Hausfeld has been rebuked by the U.K.’s Solicitors Regulation Authority and ordered to pay costs of more than £10,000 for a series of regulatory failings in relation to its representation of a major Chinese client.
Following its role in a case dating as far back as 2014, in which the firm acted for a group of claimants in an air freight price fixing cartel matter, the firm has been criticised for, among other shortcomings, failing to make adequate enquiries into the list of claimants involved in air freight, and for “allowing its independence to be compromised”, according to the SRA’s decision document.
In the case in question—Bao Xiang International Garment Centre and others v British Airways and others—the firm brought proceedings on behalf of the China Chamber of International Commerce’s (CCOIC) 64,697 members who sought damages following a €800 million fine handed down by the European Commission in relation to an air freight price fixing cartel.
In the subsequent High Court proceedings, the defendant successfully made a strike out application, and the judge who heard the matter made a number of criticisms of Hausfeld, which were then investigated by the SRA.
The SRA concluded, and Hausfeld accepted, that the firm allowed its independence to be compromised by relying on CCOIC to verify which of its members had purchased air freight services, and that it did not make adequate enquiries as to what steps the CCOIC had taken to validate such a list.
The firm also “failed to obtain full written evidence on which laws were applicable in relation to the CCOIC bringing proceedings in the name and benefit of its members by not seeking a second confirmatory Chinese law opinion rather than rely on the Chinese Law Advice alone, or what exactly was required under English law”.
No fine has been imposed on Hausfeld due to there being no adverse financial consequences for the claimants and no cost orders were made against the firm, the likelihood or repetition is low, and that although the conduct was serious it did not involve dishonesty or lack of integrity.
The firm has agreed to pay the £10,897.50 cost of the SRA’s investigation within 28 days.
Lianne Craig, managing partner for Hausfeld’s London office, said in a statement: “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”.
A spokesperson for the firm further commented: “We took the SRA investigation extremely seriously, cooperating fully. During the investigation, the SRA was provided with additional information and had access to relevant privileged documents relating to the steps taken prior to issuing the claim which were not available to the High Court at the time of its judgment.”
The SRA is currently seeking to overhaul its fining power when it comes to tackling misconduct in the U.K. legal industry. The SRA is consulting on plans which could see it increase misconduct fines for law firms and individual solicitors from a maximum of £2,000 to £25,000.
At the start of the year Mishcon de Reya was ordered to pay £232,500 with costs of £50,000, one of the largest fines ever given by the SRA for alleged due diligence and anti-money laundering failures.