It seems curious that, at a time when the likes of President Bush, Michael Bloomberg and Eliot Spitzer are criticising America's apparent obsession with class action law suits, we on the other side of the Atlantic seem to be adopting a more claimant-friendly attitude to litigation.

In addition to today's move by the EU to open the possibility of class actions across 27 member states, we have in the UK this year already seen Clyde & Co launch a suit against JJB Sports on behalf of football fans who overpaid for replica kits, and a court agree to hear a group damages claim brought by Ivory Coast residents alleging they fell ill after toxic waste was dumped by a European oil trading group. Then there was the widely publicised arrival of US class action specialists Cohen, Milstein, Hauself and Toll in London.

The UK will have some way to go if it is to develop a class action legal system as large and sophisticated as that of the US. There is still a tension in our legal system between Lord Woolf's aim for justice to be open and accessible to all and the enduring suspicion of "no win, no fee"-style lawsuits, which are seen as degrading justice. On the other hand, courts here have the ability to limit costs imposed on failed claimants, a practice that, if it becomes popular, could remove one of the major barriers to these types of cases reaching court.

Despite all the hype, however, British businesses have more to fear in the immediate term from being dragged into class action lawsuits on the other side of the channel. Shell, to cite the most high profile example, has already paid out $90 million to disgruntled investors for allegedly misstating reserves and is facing further litigation, while Deutsche Telecom, Vivendi, Parmalat and Roche have also been targeted. Lawyers predict that similar cases will follow.

“Companies should be wary of the long arm of the US law reaching into foreign boardrooms and hauling British companies - or individual executives - before American courts,” says Peter Watson, a litigation partner at Allen & Overy. “US courts tend to take the view that if foreign companies come to the US to enjoy the benefits it has to offer, then they should also accept the costs of doing business there which means answering to the American legal system where appropriate.”

Patricia Hynes, his New York-based colleague, points out that although the number of class action lawsuits launched in the US has fallen in recent years the average settlement has increased, therefore ratcheting up the financial pain for the companies targeted. A former litigator at prominent US class action firm Milberg Weiss & Bershad, Hynes adds that large, professional shareholders such as public worker or trade union pension funds often take lead roles in such litigation, vastly increasing the chances of the target company having to make a substantial payment.

It is not only the British or European companies that have a physical presence or carry out large-scale business activity in the US that are at risk from being sued there. Even those companies that don't actually do business in the US but access its capital markets could find themselves at the receiving end. It doesn't end there: the “long arm” approach of US law can present a threat to companies that so much as conduct business with other companies that are active there - such as the banks that have been providing services to internet gaming companies that have come under scrutiny by US authorities.

Such cases can often be dismissed at the early stages or settled on favourable terms, but they remain a time-consuming and potentially damaging distraction.

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