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In 2004, the Securities and Futures Investors Protection Center (SFIPC) filed a civil damages suit on behalf of investors for insider trading. A judgment in the SFIPC's favor was handed down in January 2005. As the SFIPC's first successful class action for insider trading, this is a landmark case to seek redress for illegal conduct in secu-rities markets.
A class action has the following two special features: (i) it arises out of incidents that affect a large number of victims, which typically occur in such areas as product liability, environmental pollution, or securities tradings; and (ii) by eliminating the need for victims to bring indi-vidual lawsuits in respect of a single incident, class actions can reduce the burden of proof on the parties, and also reduce the burden on the courts in hearing such cases.
The areas in which class actions are available are as follows:
Consumer-related incidents: When consumers suffer loss or injury owing to defective goods or services, a multitude of people are often affected. If each victim had to file a lawsuit individually, this would inevitably place a heavy burden on the courts. Thus there is a need for class actions. Paragraph 1, Article 50 of the Consumer Protection Act provides that a consumer protection organization may bring an action in its own name with respect to a single event that causes harm to multiple consumers, if 20 or more consumers assign their rights of claim to the organization.
Pollution: Damage or injury caused by an en-vironmental pollution incident often affects all the residents of an area that may be populous. Since the cause of the harm suffered by each is similar, there is a need for a class action to resolve disputes arising out of such incident. Article 44-1 of the Code of Civil Procedure provides that if multiple persons sharing a common interest are members of the same public-interest organization, and as long as it is within the scope of the organization's aims as stated in its articles of incorporation, the members may appoint the organization as the representative party to bring litigation. When such organization brings an action for mone-tary damages on its members' behalf, if all the members declare in writing that they agree for the court to determine the total amount pay-able by the defendant to all the members, and agree to how the money is to be distributed among them, the court need not determine the sum payable to each member, but may merely rule on the total payable to all the members.
Securities frauds: Investors in securities and futures markets often show little willingness to seek redress for losses caused by a securi-ties fraud due to the lack of needed resources. But when they do with respect to the same incident, such litigation places a heavy burden on the courts. Accordingly, Article 28 of the Securities Investor and Futures Trader Pro-tection Act (SIFTPA) provides that in order to uphold the public interest, within the scope of its aims as stated in its articles of incorporation, a protection institution may, with respect to a single securities or futures incident that causes losses to multiple securities investors or fu-tures traders, institute litigation or arbitration proceedings in its own name after being au-thorized to do so by at least 20 securities in-vestors or futures traders.
Examples of all three types of class action have already been seen in Taiwan. For example, in the area of securities and futures, the SFIPC has brought a number of class actions since the SIFTPA took effect on 1 January 2003. Through the SFIPC, investors can seek damages from company directors and supervisors who act il-legally in a variety of ways, including falsifying financial statements, engaging in insider trading, or manipulating share prices. The SFIPC has already achieved a number of firsts in the area of successful class actions.
In its traditional form, litigation is centered on the individual litigant, and therefore the provi-sions on burden of proof and trial procedures set out in the various procedural codes have all been designed with individual litigants in mind. How the procedural rights of both plaintiffs and de-fendants in class actions can be balanced while alleviating the burden on the courts is an impor-tant matter worthy of continuous monitoring in class actions.
