Welcome to our 2019 newsletter, in which we share news of our planned events and other resources for in-house counsel this coming year, as well as a brief overview of the topics that we anticipate will dominate the legal agenda in 2019.
Events and training 2019
This year we will again be running a variety of events for in-house lawyers across a range of seniority levels. For events with a discussion element, we plan to cover a variety of topics including Corporate Governance, Pay Reporting and Employee Engagement, CSR and Diversity and of course, Brexit.
We will also add to our programme to reflect developments as they arise. Look out for news on these events throughout the year and let us know here if you would like to join our mailing list to receive news of our events programme.
We also continue to offer training and guidance for in-house counsel at all levels on a wide range of other core topics, such as document execution, privilege, contract law update, competition law compliance, data protection and mergers and national security.
Whilst we often deliver training for clients on a bespoke basis, we also run sessions in a seminar or roundtable format, providing opportunities for you to share insights with your peers in other organisations. If you are interested in joining our mailing list for training events in 2019, please click here. If you have specific training requests for your team, please speak to your usual Travers Smith contact.
Soft skills training
Finally, for 2019, based on feedback as to the importance of skills development for in-house teams, we are introducing a programme of skills training led by external trainers whom we know and trust. These sessions range from bespoke masterclasses for GCs on influencing the board to presentation skills training for inhouse team members. If you are interested in taking part in any of this training, please contact Rachel Wevill from our Learning and Development team, or your usual contact at the firm.
New LinkedIn page
Our 'Insights for In-house' LinkedIn page is a useful source of information where we share legal briefings, newsletters and alerts relevant to in-house lawyers. Click here to visit and follow our page. All of our legal briefings and newsletters, many of which are aimed at in-house counsel, continue to be available on our website.
Topics for your radar in 2019
Our latest Anti-Bribery Newsletter provided a round-up of news on bribery investigations and enforcement activity, and trends in anti-bribery compliance both in the UK and internationally. With the recent launch of the National Economic Crime Centre and continuing debate around extending the corporate "failure to prevent" model to other offences, corporate crime risk is likely to remain topical during 2019.
Brexit inevitably continues to dominate everyone's agenda and since the EU Referendum we have worked with many clients on Brexit contingency planning with the help of our toolkit which is designed to help businesses to assess and mitigate their Brexit risk. You can find regular updates, including a recent note on Brexit proofing jurisdiction clauses in contracts with an EU element, and a wide range of other guidance materials on our Brexit site. We are also continually monitoring Government guidance and the influx of Brexit-related legislation to track changes which are likely have a significant impact on our clients postBrexit. Watch this space.
The CRC carbon emissions scheme will come to an end in April. However, the main rates of Climate Change Levy (CCL) will increase in order to “cover the cost of CRC abolition in a fiscally-neutral reform” and the final stages of CRC reporting and allowance surrender will still need to be complied with throughout summer 2019. The reporting element of the CRC regime will be replaced by a new Streamlined Energy and Carbon Reporting regime, "SECR", which will apply to financial years beginning on or after 1 April 2019 for "large" companies (as defined in the Companies Act 2006).
Corporates must also now comply with the separate EU-derived energy efficiency scheme, ESOS.
We will publish a full briefing on these changes in the coming months.
In 2019 we expect to see a continued focus from both the European Commission and national regulators on e-commerce and online markets. Although enforcement action against high profile names such as Google has tended to dominate the headlines in recent years, regulators are also targeting practices engaged in by a wide range of businesses, particularly in relation to online retail/distribution channels (which may, in turn, influence the EU's ongoing review of its approach to vertical agreements).
Regulators are also likely to persist with their recent trend of carefully scrutinising mergers in the technology sector, including where they involve online platforms and/or 'big data' business models. In the UK, we would expect the CMA to continue to actively investigate both mergers and alleged antitrust infringements, while attempting to prepare itself for the inevitably greater workload that Brexit would eventually entail.
Listed companies have been gearing up to meet the requirements of the new UK Corporate Governance Code which applies to financial reporting periods beginning on or after 1 January 2019. Key points to note are revised provisions on independence and tenure, changes to the FTSE 350 exemptions, new provisions on shareholder dissent and more focus on employee interaction. See our briefing on this topic here.
Meanwhile, "large" private companies will be getting to grips with compliance with their chosen corporate governance code, an obligation which comes into effect this year. The Companies (Miscellaneous Reporting) Regulations 2018 require large companies to include, in their directors' report, a statement of corporate governance arrangements in respect of financial periods starting on or after 1 January 2019. The threshold is very high, catching only private companies with at least 2,000 employees and/or turnover of more than £200m and a balance sheet of more than £2bn. The Wates Corporate Governance Principles for large private companies, published in final form in December 2018, are designed to provide a framework for complying with the new regime. Please refer to our briefing on the Wates Principles for more information.
The Regulations also impose new requirements on both private and public "large" companies (large being defined with a lower threshold), to include further information in their strategic or directors' reports, including a "section 172 statement" and statements of engagement with employees, customers, suppliers and others in a business relationship with the company.
Civil litigation - disclosure pilot scheme
At the start of 2019, a new two-year disclosure pilot scheme came into force, with a few limited exceptions, across the entirety of the Business and Property Courts. The purpose of the new scheme is to reduce the burden and cost of disclosure exercises in an era where vast quantities of documents are generated electronically. To that end, it allows parties to choose from a new sliding scale of options for disclosure and imposes new express duties on both parties and their lawyers to conduct disclosure in an efficient and costeffective manner, including through the use of technology. The hope is that the new scheme will allow disclosure in English litigation to be much more tailored to the case at hand, resulting in significant time and costs savings for the parties, while also retaining the "cards on the table" approach for which this jurisdiction is renowned.
The Competition and Markets Authority has investigations underway under consumer protection law into a number of common practices in the online sphere, including social media endorsements, automatic renewal of software subscriptions and potentially misleading information about rankings and discounts on hotel booking sites. It is also investigating upfront fees and after-death charges imposed by care homes. All these investigations could have significant implications for a range of consumer-facing businesses.
Meanwhile, the EU is proposing to enable national consumer regulators to impose fines of up to 4% of turnover for certain cross-border infringements of consumer law. It also proposes to strengthen the powers of consumer representative bodies (such as the consumer organisation Which?) to seek injunctions and other remedies. That said, the impact of these proposals on the UK will obviously depend to a large extent on what happens in relation to Brexit.
Some eagerly-awaited contract law cases in 2019 include the outcome of litigation between the European Medicines Agency and Canary Wharf over whether Brexit can frustrate a 30-year lease, and the Supreme Court's ruling in a dispute concerning implied terms (Wells v Devani).
We are also expecting more detail on proposals to prohibit termination clauses triggered by one party's insolvency (the Government having already decided in principle to proceed with this reform). Whilst such termination clauses remain enforceable for the time being, it is unclear whether any new law will affect agreements entered into before the proposed reform takes effect. Parties to longer term contracts should therefore take account of the possibility that they may not be able to rely on insolvency-related termination
triggers throughout the full term of the contract.
There may also be proposals for change in relation to electronic signatures and "smart contracts", which are both the subject of ongoing Law Commission projects.
As noted in our briefing, 2018 saw a wave of company voluntary arrangements (CVAs) and 2019 looks set to continue the trend, particularly in the consumer sectors of retail, leisure, and casual dining, where companies typically have large real estate portfolios and are increasingly experiencing a simultaneous rise in operating costs and a downfall in trading performance.
Aside from Brexit, 2018 was dominated by the implementation of GDPR and getting policies and procedures in place in the run-up to the 25 May deadline. The first major fine to be issued under GDPR has just materialised, in the form of the French regulator, CNIL's €50 million swipe against tech giant Google, for lack of transparency and the way in which it uses and sells personal data. We predict that getting to grips with transparency, and whom you pass data to, will be one of the issues which businesses will continue to grapple with in their ongoing compliance with the legislation.
Another issue is how to e-market in a compliant way. It is hoped that 2019 will see an agreement at EU level on the draft Privacy and Electronic Communication Regulations and with it, some clarification on some of the inconsistencies which GDPR created with the existing regulations.
Other issues to watch out for in respect of data protection include the outcome of another twist in the tale of Max Schrems' crusade against Facebook, who has challenged the use of standard contractual clauses as a valid mechanism for exporting personal data outside the EEA. Commentators wait with baited breath for the first fines under GDPR to be issued in respect of those major cyber security breaches which have occurred since May last year.
Gender pay gap/ethnicity gap
2018 started with a rush of employers publishing gender pay gap reports before the 5 April deadline. Whilst the pay gap varied widely between businesses and industry sectors, the median pay gap revealed by last year's reports was 18% (in favour of men). The second round of gender pay gap reporting, to take place in April this year (for 2018 figures), is likely to attract some press attention, particularly around any increase or decrease in the gap and the reasons that employers give for this.
The Government has also just finished a public consultation on proposals to introduce mandatory ethnicity pay gap reporting, alongside the gender pay gap reporting duty. While it is not yet clear when this will be introduced or which businesses will be in scope, many employers are starting to think about what their ethnicity pay gap figures look like.
LIBOR is due to be phased out starting from the end of 2021. LIBOR is used in the pricing of multi-bank loan finance transactions and also in a wide range of other commercial contracts. A Bank of England working group has recommended SONIA as an alternative to GBP LIBOR in the derivatives market, but due to structural differences in the way LIBOR and SONIA are currently calculated and quoted, it is not yet apparent how to implement this transition in all contexts. Many points therefore remain unclear as to how market participants should handle the transition between these two rates. We are likely to see more clarity on this in 2019.
There will also be implications for legacy transaction documents in the event that LIBOR ceases to be quoted and the documentation does not provide for a successor rate. Our recent survey (conducted in partnership with JCRA, an independent financial risk management consultancy) found that a large majority (83%) of firms with exposure to LIBOR in their derivative contracts are yet to make preparations.
In 2019, the Home Office is expected to put further pressure on organisations to comply with their corporate reporting obligations under the UK's Modern Slavery Act. Watch out for "naming and shaming" of non-compliant businesses, designed to ensure companies are adequately addressing slavery and human trafficking risks in their business and supply chains.
Pensions regulator powers
Following the March 2018 white paper on protecting defined benefit (DB) pensions, the Government consulted on: expanding the duties of employers and trustees to report events to the Pensions Regulator; strengthened anti-avoidance powers for the Regulator; and new powers for the Regulator to impose fines of up to £1 million and bring criminal prosecutions. These proposals are intended to deter and penalise corporate activity that puts pension scheme members' benefits at risk, in the light of high profile cases such as BHS, but their effect would be much wider. The Government's final proposals are now awaited.
A Pensions Regulator consultation is also expected shortly on DB scheme funding, including the relationship between dividend payments and pension scheme deficit reduction contributions.
2018 was a turbulent year for legal professional privilege. The uncertainty over the scope of litigation privilege, following the decisions in SFO v ENRC, Sotheby's v Mark Weiss and WH Holding v E20 Stadium, and, in relation to legal advice privilege, following Glaxo Wellcome v Sandoz, looks set to continue into 2019 and beyond and therefore practitioners should bear in mind best practice when creating and managing documents over which they may wish to assert privilege.
Prohibition on assignment - the new rules
The Business Contract Terms (Assignment of Receivables) Regulations 2018, which have applied to certain contracts from 31 December 2018 onwards, are designed to make it easier for SMEs to access finance, by nullifying terms in business contracts which prohibit or restrict the assignment of receivables.
On the flip side, clauses prohibiting assignment are common in supply contracts, to protect the debtor from having to deal with a new and unfamiliar creditor who may have a different approach to delays in payment. Going forward, purchasers should be aware that they might not now be able to rely on such prohibitions in their contracts with suppliers.
Tax remained an important topic for the boardroom agenda in 2018 and this is expected to continue during 2019. Please see our New Year 2019 Tax round up newsletter for more detail.
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