The Solicitors Regulation Authority has rebuked an international firm for failings in bringing a class action on behalf of thousands of claimants. The investigation into Hausfeld & Co LLP followed criticism from a High Court judge after British Airways plc and other defendants in the group action successfully applied to have the case struck out.

Hausfeld admitted allowing its independence to be compromised by relying on its primary clients to check which claimants were eligible, and admitted failing to obtain full written advice prior to issuing the claim.

The SRA agreement notice outlines that Hausfeld had been retained by the China Chamber of International Commerce (CCOIC) and commenced proceedings on behalf of 64,697 Chinese companies who were members of the group. They sought damages from British Airways and other defendants following an €800m fine imposed by the European Commission in relation to an air freight cartel.

The firm believed it had authority to issue the claim in the names of the Chinese companies following instructions from CCOIC. Hausfeld principally received instructions via the group’s agent, a US-based asset recovery firm named CAR International Ltd.

The claim was issued in 2014 and struck out following an application from the defendants the following year. 

The SRA investigation found that prior to issuing proceedings the firm had obtained a written opinion from an expert on Chinese law who said that CCOIC had the authority to start legal action on behalf of its members. The firm did not seek a second confirmatory Chinese law opinion.

Hausfeld also took specialist advice from English counsel but did not obtain full written advice on which law was applicable in the claims. Checks to establish which companies had shipped goods by air in the relevant period were found to be inadequate, and the firm did not make proper checks to verify the validity of claims.

The SRA said that whilst Hausfeld’s conduct was serious and required some public sanction, it did not involve dishonesty or a lack of integrity. There were no adverse financial consequences for the claimants and no costs order made against the firm. Following changes to the firm’s checks policy, the likelihood of repetition was low. The firm agreed to pay the SRA’s costs of around £10,900.

Following publication of the agreement, Lianne Craig, managing partner of Hausfeld London, said: ‘The firm has taken on board a number of learning points as a consequence of the investigation into the facts of this matter dating back to 2014, with internal procedures relating to reliance on foreign legal opinions and steps taken to verify claims prior to issue having been refined to prevent a similar issue arising in future.’