ࡱ> %`i%bjbjNN 8*,,T# 2228F23Lr3r3r3r3r3M4M4M4$hFQM4M4QQr3r3$c$c$cQL r3r3$cQ$c$c0r3f3 ̘2D^DF$ϙ0j c`8cHc| M4 c>4$cE[KM4M4M4bdM4M4M4QQQQD   Prof. dr. sc. Edita ulinovi-Herc University of Rijeka, Faculty of Law, Rijeka, Croatia Mihaela Braut University of Rijeka, Faculty of Law, Rijeka, Croatia RECENT DEVELOPMENTS IN JUDICIAL SETTLEMENT OF DISPUTES INVOLVING MASS SHAREHOLDER CLAIMS TOWARDS LISTED COMPANIES: GLOBAL, EUROPEAN AND CROATIAN PERSPECTIVE ABSTRACT Croatian capital market is, from the beginning of the year 2009, governed by new Capital Market Act that introduces higher level of investor protection, by posing firmer rules on mandatory disclosure for listed companies. Based on the similar trends in comparative law it could be expected that disputes between investors and issuers are more likely to arise. Investors would more likely seek judicial protection, i.e. sue for damages, when issuers misstatements on the capital market such us false prospectuses, non-prompt disclosure of price sensitive information etc. occur. Because of dispersed corporate structure in listed companies, it is possible to have a large group of investors on the plaintiffs side, which opens various legal issues in handling such massive claims. National approaches to this problem are very different: from an American modeled class actions, to English group litigation, German model case procedure, etc. Aim of this paper is to analyze how mass shareholders / investors suits work out in regulatory environment of the US and some EU countries, as well as point out what procedural mechanisms are available in the Croatian law, and to suggest actions which should be taken in order to facilitate settlement of those disputes. Key words: shareholders, investors disputes, listed companies, capital market, class action, group action JEL classification: K22, K41 INTRODUCTION As a result of a development and globalization of security markets, both investors and issuers request a higher level of protection of their rights. On the investors part recent developments show that one of the possible answers to these requests are so called collective redress mechanisms in its various national forms throughout the globe. The most notable comes from the U.S. that has long tradition of so called class action suits, permitting one person not only to sue for damages on his/her behalf but also on the behalf of a so called class, i.e. non identifiable number of persons who based their request on the same law and the same facts. Although class actions brought many benefits for investors, allowing them to efficiently realize their rights, it also induced strong criticism in U.S. as well as in other countries that adopted similar procedural devices. In process of transposition of the idea around the globe, Canada and Australia opted for U.S.-like approach, while other countries, as Germany, introduced solutions more suitable to continental procedural traditions. In fact, only few European countries, as England, Germany and Sweden, allow application of collective redress mechanism in security market law. Consequently, investors in securities experience great number of difficulties when seeking protection of their investment losses, especially if foreign court is trying the matter, i.e. when cross-border element exists. In those situations two questions arise: whether any sort of collective redress mechanism is available to foreign investors and if it is, to what extent can a plaintiff expect that a foreign judgment will be enforceable in his home country. The authors will therefore analyze comparative and Croatian procedural mechanisms, which serve the purpose of handling massive investors claim, as well as to suggest measures that should be taken in order to enhance level of investor protection. GLOBAL PERSPECTIVE On the global perspective, the U.S., as the most developed security market, adopted the so called class actions suits. Class actions are adopted as the effective tool for investors shareholders who suffered losses because of issuers fraudulent conduct. Although U.S. mechanism received strong criticism, it served as a model for other countries. 2.1. U.S. Class Actions The class action is a unique American procedural device (Sherman, 2003). The modern American class action dates from a revision of the Federal Rules of Civil Procedure in the mid-1960s (Sherman, 2003, Hensler, 2001). Furthermore, Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several substantive changes including changes related to pleading, discovery, class representation, and awards fees and expenses. The basic characteristic of U.S. class action is that one persons claim serves as the representative for the claims of a larger group of persons which are similarly positioned because they suffered some common damages (Sherman, 2003, Hensler, 2001). The main features of class actions are: 1. self appointment of lead plaintiff under presumption in favor of the plaintiff with largest claim (Grace, 2006); 2. so called opt-out provision which provides for the res judicata binding effect under Rule 23(b)(3) of the Federal rules of Civil Procedure, i.e. that all members of the proposed class will be bound by the res judicata binding effect of the courts ruling, unless they, upon the notice procedure, expressly opt-out of the proposed group (Grace, 2006); 3. contingency fee arrangement which provides that attorneys tie their fees to a percentage of the awarded recovery (Grace, 2006). Class actions as procedural device before the U. S. courts are available in different areas of law, especially in security fraud cases. In fact, securities class actions averagely comprise 47% to 48% of all pending class actions in federal courts (Coffee, 2006). The U.S. class actions owe their popularity to the following reasons. First, aggregation of claims with same subject matter makes the legal proceedings more time and cost effective as well as avoids that courts try the same issues in case by case method (Sherman, 2003). Second, class actions could overcome the problem of small claims plaintiffs who probably will not have the incentive of bringing the suit before the court (Amchem Products v. Windsor). Third, in "limited fund" cases, a class action ensures that a court can equitably divide the assets amongst all the plaintiffs if they win the case (Ortiz v. Fibreboard Corp.). Forth, class actions contribute the consistency and finality by avoiding the possibility of inconsistent outcomes in separate trials upon the same subject matter (Sherman, 2003, Grace, 2006). Having all these advantages in mind, it does not surprise that class actions appear to be the most suitable procedural mechanism in the U.S. regarding investors security market protection. 2.2. Review of the U.S. approach The U.S. class actions raise multiple issues regarding its efficiency. The most distinct issue is enforcement of class action awards before the courts of other countries, i.e. whether such awards can extend to foreign investors as well. The U.S. courts established practice that the issue of enforceability and the res judicata effect at foreign courts will be evaluated in case by case method (Bersch v. Drexel Firestone, Inc.; Cromer Finance Limited v. Berger; In re Vivendi Universal, S.A.). In particular, in the recent Vivendi Universal case, the court examined separately the probability of recognition before French, English, German, Austrian and Dutch courts, finding firm obstacles only for Austrian and German courts. Besides the issue of enforceability, the very procedure of the U.S. class actions endures strong criticism for the following reasons. First, the opt-out option can create an ignorant passive loser, i.e. a plaintiff who is bound by the judgment even if it wasnt aware of the litigation (Grace, 2006, Sherman, 2003). Second, defendants suffer mega-damages because they often consent to settlements of even unmeritorious claims in order to avoid the risk of awarding much higher recoveries by compassionate juries (Grace, 2006). Third, although contingency fee arrangement makes mass claims mechanisms suitable for relatively small claims, it also allows for disproportional attorneys fees which makes the attorneys primary interested parties in class actions (Grace, 2006, Coffee, 1987). Forth, class actions burden public companies without corresponding plaintiffs benefit i.e. if the plaintiffs are current shareholders they will actually bear the costs of companys damage compensation awarded to them in litigation (so called circularity argument). Fifth, individual recovery in class actions may ultimately be less then if plaintiff filed individual lawsuit (Cashman, 2001). Sixth, substantial administrative and transaction costs of dividing awarded amounts to class members proportionate to their losses (Cashman, 2001). Seventh, there is possibility of forum shopping induced by availability of the U.S. securities class actions (Grace, 2006). Consequently, influenced by American class actions experience, other countries on a global level adopted various types of collective redress mechanisms, each varying from the U.S. system. In particular, although Australia and Canada have adopted opt-out provisions, both countries implemented the loser pays rule as opposite to contingency fee arrangements, thus trying to avoid lawyers interest in running unmeritorious claims (Sherman, 2003, Beisner et. al 2008). To conclude, although the U.S. securities class actions model provides notable level of investors protection, it also opens the way to investors abusive tactics towards securities issuers. EUROPEAN PERSPECTIVE European Union did not introduce collective redress mechanisms in area of investors protection. In fact, only Great Britain, Germany, Sweden and Netherlands provide for some type of securities mass claims. On the other hand, in consumers protection area, induced by EU Directive 98/27/EC, national legislations introduced various types of collective redress mechanisms. Some patterns of those mechanisms could be transposed in investors protection area, because of the collective nature of the suit. The example of Netherlands, as explained infra, shows that same redress mechanism can be available to investors and consumers, if legislator decides so. Authors will further elaborate main features of both investors and consumers currently available collective redress mechanisms. Review of collective redress mechanism in consumers market area The EU Directive 98/27/EC set forth basic features of consumers collective redress mechanisms for EU countries. In particular, it provided that only authorized national entities are entitled to request injunctions of defendants wrongdoing, without providing possibility for an injured party to request individual damage recovery (Louis and Morson, 2006). However, thirteen EU countries further enhanced their legislations by introducing various models of consumers mass claims, which can be selected into 3 main categories (Green Paper, 2008, Final Report, 2008). First, group action mechanisms which allow grouping individual actions into one procedure. It can be brought by an individual lead plaintiff, consumer organization, group of victims or an ombudsman representing injured consumers which formed the group by using an opt-in option (Final Report, 2008). Group actions are adopted in Bulgaria, Denmark, Finland, France, Germany, Italy, Netherlands, Portugal, Spain, Sweden and United Kingdom (Final Report, 2008). Second, representative actions which can be brought by the representative on the behalf of either individual or collective consumers interest. In the case of collective consumers interest, damage recovery shall be awarded to representative, not to individual consumers (Final Report, 2008). Representative actions are currently adopted in Austria, Bulgaria, France, Germany, Greece and United Kingdom (Final Report, 2008). Third, test case procedure where test case judgment serves as a model for other cases brought by consumers with same interest. Its main feature is that test case judgment is not obligatory, but only persuasive upon other courts trying cases with the same subject matter (Final Report, 2008). Test case procedure is adopted in Austria and Greece (Final Report, 2008). Different approaches, as described, recently induced the EU to introduce the Green Paper on Consumer Collective Redress, which reopened the issue of adopting more effective consumers collective redress mechanism on the EU level. 3.2. Review of collective redress mechanism in security market area Only few European countries, namely England, Sweden, Netherland and Germany, provide for some type of collective redress mechanism that can also be applied in investors/shareholders protection area. Authors will further analyze main features of mass claims mechanisms in each country. 3.2.1. England & Wales The Civil Procedure Rules 1999 (CPR), provide specifically for two forms of collective actions which are available in investors protection area. First, representative party mechanism in Part 19.II. of the CPR, where a single party can represent parties with the same interest. This mechanism has been used very rarely (Howells and Kelly v. The Dominion Insurance Company Limited) because the requirement of the same interest has been interpreted strictly by the courts (Duke of Bedford v. Ellis). This induced the invention of the second collective action: the Group Litigation Orders 2000 (GLO) mechanism. The GLO is the main judicial mechanism for case management of large number of similar claims with the only criteria that they give rise to common or related issues of fact or law (CPR: Part 19.10). Criteria for issuing the GLO and rules for case management are deliberately simple, allowing wide discretion to judges in order to maintain orderly progress in litigation (Hodges, 2007, AB v Wyeth & Brother Limited and Another). The main features of GLO mechanism are: a register of plaintiffs (opt-in option), flexible case management, test cases with judgments binding only for registered parties, loser pays winners costs rule and compensatory damages (limited to the extent of plaintiffs loss) (Hodges, 2007). Application to the court to order GLO can be filed both by the parties (plaintiff and defendant) and the court itself. In the GLO, the court must: order establishment of the group register where all claims under the GLO must enter, specify the issues which will be managed under the GLO and establish the management court (CPR). The courts have discretion to specify a cut-off date, i.e. a deadline after which no claim may be added to the group register (CPR). Furthermore, management court may provide for one or more claims on the group register to proceed as test claims (CPR). Test case judgments or judgments relating to one or more GLO issues are binding upon all registered parties at the time the judgment is given (CPR). However, GLO has been criticized for the following reasons. First, GLOs flexibility could potentially open the way to the inherent uncertainty (Mulheron, 2004). Second, the issue of funding group litigations could be obstacle for small claims plaintiffs (Hodges, 2007). Third, extensive media interest in particular case can induce many people joining the group litigation although their particular cases are weak or even fraudulent (Hodges, 2007). As to the court practice, there are 68 GLOs recorded till now (GLO Registry). Statistics show that the most frequent types of claims under the GLOs are child abuse, environmental, drug/pharmaceuticals, holidays, accidents, taxation disputes, financial misstatement or financial negligence cases and etc (GLO Registry, Hodges, 2007, Mulheron, 2008). Importantly, in spite of wide ranging types of claims under the GLO, there are no recorded GLOs involving investors/shareholders securities disputes (GLO Registry, Hodges, 2007, Mulheron, 2008). However, there are reasons to suggest that this is only a matter of time. In particular, GLO is available in all areas of law and there are already recorded GLOs in area of financial misstatement which usually triggers investors mass actions. Moreover, the National Association of Pension Funds (NAPF) issued an advice to its trustees to conduct class actions if necessary, whether in UK or other jurisdictions (NAPF, 2007). To conclude, large numbers of recorded GLOs clearly show that this mechanism is well accepted in practice, and till now, there were no strong calls for its reform (Hodges, 2007). 3.2.2. Germany In 2005, Germany adopted unique experimental model proceedings for investors/shareholders collective claims: The Capital Markets Model Case Act (KapMuG). Its purpose is to clarify model issues, i.e. certain issues of fact or law which are common to a great number of similar claims, with binding effect to trial courts which are making final individual judgments (Baetge, 2007). Importantly, it is applicable solely in securities disputes area, primarily to investors claims for compensation of damages due to false, misleading or omitted public capital markets information (KapMuG). The KapMuG has a sunset clause which means it will automatically expire on November 1, 2010, unless extended. The invention of the KapMuG was triggered by the biggest investors action in Germany, the Deutsche Telekom case, which involved 15,000 individual plaintiffs, 2,100 individual law suits and 700 plaintiffs attorneys (Rubin, 2008). The main feature of KapMuG is that it represents a mere interlocutory proceedings and not a separate action as are e.g. U.S. class actions (Blz and Blobel, 2007, Baetge, 2007). Furthermore, plaintiffs in a model case procedure are neither members of the class or the group, which means they neither opt-in nor opt-out (Baetge, 2007). Model proceedings under the KapMuG are divided into three phases (Blz and Blobel, 2007, Baetge, 2007). First phase is the application for establishment of a model case and if accepted, subsequent management of the model case procedure. The application can be made solely by the parties (plaintiff and defendant), which must show to the court that the model case procedure may have significance for other similar cases beyond the individual dispute concerned (KapMuG: Section 1(2)). Admissible applications shall be then publicly announced by the court in a special electronically Internet based Complaint Registry (Elektronischer Bundesanzeiger). If at least ten similar proceedings apply within four months from the publication, the court shall suspend ex officio all pending similar proceedings and refer the matter to a higher court of instance, irrespective of whether the application was filed in particular case (KapMuG). The parties of the model case proceedings are the model case plaintiff, the model case defendant and summoned interested parties (KapMuG). Second phase of the model proceedings is bringing the model case ruling, which has binding and final effect to the courts trying the matter in regards to the model case issues (KapMuG). In third phase, the trial courts will, with regards to the model case ruling, rule each proceeding itself, including decision on individual damages. Importantly, model case ruling is referring solely to claims in the Complaint Registry (KapMuG, Baetge, 2007). In addition, the KapMuG provides for a special settlement procedure of model cases. However, it is highly unlikely to happen since it requires consent of each individual plaintiff separately (Baetge, 2007). As to the court practice, there are currently seven model proceedings under the KapMuG (Elektronischer Bundesanzeiger), from which two cases particularly gained public profile: Deutsche Telekom case and DaimlerChrysler case. To conclude, since the number of cases under the KapMuG is increasing, practice demands for its improvement. In particular, German Federal Supreme court in recent case Frau Dr. T., ruled that the current prohibition on contingency fees is unconstitutional. Consequently, Germany is looking at permitting contingency fees in exceptional cases, which directly introduces the main feature of the U.S. class actions model. 3.2.3. Netherlands In the Dutch law, two models of collective disputes resolutions are available in all areas of law. The first is the group interest collective action which is implemented by Art. 3:305a-c CC in the Dutch Civil Code, in force since 1 July 1994 (Tzankova, 2007). It is a representative action, which can be commenced solely by representative organizations as are e.g. generic investors or consumers organizations, on behalf of plaintiffs who share similar interest (Tzankova, 2007). Importantly, it is possible to seek only injunctive relief, without possibility to obtain neither compensatory damages nor declaratory judgment on liability (Tzankova, 2007). As to the court practice, there are five group actions recorded regarding investors protection (Tzankova, 2007). However, impossibility of seeking damage recoveries led to invention of the second collective dispute model: an opt-out collective settlement authorized by the competent court. It is introduced with 2005 Act on Collective Settlement of Mass Damages (CSMDA) and implemented in the Dutch Civil code (Art. 7:907-910) and in the Dutch Code of Civil Procedure (Art. 1013-1018) (Tzankova, 2007). Although it was primarily brought for mass damage recoveries for physical injuries, it became a useful device for investors protection as well (Harmeling, et. al 2008). Its main feature is that parties negotiate and settle the dispute out of the court and then apply to the Amsterdam court of Appeal, who has exclusive jurisdiction in this matter, to declare their settlement fair and binding to all parties on an opt-out basis (Tzankova, 2007). Although the settlement negotiations may take years, the average time necessary for courts approval is relatively short, i.e. one year (Tzankova, 2007). Specifically, there are four requirements which should be fulfilled in order to obtain courts approval: reasonable compensation amount, sufficient guarantee of defendants performance, the representative organization must sufficiently represent its members and sufficient number of class members (Tzankova, 2007). Significantly, special two steps notification procedure to class members is provided (Tzankova, 2007). In particular, the first notification is referred to known class members individually, while the second notification is referred to unknown class members by means of public communications (Tzankova, 2007). After the settlement is approved, the court determines the period of at least 3 months for plaintiffs who want to opt out and proceed with individual claims, after which settlement becomes binding upon all members, regardless of their knowledge (Tzankova, 2007). In Netherlands, differing from both the U.S. model and new movements in Germany, contingency fees remain prohibited in all forms (Tzankova, 2007, Harmeling et. al 2008). As to the court practice, there are two finally resolved settlements till now: DES case and Dexia case, only latter referring to investors protection area. Besides these cases, court approval is pending for collective settlements in the Shell case, Delta Lloyd case, Vedior case and Vie dOr case (Netherlands Class Action Cases). The main criticism of the Dutch model is the fact that, since not all parties actively participate in the negotiations, settlements are not adjusted enough to individual requests, thus causing some individuals to opt out. Consequently, the mechanism becomes less attractive and less efficient (Barendrecht and van Doorn, 2007). However, to conclude, although some improvements are necessary, the current experience with the Dutch model remains positive as it provides reasonable compensation for plaintiffs and final resolutions for defendants (Tzankova, 2007). 3.2.4. Sweden In 2002, Sweden adopted the Group Proceedings Act (GPA), which is available in all areas of law (Lindblom, 2007). It provides three forms of group actions: private (instituted by a natural person or legal entity), public (instituted by Government authorized entities) and organization (instituted by a non - profit organization for consumers protection) (GPA). The private group action, which is the only available in investors protection area, can be formed only by members who share common or similar interest, including the representative plaintiff (GPA). Plaintiffs are entitled to petition for injunctive reliefs, declaratory judgments and damage compensations (Lindblom, 2007). The main features of Swedish group actions are the following. First, it represents a mandatory opt in procedure. In particular, at the commencement of group proceedings, the court sends notifications to all members that they can opt in within a certain period (GPA). Only those plaintiffs who expressly opt in are considered to be included in the group action (GPA). Second, only the plaintiff who represents the group is a trial party to the action (GPA, Lindblom, 2007). Third, courts ruling is legally binding solely upon group members who opted in (GPA). Forth, settlements are possible only if two requirements are fulfilled: if all group members consented to it and if the court confirmed it by its ruling (GPA). Fifth, although contingency fees are not allowed, GPA introduced the so called risk agreements, where attorneys fees are conditional in regard to successfulness of claims. Risk agreements must be approved by the court, which will approve it only if it finds the agreement reasonable in regard to the nature of the dispute (GPA). As to the court practice, there are twelve group actions recorded till now (Lindblom, 2008). However, none of them refers to mass securities dispute. Thus, to conclude, although Swedish group actions model provides a possibility to conduct mass securities dispute, there are still no such incentives. CROATIAN PERSPECTIVE Croatia recognized a type of limited collective redress mechanism solely in consumers protection area. However, authors will analyze available procedural mechanisms in both consumers and investors protection area. 4.1. Consumers protection As to the consumers protection in general, it is necessary to divide it into three levels. First level is the regular individual protection where consumer, as plaintiff, can bring an action towards a trader, as defendant. Significantly, Croatian Code of Civil Procedure (CCP) provides a special, speedy procedure for plaintiffs (including consumers) with small claims, limited to the amount of 10,000 KN. However, this possibility alone does not provide for sufficient consumers protection due to the following reasons. First, most of consumers claims are too small to encourage them commencing an action. Second, available procedure for small claims is still too lengthy. Third, any ruling obtained in such procedure has only inter partes effect, meaning it will neither affect any other consumer suffering the same damage, nor will prevent trader from the same violation towards other consumers. Second level of consumers protection is the protection of collective consumers interests, which is implemented in former and current Consumers Protection Act (CPA, 2003, CPA, 2007). This model follows the EU Directive 98/27/EC, introducing a type of representative action requesting injunctions of defendants wrongdoing, without possibility of seeking neither collective nor individual damage recoveries. While the application of the CPA 2003 was limited to violation caused by distant selling, by unfair contractual provisions in standard contracts and by misleading comparative advertising, the application of the CPA 2007 is expanded to almost all disputes between consumers and traders. However, authors consider the CPA 2007 introduced two confusing novelties. First, in its article 155, it excluded the entire collective consumers protection, postponing it until Croatia becomes a member of the EU. In other words, no collective consumers protection is currently available in Croatia. Second, while the CPA 2003 was founded on the judicial, the new CPA 2007 provides primarily for administrative protection, leaving judicial exclusively for disputes concerning unfair contract terms. Authors consider administrative protection to be insufficient considering delicate legal issues connected with consumers protection. Third level of consumers protection is collective protection of individual consumers interest, which allows consumers to seek individual damage recoveries in collective actions usually led by the lead plaintiff or by authorized representative body (types of group actions, class actions, representative actions and test case procedures). However, these mechanisms are not available in Croatia. To conclude, although prima facie Croatia recognizes some forms of collective consumers protection, when put under scrutiny, result is completely the opposite. 4.2. Investors protection As to the investors protection, authors would like to emphasize that investors cannot use representative action as introduced in the CPA 2007, due to the following reasons. First, investors are not consumers, since consumer shall mean any natural person concluding a legal transaction for purposes that are not related to his or her business or entrepreneurial activity (CPA, 2007: Article 3). Although Croatian law does not define investor as a legal term, one who commits capital in order to gain financial returns can be easily understood as one. An investor plays different role in the economic process, as it rather forms the part of producers apparatus, while consumer remains on the other side, primarily focused on consumption (Cartwight, 1999, ulinovi-Herc, 2005). Moreover, investors protection is more focused on pre-transaction transparency, while consumer protection is more comprehensive, i.e. it encompasses period before and after the contract is concluded. However, since the concepts of consumers and investors could occasionally overlap, some authors argue that, especially in domain of financial services, small investors should enjoy consumers protection (Cartwight, 1999). Nonetheless, risk taking is inherent to an investor, but not to a consumer, and that difference cannot be overridden. Moreover, since the nature of currently available representative action for consumers is prohibitory and not compensatory, it would not be useful tool in investors action for damages. For the following reasons, representative action, as introduced in the CPA 2007, remains unavailable and impracticable to investors. Moving on, when analyzing individual investors protection, authors encountered the issue of whether Commercial or Municipal court would be competent in disputes for damages caused by issuers misstatements on the capital market. Croatian CCP allows commercial courts to adjudicate these disputes when one of the two criteria is fulfilled. First, according to the ratione materiae criterion, Commercial court will adjudicate all disputes filed by shareholder(s) towards an issuer/company for protection of its rights, which one has as a member of that company, i.e. the "membership rights". However, the issuers duty to disclose certain information on the capital market is not directed towards its shareholders only, but rather towards the entire investors public. For these reasons, it is questionable whether disputes concerning issuers misstatements on the capital market would fit into a category of membership rights at all. Therefore, establishing jurisdiction of the Commercial courts based on this criterion remains an open issue. Second, the rationae personae criterion enables Commercial courts to adjudicate in all disputes where plaintiff, (i.e. shareholder/ investor) who sues the company has a legal personality. The same applies if a shareholder - natural person is considered as a "material joinder" (materijalni suparni ar) of the plaintiff who is a legal person, as well as in the case when the members of the board are sued along with the company, regardless of whether plaintiff is legal or natural person. In other words, rules on jurisdiction in CCP regarding disputes between investors and issuers for misstatements on the capital market, may lead to competence of two different courts, depending predominantly on the status of the plaintiff, i.e. whether it is a natural or a legal entity. Since commercial courts, as specialized courts are more competent in solving capital markets disputes, authors consider the current solution unsatisfactory, as it fails to achieve a principle of legal certainty. As to the collective protection of individual investors interest, there are no specific, but rather general possibilities available in the CCP. Authors find that the concept of  material joindership (materijalno suparni arstvo), particularly the unique joindership (jedinstveno suparni arstvo), when combined with plaintiffs request for declaratory ruling on defendants liability for misstatements on the capital market, could enable achievement of certain effects that resemble group actions as known in comparative law. Namely, material joindership allow several plaintiffs to file one claim with identical relief requested, under condition their request is based on the same factual and legal grounds (CCP). Moreover, the court could find some material joinders to be unique joinders (jedinstveni suparni ari),  if under the law or because of the nature of the legal relationship dispute could be solved uniquely towards all joinders (CCP: Article 201). The most important consequence of unique joindership is that court s ruling would have the res iudicata effect even upon those unique joinders, who were not party to the proceedings (Triva and Dika, 2004). Because of this important consequence, non-participating unique joinders, even though the CPP is silent on that issue, should be informed about the proceedings. How this should be done is to be solved by substantive law governing the subject matter of dispute. For example, if shareholders are potential plaintiffs, information about dispute could be provided by announcement in the companys gazette and/or issuers website. For non-shareholders, official registry of published information, could be reliable source of information. The reasons why potential plaintiffs should combine benefits of joindership with a request for declaratory ruling are many. First, if the court accepts them as unique joinders and declares defendants liability for misstatements on the capital market, upon such ruling, each unique joinder (either participating or nonparticipating), could request individual damage recovery. However, it is hardly conceivable that the court will always recognize investors as unique joinders, since their position is usually differing. Namely, a group of plaintiffs could consist of former / actual shareholders (or bondholders). Some of them may claim the loss suffered by acquiring or selling securities at the time (mis)statement was made, while the other may claim damages resulting in the loss of market value of their shares although they were not entering any transaction with securities, etc. Second, a request for declaratory ruling could be viable procedural tactic for other types of joindership (i.e. formal or material joinders who are not unique), especially in cases where the issuers liability is not self-evident and a disparate group of plaintiffs is suing. In order to decide whether to sue for damages at all (condemnatory request), investors might first consider suing for declaratory judgment. Filing condemnatory claim in such circumstances could be counterproductive and premature. Additionally, all types of joinders enjoy a benefit of having more expeditious and less costly procedure as opposed plaintiffs conducting each suit separately. This is particularly vital for the substantiation of the claim, i.e. when the plaintiff tries to collect and produce evidence. Since the crucial evidence, as a rule, belongs to defendant, the process of collection of evidence could be very costly and cumbersome. Therefore any distribution of the costs between plaintiffs is welcomed. Therefore, to conclude, even Croatian law does not recognize group actions for the disputes concerning misstatements on the capital market, group of investors, when suing jointly could obtain effects similar to group actions if they file request for declaratory ruling. If the court finds them as unique joinders the ruling would have binding effect on the non participating unique joinders, which is very much alike in comparative law. In other circumstances benefits of suing jointly remain on the level of cost saving and more expedient procedure. Authors conclude that collective protection of individual investors interest in Croatia is weak and unsatisfactory. CONCLUSION Authors find that collective protection of individual investors interests is unsatisfactory in Croatian law. While the courts ruling in litigation initiated by individual investor has solely the binding effect between the parties, the ruling will neither benefit any other investor suffering the same damage nor will prevent issuers from further infringement. The deciding court(s) could obtain, in two separate proceedings, two differing rulings, although both based on the same facts and law. This in turn causes legal uncertainty, which every coherent legal system tries to avoid. Commencement of the numerous individual lawsuits towards issuers is time and cost ineffective for both parties and courts, and ultimately discourages investors in their access to justice. Due to all these reasons, authors find that kind of collective protection of individual investors interest is needed in Croatian law. Examined comparative models show different approaches in mass investors lawsuits. In spite of the flaws found in these models, authors consider Croatian legislature should adopt some type of collective investors protection of individual interests, based on the selection of the best comparative model. It should be the one that mostly resembles to Croatian law of the civil procedure. German model case procedure seems very coherent and the closest to our legal environment. Beforehand, authors plead for a change of the jurisdiction rules in Code of Civil Procedure. Only commercial and not the municipal courts should be competent to adjudicate over capital market disputes, especially concerning infringements made by misstatements. If a German model would be adopted, it would mean that Croatian High Commercial Court would be competent to decide on the issues of law and fact which are common to all group members. Such decision would be binding to lower courts and it would serve as a base of bringing final decisions in individual disputes. Character of such decision would be a kind of preliminary ruling, and not as an interlocutory judgment. Although one might argue that appointing the High Commercial Court as the first instance court in model proceedings would reduce number of legal remedies available (solely Supreme Court could decide on appeal of the High Commercial Courts model decision), when model case decision is forwarded to first instance court, its decision in individual litigation would be appealable in full scale. Another possibility would be to invest HANFA, as a specialized agency, with such an authority. Similar division of competencies is found in the field of market competition, whereby Croatian Competition Agency (AZTN) is authorized to decide whether market participant(s) infringed the Market Competition Act. However, legal remedies on HANFAs decisions would induce competence of the Administrative Court. Since it is more desirable these disputes remain within the framework of the judiciary, authors find the competence of the High Commercial Court is more suitable solution. Proficiency necessary in dealing with such disputes could be solved by introduction of adequate rules on the composition of the High Commercial courts panel. Such a procedure would save time and money to both litigants. For implementation of such model, institution of the public, electronically available Complaint Registry where investors could register their claims, would be necessary. This feature origin from the opt-in group action models, which authors find more suitable to continental civil procedural traditions. This Registry should be preferably instituted at Ministry of Justice, but in absence of such registry, the newly instituted Official Registry of Public Information, introduced by art. 444. of the Croatian Capital Market Act is suitable. In order to preclude investors abusive behavior, it is necessary to establish the cut-off date. This is the date until which investors could opt in the group, in order to enjoy the benefits of suing jointly. This would be an effective tool in defining relations between co-litigants, especially in regard to division of the costs. The solution should be in accordance with existing rules regarding parties joining in the litigation, or, if necessary, slightly modified. Authors would like to draw attention to the most important incentive to enter in group litigation, i.e. the issue of financing such disputes, since there are considerable high litigations costs involved. Comparative experience shows that some sort of strictly regulated risk-arrangements could encourage investors to commence such disputes. Authors find that all of these proposals could merge with existing legislative solutions. To conclude, authors standpoint is that Croatian legislature should consider implementing some type of group actions that would facilitate adjudication of mass investors litigation. That would in turn serve the ultimate goal of investor protection, being the most important for the capital market as a whole. REFERENCES AB v Wyeth & Brother Limited and Another [1991] 2 Med LR 341. 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Triva, Sinia & Dika, Mihajlo (2004), Graansko parni no procesno pravo, Narodne Novine d.d., VII. Izmijenjeno i dopunjeno izdanje, Zagreb. Tzankova, Ianika (2007), Netherlands Class Actions, Group Litigation and Other Forms of Collective Litigation, Global Class Actions Project, available atCDNO 7$8$$Z%[%]%^%`%a%gd"q8$a$gd{D$a$gd !$a$gd#,$a$gdJF$a$gdJFNOv 74B$6$7$8$9$:$$⵩Ⓜwhhbh yCJaJmH sH hbh yCJaJ!jhbh y0JCJUaJh{Dh#,aJUh<h<CJaJh<h#,6CJaJh<h#,CJaJ"h<h#,6CJ]aJmH sH h<h#,6CJaJmH sH h<h<CJaJmH sH h<h#,CJaJmH sH #: http://globalclassactions.stanford.edu/reports.html.  The main options of funding the civil litigation in England & Wales are: pay yourself, Trade Union, first party insurance, public or charity funding, conditional fee agreement (CFA  Such as in disputes for annulment of shareholder's meeting decision, provided under Croatian Companies     $$Z%[%\%^%_%a%b%d%e%h%i%h{Dh#,aJjh]aUh]ahfh yCJaJ!jhfh y0JCJUaJ a%c%d%f%g%h%i%$a$gd !6&P 1h:p}. A! 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