Latest legal and Regulatory News - 12th October

In this issue:

Risk & Compliance

Commercial

Corporate

Information law and TMT

Employment

In-house

Dates for your diary

Useful information

LexTalk®In-house: a Lexis®PSL community

Risk & Compliance

Data protection

The European Scrutiny Committee (the Committee) has published recent correspondence with the Minister of State for Media and Data, following the Committee's request for information on—(a) the UK Government's view of the case of Data Protection Commissioner v Facebook Ireland Limited, Maximillian Schrems (commonly known as 'Schrems II'), Case C-311/18, and (b) the UK’s aspirations for durable data adequacy decisions from the EU for both commercial and law enforcement purposes from 1 January 2021. See: LNB News 06/10/2020 4.

The Departments for Digital, Culture, Media & Sport (DCMS) and Business, Energy & Industrial Strategy (BEIS), along with the Office for Civil Society (OCS) and Information Commissioner's Office (ICO) have collectively published updated guidance on data protection and data flows to help stakeholders prepare for the end of the transition period and beyond. Further new and updated guidance may be issued as the transition period progresses, so stakeholders are advised to monitor the pages for updates. See: LNB News 02/10/2020 89.

The ICO has launched a public consultation on its draft statutory guidance, which details how it will regulate and enforce data protection legislation in the UK. The draft guidance sets out the ICO’s powers, how it is used and how fines are calculated, while assuring businesses that the powers will be used ‘proportionately and consistently’. The consultation closes at 5pm on 12 November 2020. See: LNB News 01/10/2020 11.

Financial crime and sanctions

MLex: Jersey has struggled to reduce its exposure to international money laundering despite its commitment to boost corporate transparency, the British Crown Dependency has acknowledged. See News Analysis: Jersey lays bare difficulties in curbing money laundering.

The European Commission has published a speech by executive vice-president Valdis Dombrovskis at the high-level conference on anti-money laundering and counter-terrorist financing (AML/CTF), in which he noted that around 1% of the EU’s annual GDP is thought to relate to criminal activity. Dombrovskis said he would be in favour of creating a dedicated AML authority with significant and direct supervisory powers regarding the most risky obliged entities. The EU’s AML rules are now among the toughest in the world, but still not enforced equally across the board, and the EU intends to present a package of legal proposals in the first quarter of 2021, based on the EU’s AML action plan and consultation input. See: LNB News 01/10/2020 57.

The European Central Bank (ECB) has published the slides from a speech by Édouard Fernandez-Bollo, a representative of its supervisory board, setting out ECB Banking Supervision’s role in anti-money laundering and counter-terrorist financing (AML/CTF). Fernandez-Bollo set out the current structure of prudential supervision and the separate AML/CTF framework, and highlighted the ECB’s horizontal AML co-ordination function and updated supervisory methodologies. See: LNB News 01/10/2020 83.

Cybersecurity & cybercrime

Europol has published the 2020 Internet Organised Crime Threat Assessment (IOCTA), which maps out the cybercrime landscape. The report has found that coronavirus (COVID-19) in many cases enhanced existing cybercrime problems, with social engineering and phishing being used to exploit vulnerable people and sell unproven coronavirus ‘cures’. A challenge faced by authorities is how to access encrypted information for criminal investigations. Further threats include improved malware, the increase in child sexual abuse material available online, sim swapping and criminal abuse of the dark web. See: LNB News 06/10/2020 28.

Law360: Ransomware victims and the third party companies that negotiate on their behalf may face stiff legal penalties if the cybercriminals behind an attack are known or turn out to be under economic sanction, the US Treasury Department said on 1 October 2020. See News Analysis: Paying cyber ransoms can breach sanctions, US Treasury says.

Non-cooperative jurisdictions for tax purposes

The European Council has announced the jurisdictions which are being added and removed from the EU list of non-cooperative jurisdictions for tax purposes. Cayman Islands and Oman have both been removed from the list after 'having passed the necessary reforms to improve their tax policy framework', meanwhile Anguilla and Barbados have both been added to the list following reports published by the Global Forum on Transparency and Exchange of Information for Tax Purposes downgrading the jurisdictions to 'non-compliant' and 'partially compliant' respectively. The list now contains twelve non-cooperative jurisdictions: American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu. See: LNB News 07/10/2020 35.

Commercial

Brexit and beyond

HMRC has published updated guidance on importing and exporting excise goods to help stakeholders prepare for the end of the transition period. Further new and updated guidance may be issued depending on the precise terms upon which the UK leaves the EU, so stakeholders are advised to monitor these pages for updates. See: LNB News 05/10/2020 14.

UK Prime Minister, Boris Johnson, and President of the European Commission, Ursula von der Leyen, have ‘agreed on the importance of finding an agreement, if at all possible, as a strong basis for a strategic EU-UK relationship in future’, as the final scheduled round of talks struggled to break the deadlock. With little time remaining in the transition schedule, ‘regular’ political engagement and intensive negotiating work is hoped to be key to resolving the deadlock. See: LNB News 05/10/2020 79.

The Department for International Trade (DIT) has announced that UK businesses will be able to continue bidding for public sector contracts around the world, worth over £1.3trn a year, following IP completion day. The announcement follows ‘extensive engagement’ with the World Trade Organization (WTO). The agreement ensures UK businesses can continue bidding for public sector contracts overseas covered by the Government Procurement Agreement (GPA), on the same terms as they do now, and overseas firms can continue to bid for UK public sector contracts covered by the GPA. See: LNB News 07/10/2020 77.

The DIT has published the responses received to its consultation on its proposal to open ten new innovative freeports across the UK. Following the responses, the government has offered further information on how it will create the new freeports, which will ‘create jobs, drive investment and regenerate communities,’ aiding growth following Brexit. See: LNB News 07/10/2020 65.

The European Commission has sent a letter of formal notice to the UK for breach of the Withdrawal Agreement, following the government’s refusal to withdraw certain provisions of the United Kingdom Internal Market Bill, which completed its Commons Stages in Parliament on 29 September 2020 before progressing to the House of Lords for further consideration. Professor Adam Cygan of the University of Leicester and Bernadine Adkins, partner at Gowling WLG, comment on the latest developments. See: LNB News 01/10/2020 121.

Coronavirus

The WTO has announced that world trade has shown signs of bouncing back following the slump precipitated by the coronavirus pandemic. However, WTO economists have also cautioned that this recovery could be disrupted by the effects of the ongoing pandemic. See: LNB News 06/10/2020 80.

Contracts

HM Land Registry has published a blog on the developing use of electronic signatures. The blog post discusses the progress of the adoption of electronic signatures, commenting on the recent widening of the scope of the use of witnessed electronic signatures, adding qualified electronic signatures and digital conveyancing. See: LNB News 02/10/2020 64.

The net loss approach to the quantification of damages for loss of profit in a breach of contract claim requires account to be taken of costs and expenses for which the claimant would have been liable in law had the contract been performed, even where, in practice, it would not necessarily be required to pay those expenses. Written by Phillip Patterson, barrister, at Hardwicke. See News Analysis: Defendant awarded summary judgment on the manner in which a lost profit claim is quantified (Palmali Shipping SA v Litasco SA).

Public procurement

BEIS has launched a consultation on giving the Small Business Commissioner (SBC) new powers which would enable them to ensure that small businesses are being paid on time. The new powers include the ability to order companies to pay their partners when a complaint for a late payment has been instigated or upheld, launch investigations without the need to first receive a complaint, compel companies to share information during an investigation conducted by the SBC and claim investigation costs from a company if there have been adverse findings. The consultation closes on 24 December 2020. See: LNB News 01/10/2020 90.

Corporate

Brexit

The Financial Conduct Authority (FCA) has published an updated version of the FCA Handbook on its website to show the rules that will apply at the end of the Brexit transition period on IP completion day. Users can use the time travel function to view the future version of the Handbook. It has also provided details on how it intends to use the temporary transitional power (TTP)—the power given to the FCA by the Treasury to make transitional provisions to financial services legislation for a temporary period to help firms adapt to the new requirements. There are certain key areas where the FCA says it will not grant relief at the end of the transition period. This means that, in those areas (which includes issuer rules and certain requirements under the Market Abuse Regulation (EU) 596/2014), the FCA expects firms and other regulated persons to be preparing to comply with changed obligations from 31 December 2020. See: LNB News 01/10/2020 82.

The Competition and Markets Authority (CMA) has launched a consultation on draft guidance regarding its functions after the transition period ends (ie 31 December 2020). The draft guidance explains the legal changes expected to result from 1 January 2021. In relation to merger control, the draft guidance explains, amongst other things, how cases which are live at the end of IP completion day are to be treated under the terms of the Withdrawal Agreement and how existing CMA guidance should be read in the light of EU exit. The CMA has invited comments from all stakeholders. The deadline for responses is midday 30 October 2020. See: LNB News 02/10/2020 61.

Coronavirus

The Financial Reporting Council (FRC) has published a review of the different ways that FTSE 350 companies conducted their 2020 AGMs following the disruption caused by the coronavirus (COVID-19) pandemic. The FRC review analyses a sample of 202 AGMs held between March and August 2020. In conducting the review, the FRC spoke with a cross-section of stakeholders, shareholder organisations, companies, technology providers, registrars, legal representatives, proxy advisors and others. The FRC concludes that the best organised and executed virtual and hybrid meetings enabled increased participation from shareholders, but companies that held closed meetings in which retail shareholders were unable to participate or vote on the day of the AGM disenfranchised those shareholders. The FRC also calls on the government to consider as soon as possible what measures may need to be brought forward to ensure AGMs are able to take place virtually or as a hybrid during 2021. See: LNB News 06/10/2020 97.

Audit

In Financial Reporting Council Ltd v Frasers Group plc (formerly Sports Direct International plc) [2020] EWHC 2607 (Ch), [2020] All ER (D) 18 (Oct), the Chancery Division was asked to consider whether certain reports which Sports Direct International (SDI) had disclosed to its accountant, regarding, among other things, the distance and/or internet selling arrangements of SDI and/or its affiliates, attracted legal privilege.

Corporate governance

The FRC has published a ‘Review of Early Reporting’, following the introduction of an annual Stewardship Report mandated by the UK Stewardship Code 2020. The review seeks to help prospective signatories to the UK Stewardship Code in their planning by reiterating and expanding on the FRC’s expectations for high quality disclosure. See: LNB News 01/10/2020 47.

Pensions & Investment Research Consultants Ltd (PIRC), Europe’s largest independent corporate governance and shareholder advisory consultancy, has launched a consultation on a ‘fundamentally different model of executive pay’. See: LNB News 01/10/2020 48.

The Confederation of British Industry (CBI), in collaboration with other companies, has announced that it will launch the ‘Change the Race Ratio’ campaign—an initiative designed to ‘increase racial and ethnic participation in British businesses’—at the end of October 2020. The campaign is calling for businesses to set and publish clear targets for racial and ethnic diversity at the Board, ExCo and ExCo minus one. Signatories to the campaign will pledge to increase racial and ethnic diversity among Board members and senior leadership, publish a transparent action plan (including publishing progress in annual reports or on the company’s website), disclose ethnicity gaps by 2022 and create an inclusive culture in which talent from all diversities can thrive. See: LNB News 01/10/2020 109.

Information law and TMT

Exclusive data used by tech giants

MLex: Facebook, Google, Apple and Amazon could be banned from reserving data gathered across their platforms for themselves, giving preferential ranking in online search, or forcing users to sign into multiple services, under a draft ‘blacklist’ being considered by EU officials. The European Commission is drafting rules for digital ‘gatekeepers’ that would impose tough new obligations on online commerce, advertising, apps and data, with a ‘grey list’ potentially casting the net even wider. See News Analysis: Tech giants face ban on exclusive data use, app pre-installation in draft EU ‘blacklist’.

International data transfers

A group of financial sector associations have written to the European Commission and the European Data Protection Board (EDPB) to raise concerns about the impact of Data Protection Commissioner v Facebook Ireland Limited, Maximillian Schrems (commonly known as ‘Schrems II’), Case C-311/18. The letter calls on the Commission to provide legal certainty as soon as possible, to enable European companies to carry out their business activities that include the transfer of personal data from the EU to the US and other third countries. See: LNB News 06/10/2020 96.

State surveillance

In Privacy International v Secretary of State for Foreign and Commonwealth Affairs and others, Case C‑623/17, the Court of Justice held that a provision of UK law allowing a Secretary of State to order companies to transfer bulk communications data to national security agencies falls within the scope of Directive 2002/58/EC (the ePrivacy Directive). Further, the ePrivacy Directive precludes such orders on the basis that they are general and indiscriminate. However, they may be permitted where a Member State faces a serious national security threat or where the data acquired is targeted, rather than indiscriminate, and kept for a period of time that is no longer than strictly necessary. The ruling will be of interest to data protection lawyers due to its potential implications for the European Commission’s on-going analysis of whether it can grant the UK adequacy decisions under the GDPR. See News Analysis: Acquisition of bulk communications data by UK agencies precluded by ePrivacy Directive (Privacy International v Secretary of State for Foreign and Commonwealth Affairs and others).

Employment

Brexit

The European Commission has published new guidance on the provision of services and the posting of workers to help stakeholders prepare for the end of the transition period and beyond. Further new and updated guidance may be issued, so stakeholders are advised to monitor the pages for updates. See: LNB News 06/10/2020 25.

Immigration

The Home Secretary, Priti Patel MP, has published a letter written to the Migration Advisory Committee (MAC) commissioning a review of the Intra-Company Transfer (ICT) immigration route. The Chair of the MAC, Professor Brian Bell, responded to the letter welcoming the review. The MAC intends to complete its review by the end of October 2021. See: LNB News 07/10/2020 76.

Members of the House of Lords have urged the government to reconsider provisions of the Immigration and Social Security Co-ordination (EU Withdrawal) Bill, approving a number of amendments at the Report Stage. The Third Reading of the Bill is scheduled to take place on 12 October 2020, before the Bill returns to the Commons for consideration of the Lords amendments. See: LNB News 07/10/2020 62.

Employee rights to be informed and consulted

In (1) Verizon EWC (2) Charpentier v Central Management of the Verizon Group (UKEAT/0053/20/DA (V)), the first judgment of its kind, the EAT has issued an employer with penalty notices of £35,000 relating to a failure to inform and consult properly with its European Works Council relating to a reorganisation and a further £5,000 for an unreasonable refusal to agree to pay a lawyer’s fees. See News Analysis: EAT issues penalty notices relating to failure to inform and consult ((1) Verizon EWC (2) Charpentier v Central Management of the Verizon Group).

Practice, procedure and settlement

Statistics published by the Ministry of Justice show that in the period from April to June 2020 10,318 single claims were received (up 18% on the same quarter in 2019 and only slightly down from last quarter’s revised figure of 10,436); the most common jurisdictional complaints received in this quarter were unfair dismissal, unauthorised deductions and breach of contract; and the total caseload outstanding for employment tribunals at the end of June 2020 had increased to 37,156, the highest figure for single claims since at least 2009 (and up by 31% from 28,336 for the same quarter in 2019). See News Analysis: Employment tribunal quarterly statistics for the period April to June 2020.

In-house

Virtual networking and forum events

There’s no need to feel isolated if you are working from home—join one of our virtual networking or forum events. Even if you aren’t working from home, take some time to network with your peers, find out what challenges they’re facing and how they are meeting those challenges.

Commercial

Updated Practice Notes:

● Brexit legislation tracker

● Contractual damages—general principles

● EU regulatory framework for electronic communications—ePrivacy Directive

● Force majeure clause analysis—a practical guide

● Intangible fixed assets—introduction

● Social value and public procurement

Corporate

New Q&A: Where a company incorporated under the Companies Act 1985 (CA 1985) intends to replace its articles with bespoke articles, do both Table A and the model articles need to be disapplied? Should the amended articles refer to CA 1985 or Companies Act 2006?

To view analysis of the latest deals in the market and the underlying transaction documents, use our Market Tracker deal analysis tool.

Information law and TMT

Updated Practice Note: EU regulatory framework for electronic communications—ePrivacy Directive

Employment

New Q&A: If an employer agrees to place a worker on furlough under the Coronavirus Job Retention Scheme (CJRS) and then later discovers that it is not eligible to claim the CJRS grant to subsidise the cost of the furloughed worker's wages, can the employer treat the payment it has made to the employee as an overpayment of wages and make a deduction from wages to recover the money, or will it depend on the contents of the furlough agreement?

Dates for your diary

Useful information

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