paper, which provides the current state of various courts’ interpretation of Morrison; practical considerations for institutional investors when considering foreign actions, the current state of securities laws of 15 foreign jurisdictions; and select foreign case studies, which show how some of the first foreign cases have been resolved and highlight those cases to watch. We hope that this paper will be a useful and educational tool. As co-chairs of the Working Group, we would like to thank each member of the Morrison sub-committee for their efforts over the last several months. Their research, tremendous work and dedication to this project has produced a paper that is extraordinarily valuable and instrumental in helping institutions and practitioners to better understand the state of the securities laws in the post-Morrison world. Catherine E. LaMarr Christopher J. Supple General Counsel Deputy Executive Director and General Counsel State of Connecticut Commonwealth of Massachusetts Office of the Treasurer Pension Reserves Investment Management Board Co-Chair, NAPPA Securities Litigation Co-Chair, NAPPA Securities Litigation Working Group Working Group THE CONTRIBUTING MEMBERS OF THE GROUP ARE: Karen M. Grenon, Morrison Sub-Committee Coordinator Office of the Connecticut Treasurer Rachel Avan, Labaton Sucharow LLP Jonathan Beemer, Entwistle & Capucci, LLP Stanley Bernstein, Bernstein Liebhard LLP Peter Borkin, Hagens Berman Sobol Shapiro, LLP Darren Check, Kessler Topaz Meltzer & Check, LLP Emily Christiansen, Kessler Topaz Meltzer & Check, LLP Joshua S. Devore, Cohen Milstein Sellers & Toll PLLC Nicholas Diamand, Lieff, Cabraser, Heimann & Bernstein, LLP Andrew Entwistle, Entwistle & Capucci, LLP Jason Geisker, Maurice Blackburn Lawyers Karen M. Grenon, Office of the Treasurer, State of Connecticut Simon Jaffa, Barnea & Co. Geoffrey Jarvis, Kessler Topaz Meltzer & Check, LLP Barbara Hart, Lowey Dannenberg Cohen & Hart P.C. Reed Kathrein, Hagens Berman Sobol Shapiro, LLP Michael Korn, Labaton Sucharow LLP Joy A. Kruse, Lieff, Cabraser, Heimann & Bernstein, LLP Nicole Lavallee, Berman Devalerio Christina McPhaul, Lowey Dannenberg Cohen & Hart P.C. Frank Meckes, Wach + Meckes LLP Matthew D. Pearson, Berman Devalerio Megan Peitzmeier, Colorado Public Employees’ Retirement Association Jennifer Rudnick, Lieff, Cabraser, Heimann & Bernstein, LLP Maya Saxena, Saxena White, P.A. Irwin Schwartz,* BLA Schwartz Thomas Skelton, Lowey Dannenberg Cohen & Hart P.C. Daniel S. Sommers, Cohen Milstein Sellers & Toll PLLC Michael Stocker, Labaton Sucharow LLP Richard Texier, Lieff, Cabraser, Heimann & Bernstein, LLP Keith Thomas, Stewarts Law LLP Karen Vermaere, Laurius Times Wang, Cohen Milstein Sellers & Toll PLLC Kathryn Weidner, Saxena White, P.A. James Weir, Bernstein Liebhard LLP *Editorial Support This white paper is for guidance only and is not intended to provide legal advice. This document is primarily intended for the personal educational use of NAPPA members only and is subject to copyright. Permission to use, copy or reprint this white paper or its contents for any other purpose requires the advanced written permission of NAPPA. TABLE OF CONTENTS I. THE SHIFTING GLOBAL LANDSCAPE OF SECURITIES FRAUD CASES ...................................................... 1 A. Legal Landscape ........................................................................................................................................... 2 B. The Effect of Morrison on ADRs ................................................................................................................ 8 C. Alternatives to Foreign Litigation – Bringing State Law Claims on an Individual Basis ................................... 13 D. Foreign Law Claims ................................................................................................................................... 22 E. RICO Claims ............................................................................................................................................. 24 II. PRACTICAL CONSIDERATIONS FOR INSTITUTIONAL INVESTORS INTERESTED IN FOREIGN ASSET RECOVERY ACTIONS.................................................................................................................................... 26 A. Evaluating Whether To Participate In A Foreign Asset Recovery Action ......................................................... 27 B. Analysis of Potential Asset Recovery Actions (Evaluating Participation Agreements/Funding Agreements From Competing Groups) .................................................................................................................................... 30 C. The Role of Domestic Law Firms/Monitoring Companies In Foreign Litigation (Referral Fees, Expectations) .. 32 D. Evaluation of Foreign Counsel .................................................................................................................... 34 III. SURVEY OF COUNTRIES .............................................................................................................................. 36 A. Australia .................................................................................................................................................... 37 B. Belgium ..................................................................................................................................................... 45 C. Brazil ......................................................................................................................................................... 51 D. Canada ....................................................................................................................................................... 56 E. Denmark .................................................................................................................................................... 67 F. England and Wales ..................................................................................................................................... 71 G. France ........................................................................................................................................................ 78 H. Germany .................................................................................................................................................... 83 I. India .......................................................................................................................................................... 90 J. Israel ......................................................................................................................................................... 94 K. Japan ......................................................................................................................................................... 98 L. Mexico .................................................................................................................................................... 102 M. The Netherlands ....................................................................................................................................... 107 N. South Korea ............................................................................................................................................. 116 O. Spain ....................................................................................................................................................... 125 IV. CASE STUDIES ............................................................................................................................................ 129 A. Resolved and Settled Cases ......................................................................................................................