The legal action being brought against Wackenhut, which operates private jails in the US, surrounds the abuse of girl offenders by staff at Coke County Juvenile Centre in the town of Bronte, Texas.
The jail, which has been dubbed a "training ground for paedophiles", has closed. If the claims are successful, Wackenhut could be forced to pay out as much as pounds 10m to each girl.
In Britain, there has already been controversy surrounding Premier Prison Services management of Doncaster jail in South Yorkshire after a suicide and the sacking of a nurse found to have a criminal record.
But this has not stopped the Home Office from awarding the company the contract to run Hassockfield, the secure training centre in Co Durham which is to open this autumn.
Child jails have attracted controversy since they were proposed by Michael Howard, the former Home Secretary, to detain persistent young offenders who would not have faced a custodial sentence under past rules.
This week, the Rainsbrook secure training centre will officially open near Rugby to be run by Rebound ECD, the same Group 4 company which operates the first child jail at Medway in Kent. This will be followed by Ranby in Nottinghamshire and Sharpness in Gloucestershire.
But a new report by the Howard League for Penal Reform shows that juveniles released from child jails have a 100 per cent reoffending rate. The study called Child Jails: The Case against Secure Training Centres says a similar institution operating in Northern Ireland called the Lisnevin training centre has been found to have the reoffending rate of 100 per cent.
The reform group refers to the opening of Rainsbrook as a "serious error of judgement". This follows a report by the Social Services Inspectorate which criticised staff at Medway for using excessive force on children and strengthening the children's criminal behaviour. This contrasts with the Bridges Project in Sheffield which has reduced the offending rate of 60 per cent of the children at an annual cost of pounds 10,000 compared with pounds 110,000 per child at a secure training centre. Due to lack of funding, this project was forced to close earlier this year.
Fran Russell assistant director of the Howard League says child jails are potentially damaging to children and should be scrapped.
"They make their criminal behaviour worse," she added. "They will become even more criminalised by being in these jails. We think their decision will come back to haunt them. These are not the most difficult kids in the system.
"These children are not evil but they are damaged and vulnerable and need proper care."Reuse content