Plans by Deminor, an investor rights group, to form a “European Creditor Committee” to recover assets from Lehman Brothers are nothing more than a sophisticated way of rallying potential litigants together.

The promise to form a Creditor Committee, which sounds official, influential and appealing to those familiar with the US bankruptcy system, is a smokescreen. This is not a Creditors Committee in the technical sense as understood in either the US or Europe – it is a vague group of people with a common enemy.

By announcing plans to form a Creditors Committee, Deminor is planting a flag in the ground and inviting anyone with a grievance against Lehman Brothers to gather around it. Once interested parties have assembled, it can divide them into smaller groups that have exactly the same grievance.

So, all bondholders that held the same class of debt security can be lumped together to consider a group action. In this sense, it is no different from a law firm placing a general advert in a newspaper saying: “Have you lost out through the Lehman Brothers collapse? If so contact us.” That law firm’s first job is to file the replies into groups of similar complaints.

This is not without merit, particularly when there are retail investors facing losses who might not otherwise be able to bring legal action against Lehman. It may also provide a useful service to institutional investors looking to assert their legal rights and willing to pay a third party to handle the process.

Deminor declined to comment on its fee structure but lawyers said it is likely the group would take a percentage of the amounts recovered in any successful lawsuits.

Identifying and processing legal claims is a far cry from a genuine European Creditors Committee, which suggests an official or at least semi-official group that will be actively involved in and able to influence the main administration proceedings.

Although they lack the legal status and power of their equivalents in the US, Creditor Committees are becoming more common and influential in Europe. However, in the UK at least, they are elected at the first creditor’s meeting with preference usually given to the largest creditors. These are almost always large institutions who can look after themselves and would not need a group like Deminor to help for a committee.

Deminor declined to comment.

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