* Australia has one of world's most class-action friendlylegal regimes
* A$1 bln worth of class action claims have been settled todate
By Cecile Lefort
SYDNEY, Nov 20 (Reuters) - Investors in Australian corporatebonds need to weigh more than market movements and a company'sprospects these days - they also have to follow which firms gethit with class action lawsuits, and guess how much damage thesemight cause.
Australia has one of the world's friendliest legal systemsfor class action suits, and some well-known companies have beensued by unhappy shareholders.
Class action lawsuits have become so common that a global law firm, Herbert Smith Freehills, calls them the second biggestrisk for corporate Australia, behind regulatory compliance andgovernance issues.
"Around 10 years ago, there were almost no shareholder classactions," said Jason Betts, a Sydney-based partner at HerbertSmith Freehills. "Since that time, more than 30 investor andshareholder class actions have commenced and a great number morehave been threatened."
One factor driving class actions is the growth of"litigation funders", who pay for fighting companies in courtin exchange for a share of any settlement or judgement.
The website of IMF Australia, a listed company thatsays it is the country's largest litigation funder, asserts ithas recovered more than A$1 billion (US$942 million) for clientsin the past decade.
Bond investors are concerned about the growing number ofsuch lawsuits because of their potential to impact a company'scash flow.
"We don't like class actions because in our business anyuncertainty hurts," said Vivek Prabhu, senior portfolio managerat Perpetual Limited which has about A$4.5 billion incash and fixed income investments.
"If a claim is successful, trying to quantify the likelypayment is hard and if you have that uncertainty, you'll buysomething that does not have that uncertainty," he said.
For example, due to then-ongoing litigation, Perpetual didnot invest in bonds that global energy giant BP Plc issued following a massive oil spill in the Gulf of Mexico in2010.
CENTRO'S BIG SETTLEMENT
Settlements of Australian class-action suits have topped A$1billion. The largest was Centro Properties Group's payment ofA$200 million. The group, now called CNPR, said at the time thatproceedings "have been dismissed without admission of liabilityby CNPR."
Also in 2012, Nufarm paid A$46.6 million>, alsostating the suit was dismissed without any admission ofliability by the company.
Among firms now in litigation is construction companyLeighton Holdings, which the plaintiffs have accused ofbreaching disclosure obligations relating to allegations ofbribery and corruption overseas. Leighton says there is no basisfor the claim.
Asset managers said that among the firms most at risk offacing class-action suits are mining and construction companies,especially those operating in emerging markets that haveinstances of business practices which are illegal in mostdeveloped markets.
Australia, along with the United States and Canada, is amongthe few countries allowing a comprehensive class action regime,with shareholder class actions the most popular type.
Also underpinning this is Australia's strict liabilityregime for corporations to continuously disclose information.This makes the nation a particularly attractive forum forclass-action promoters, including for firms from overseas.
Betts of Herbert Smith Freehills expects the number of suitsto rise, along with the size of claims.
A group of individuals calling itself Unhappy Banking hasthreatened to sue the nation's top lender by market value,Commonwealth Bank of Australia, in connection with abank takeover. A CBA spokesman said "Given no action has beenbrought by Unhappy Banking, we are not able to comment."