Our round-up of recent and forthcoming developments in UK law
and practice for our international stakeholders.
Highlights
- Beyond Brexit – what’s the latest on
importing EU goods into the UK? What do The Windsor Framework and
the 2019 Hague Judgments Convention mean? And where are we on the
revocation of retained EU Law? - ESG – one of the defining issues of our
time and at the top of our clients’ agenda across all sectors;
we discuss mandatory climate-related disclosures and reporting
standards, the UK’s 2023 Green Finance Strategy and measures to
promote ethical practices in the workplace - Digital regulation – reforming UK data
protection, strengthening cybersecurity and regulating AI - Employment Law – post-Brexit changes on
business transfers, ethical workplace issues and reform of
non-compete covenants - Competition and consumer protection –
the Digital Markets, Competition and Consumer Bill, a tougher
regulatory environment for consumer-facing businesses operating in
the UK - UK cases round-up – the latest cases
affecting UK-based commercial and M&A-related contracts - Preparing for the next Silicon Valley Bank UK
Limited – what happens when a lender fails to fund? And
the end of Sterling LIBOR - Tackling economic crime in the UK through corporate
compliance – Measures to promote greater
transparency and prevent economic crime in the use of UK corporate
structures - Pensions – climate change disclosures,
key changes to UK pension allowances and getting to grips with
pension dashboards - Real Estate – reforming the UK private
rented sector, improving building safety and energy efficiency,
plus the latest on the Register of Overseas Entities - UK Tax – top-up tax for large
multinational corporates and the latest on personal taxation and
incentives for UK-based employees
- Beyond Brexit/ Regulatory Reform
- Competition and consumer protection
- Contract Law
- Corporate Governance
- Data Protection, IP and Technology
- Debt Finance
- Dispute Resolution
- UK Employment Law
- Equity Capital Markets
- ESG
- UK Pensions
- Real Estate
- Taxation – Corporate
- Taxation – Personal and Incentives for UK-based
Employees
1. Beyond Brexit/ Regulatory Reform
The Retained EU Law Act: Cliff edge removed, but cloud
of uncertainty remains
The UK’s departure from the European Union did not lead to
all EU-derived law being jettisoned. On the contrary, a significant
proportion of it was kept and the UK had a new category of
“retained EU law”. However, controversial legislation
enabling the UK Government to revoke or reform retained EU law, the
Retained EU Law (Revocation and Reform) Act (REUL Act), has now
become law in the UK, although not all its provisions come into
force immediately.
Here are the key points:
- A more moderate approach to sunsetting:
Originally, the REUL Act provided for a wide range of EU-derived
measures to be revoked automatically at the end of 2023. In a
welcome move, these “sunsetting” provisions have been
replaced with a more modest list of measures to be revoked at the
end of 2023. Our view is that for most businesses operating in the
UK, the final list is unlikely to give rise to serious
concern. - But there will still be uncertainty: The
legislation creates uncertainty over whether the meaning and effect
of EU-derived law will remain the same. It may also make it
somewhat easier to depart from retained EU caselaw. Lastly, it
gives the UK Government additional powers to change retained EU
legislation on a fast-track basis. - Removal of directly effective rights: The REUL
Act also provides for all “retained EU law rights” to be
repealed at the end of 2023, removing rights derived from certain
EU Treaty articles. It is likely to have an impact in areas such as
employment and pensions. - New terminology: The REUL Act states that
after the end of 2023, retained EU law is to be known as
“assimilated law” (even if it is unchanged by the
legislation). Whilst “retained EU law” may well remain in
use, formal documents such as pleadings will need to use the new
term. - Other reforms to EU-derived law: Although much
attention has focussed on the REUL Act, the UK Government has
already embarked on a reasonably significant programme of reform of
EU-derived legislation through other Bills, notably in the
following areas: consumer protection, data protection, employment
law and financial services.
Although some of the most heavily criticised aspects of the
legislation have been removed, it will still create a climate of
uncertainty around the status of retained EU law in the UK. This briefing explains why and what this means
for business. We also highlight the impact of other post-Brexit
reforms in areas where EU-derived law remains relevant in the UK.
Learn more about the impact of the REUL Act on data, e-commerce,
tech and IP with this briefing.
For more information on the status of EU-derived law in the UK
following Brexit, see our briefing “Retained EU law: 10 key questions”.
Looking at the wider picture, our Beyond Brexit portal contains a wealth of
useful resources on the post-Brexit legal landscape including the
UK-EU Trade and Cooperation Agreement, immigration and business
travel after Brexit, the UK’s trade agreements with non-EU
countries and a helpful Brexit A-Z by topic page.
Northern Ireland: Windsor Framework agreed
The UK Government and the EU have reached an agreement on
changes to the post-Brexit arrangements for Northern Ireland. Here
are the key points for UK businesses trading with Northern
Ireland:
- Wider impact: For businesses which do not have
any activities in Northern Ireland, the deal has a number of wider
ramifications which are broadly positive. Read this briefing for further explanation.
- Goods trade: For businesses based in the
mainland UK which supply goods to Northern Ireland, the Windsor
Framework will not deliver frictionless trade, but it does
represent a significant improvement on the existing Northern
Ireland Protocol.
- Subsidies: The state aid position is broadly
unchanged; this means that EU law will still need to be considered
when assessing the legality of subsidies and other forms of state
support offered by the UK.
- Democratic accountability: Although the
“Stormont Brake” is hedged around with numerous
conditions, experience of similar mechanisms under the EEA
Agreement suggest that it may have value as a “political
safety valve”.
For further detail and discussion, read our briefing The Windsor Framework: is it a good deal for
business?
Beyond Brexit: guidance on the ongoing business impact
of Brexit
As the level of debate surrounding the Windsor Framework
demonstrates, the fallout from Brexit is not just a political issue
in the UK; it continues to be a live issue for business, despite
the UK having entered into a new, all be it more distant trading
relationship with the EU. For more guidance and information, see
our Beyond Brexit client portal.
Post-Brexit enforcement of judgments between the UK and
the EU
Following Brexit, there is no longer a comprehensive,
overarching framework governing the reciprocal recognition and
enforcement of civil court judgments between the UK and the EU.
However, there are signs that this state of flux may ultimately be
resolved. The 2019 Hague Convention on the Recognition and
Enforcement of Foreign Judgments in Civil and Commercial Matters
2019 (2019 Hague Judgments Convention) provides a relatively full
framework for the recognition and enforcement of civil and
commercial judgments between contracting states.
The 2019 Hague Judgments Convention will come into effect
between the EU (except Denmark) and Ukraine on 1 September
2023. At the time of writing, it has also been signed (but
not ratified) by Costa Rica, Israel, Montenegro, North Macedonia,
Russia, the United States and Uruguay.
Meanwhile, the UK Government has launched a consultation on
whether the UK should join the 2019 Hague Judgments Convention. If
the UK does join (as most UK-based lawyers hope will be the case)
then it will apply as between the EU and the UK and provide greater
certainty in this area than presently exists.
For an explanation of the current position in the UK on
recognition and enforcement of civil court judgments following
Brexit, read Beyond Brexit: Dispute Resolution and watch a 5-minute video guide to Post-Brexit Dispute
Resolution.
Importing EU goods into the UK: More change on the way
(and more disruption)
Following repeated postponements, in April 2023, the UK
Government finally published its plans to introduce full border
controls on imports of goods from the EU. The key points for
UK-based businesses reliant on imports from the EU are that this
may mean further disruption and that it will be important to ensure
that EU trading partners are fully prepared for the changes.
Imports from the EU will be subject to the same controls as
imports from the rest of the world. This means an increase in red
tape for EU imports, although various simplifications and
improvements to border control processes mean that imports from the
rest of the world may benefit from a reduction in red tape.
Our briefing explains the changes in more
detail and what businesses need to do to prepare. It also includes
a useful timeline of the expected changes.
UK signs up to Trans-Pacific trade pact
The UK has signed an agreement to join the Comprehensive and
Progressive Trans-Pacific Partnership (CPTPP), covering 11
countries.
Despite the size of this trade agreement, its impact in practice
is expected to be relatively small, mainly because the UK already
has trade agreements with 9 of the CPTPP’s current members
(Australia, Canada, Chile, Japan, Mexico, New Zealand, Peru,
Singapore and Vietnam) – and the CPTPP’s provisions add
relatively little to those existing deals. The only “new”
countries from the UK’s perspective are Malaysia and Brunei
Darussalam. Although China has applied to join the CPTPP, many
commentators think that existing CPTPP members are unlikely to
agree to its request to accede.
Businesses will not be able to take advantage of the CPTPP as
regards trade between the UK and other member countries until all
parties have completed their ratification processes; this is not
expected to be completed until the second half of 2024. Watch this
space for more commentary on the UK’s accession to the CPTPP
and its post-Brexit trade agreements more generally.
Spotlight on Better Regulation series
Take a look at Spotlight on Better Regulation, a new series
of briefings looking at the opportunities and challenges as the UK
reforms its regulatory framework following Brexit. So far, the
series includes briefings on:
Sign up to be notified of more content in this
series. You can also use our Regulatory Reform portal to check for the
latest updates on changes to regulation across all areas on which
we advise.
2. Competition and consumer protection
UK Digital Markets, Competition and Consumer Bill – the
wait is over
The Digital Markets, Competition and Consumer Bill is likely to
become law in the UK in 2024.
It will give the UK Competition and Markets Authority (CMA)
significant new powers to enforce UK consumer protection law,
including the ability to impose fines of up to 10% of global annual
turnover (which is higher than many jurisdictions, including the
EU) and to sanction enhanced consumer measures, such as redress
schemes. The Bill also promises to tighten up the law on
subscriptions and fake reviews – but in our view, the real game
changer for B2C (business to consumer) businesses is the new
enforcement regime. For more, read this briefing.
The Bill also contains measures designed to allow the CMA to
intervene in the tech sector with a view to promoting competition,
along with a raft of changes designed to streamline and improve the
effectiveness of the existing competition law and merger control
regimes. For more detail, see this briefing.
It will be interesting to see how far the CMA looks to use its
greatly enhanced powers to enforce consumer protection law in
conjunction with other measures set out in the Bill, notably its
new powers to intervene in digital markets and its strengthened
powers to carry out competition investigations and market
inquiries. Take a look what recent CMA activity tells us
about the rationale for the new legislation once it is in force,
and how it has highlighted a desire for key reforms to the UK
competition law regime.
Online sales: Do countdown timers break consumer
law?
The CMA is investigating whether online mattress and bed seller
Emma Sleep breached consumer law by making misleading claims about
urgency, including the use of countdown timers for discounted
deals. This investigation may be the start of a wider crackdown by
the CMA on potentially harmful online selling practices. It also
highlights the CMA’s interest in using behavioural science to
shape its approach to this area. For more detail, see our briefing.
CMA warms online B2C businesses against misleading
urgency and pricing claims
The UK Competition and Markets Authority (CMA) has published an
open letter to online B2C businesses, highlighting certain
practices that may mislead consumers. The focus is on claims
relating to the need to act urgently (such as countdown timers) and
price reductions. As we explain in our briefing, enforcement action is already
being taken over these issues – and with plans to allow the
CMA to impose substantial fines for breaches of consumer law, the
risks of non-compliance are poised to escalate.
Mid-contract price rises in consumer contracts: to
advertise fairly
In late 2022, the UK Advertising Standards Authority consulted
on guidance that would require mid-contract price rises in consumer
contracts to be more prominently stated in telecoms advertising. As
we explain in our briefing, this may also be of interest to
other B2C businesses outside the telecoms sector –
particularly those which operate a subscription model.
3. Contract Law
Spotlight on pricing and payment
Against the background of high inflation and challenging
economic conditions, we have launched a series of briefings about pricing and payment
issues in commercial contracts which are governed by English
law. The series includes:
Recent case law developments
The following briefings may be of interest to businesses which
make use of English-law governed contracts:
- Force majeure: In MUR Shipping BV v RTI
Ltd, the Court of Appeal ruled that a force majeure clause did
not apply because the party unable to comply with its obligations
had offered suitable alternative performance. In doing so, it
reversed the decision at first instance, where the court ruled that
the shipowners were entitled to insist on being paid in US dollars,
not euros, as required by the contract. As our briefing explains, this case highlights
the difficulties in relying on force majeure clauses, even where
(as here) the contract is affected by US sanctions. - Good faith: In Re Compound Photonics
Ltd, the Court of Appeal provided some useful guidance on the
meaning of good faith in a shareholder’s agreement. Read our detailed briefing for more. - Construction of settlement agreements: In
Maranello Rosso v Lohomij, the Court of Appeal confirmed
that, where the natural meaning of the wording of a settlement
agreement and its factual matrix indicate that it is objectively
intended to cover claims of fraud or dishonesty, that agreement
will be given effect, even where these is no express reference to
such claims in the relevant clause. Although a court will not
readily conclude that a release includes claims for fraud and
dishonesty without express wording, there is no rule of law to that
effect. The case confirms that claims in fraud and dishonestly will
not be given special treatment by the court when construing
settlement and release clauses, and may be released by general
wording. A useful reminder to carefully consider what claims you
are releasing in a settlement agreement and to take care in the
claims asserted in pre-action correspondence. For more, read our briefing.
For more, read our recent Dispute Resolution Case Round-up.
4. Corporate Governance
Improving Corporate Transparency
The Economic Crime and Corporate Transparency Bill (ECCT Bill)
is expected to come into force later this year and introduces
measures which aim to improve the quality and value of information
on the UK companies register and prevent the abuse of corporate
structures in economic crime. The reforms have significant impact
on the day-to-day corporate management of companies incorporated in
England and Wales, as this briefing explains.
Notably, the UK Government is creating a new “failure to
prevent fraud” offence. An organisation will be liable where a
specified fraud offence is committed by an employee, agent or other
associate, and the organisation does not have reasonable fraud
prevention procedures in place. It does not need to be demonstrated
that the employer knew about the fraud. If convicted, an
organisation can receive an unlimited fine.
UK-registered organisations should review internal policies and
procedures to ensure that they are fit for purpose and implement an
effective strategy for monitoring and communicating potential
risks.
The ECCT Bill makes changes to the Register of Overseas Entities
regime which was introduced under the Economic Crime (Transparency
and Enforcement) Act, which was passed in March 2022. For more on
this, see this article in our Real Estate section.
Audit and Corporate Governance Reform
The UK Financial Reporting Council (FRC) recently published a consultation on its proposals to revise the
Corporate Governance Code (Code). The proposed changes are targeted
and aim to:
- provide a more robust framework of effective risk management
and internal controls; - achieve greater transparency on malus and clawback arrangements
in directors’ remuneration; - make other improvements to the current Code, including in
relation to environmental, social and governance (“ESG”)
considerations, directors’ time commitments and reporting on
diversity; and - make other changes where the FRC feels reporting needs to be
improved, based on its research and assessment of reporting against
the Code over the past three years.
The new Code is expected to apply to financial periods beginning
on or after 1 January 2025 to allow companies sufficient time for
implementation. For more, read this insight.
5. Data Protection, IP and Technology
UK Data Protection Reform
The UK Government introduced the Data Protection and Digital
Information (no. 2) Bill to Parliament in March 2023 (DPDI No.2),
withdrawing its previous Data Protection and Digital Information
Bill (DPDI No.1).
Promoted as “a truly bespoke, British system of data
protection”, as it transpires, DPDI No.2 is a modest uplift to
DPDI No.1 and, overall, the package of reforms is not a dramatic
departure from the UK GDPR, the framework of which is retained. Our
briefing looks at the recent changes.
Strengthening cybersecurity laws: changes to the
EU’s and UK’s NIS regimes
Improving cybersecurity for essential services and
infrastructure is high on the agenda for the UK’s and the
EU’s legislators, in response to the ever-evolving threat
landscape. While the UK’s and the EU’s respective network
and information systems or “NIS” regimes are to be
strengthened (including bringing managed service providers into
scope), the two regimes also look to be diverging.
Some fear that this may lead to inconsistent cybersecurity
standards. In-scope organisations operating in both the UK and EU
will need to monitor developments in relation to each regime and
their suppliers should prepare for increased due diligence. This briefing looks at some of the potential
differences and their likely impact in practice.
For more information about handling cybersecurity threats
originating from within an organisation or its supply chain, see
our ‘Mitigating a Data Breach ‘ podcast series.
Regulating online content: Where are we
now?
The EU and the UK are each determined to regulate online content
and protect users from online harms. The EU got there first. Its
Digital Services Act (DSA) impacts all online intermediaries
operating in the EU at varying levels and is already in force.
17 February 2023 marked the DSA’s first
milestone, the deadline for online platforms and search engines to
publish average active user figures. The European Commission has
already begun to identify the very largest online platforms and
search engines, which will face the most stringent controls and
responsibilities, and which have to start complying with those
obligations 4 months from designation. The compliance deadline for
other entities within the scope of the DSA is later – 17
February 2024.
Meanwhile, the journey of the UK’s Online Safety Bill, which
has seen four Prime Ministers since its inception as the Online
Harms White Paper, has been a troubled one. Our briefing looks at the obligations on
online intermediaries under the DSA and the key similarities and
differences compared with the Online Safety Bill.
Are online platforms liable where third parties
advertise counterfeit goods?
Our briefing looks at the implications for
brand owners and platforms both in the EU and the UK of the
decision of the Court of Justice of the European Union which has
ruled that Amazon could be held liable for trade mark infringement
in relation to advertisements for ‘fake’ Christian
Louboutin shoes placed on its website by a third party.
This preliminary ruling, a departure from previous case law and
the Advocate General’s opinion in the case, is good news for
brand owners (particularly for luxury products) and may cause
online platforms, offering both their own and third party products
for sale, to rethink their website design.
A new EU-US Adequacy Decision
There’s now a new route to transfer personal data to the US
under EU GDPR – for the time being at least. The European
Commission adopted its adequacy decision for the EU-US Data Privacy
Framework. Only transfers to US organisations that have
self-certified their participation in the framework will benefit
from it. It means that data exporters subject to EU GDPR
transferring data to certified US organisations do not have to rely
on alternative transfer mechanisms, such as standard contractual
clauses, nor to undertake a “transfer impact assessment”
to complete that transfer compliantly. But will it last? Max
Schrems has already announced that he will challenge it in the
Court of Justice of the EU and so this is unlikely to mark an end
to the uncertainty that has hung over international data transfers
since Schrems II. The UK plans to extend this framework
for its own “data bridge” in respect of the US –
but that’s not finalised yet. Our briefing provides more detail about the
implications of the adequacy decision.
The tech giants will certainly welcome the arrival of the
adequacy decision. In May 2023, Ireland’s Data Protection
Commission ordered the suspension of Meta’s transfers of
Facebook users’ personal data to the US (and imposed a
€1.2bn fine). Anticipating the arrival of this adequacy
decision, Meta applied for, and was granted, a stay on the
suspension – for more, read our briefing. Data protection authorities across
the EU will no longer be able to suspend transfers of personal data
to the US that benefit from the adequacy decision for lack of
adequate safeguards.
The regulation of AI
The UK Government recently published its White Paper on how it proposes to regulate AI.
Designed to encourage investment in AI in the UK, it aims to reduce
the regulatory burden on businesses and follow a pro-innovation
approach, relying on existing regulators and regulatory structures,
rather than establishing broadly applicable AI-specific regulations
or a dedicated AI regulator.
The UK is choosing to take a very different approach from the EU
(as set out in the EU’s draft AI Act), which is far more
prescriptive, although the Government recognises the need for
interoperability between its framework and the regulatory approach
in other jurisdictions. Our briefing compares the UK and the EU
approaches to regulating AI.
Intellectual property law also has a significant part to play in
striking a balance between encouraging innovation and investment in
AI, on the one hand, and protecting rightsholders, on the other. Our briefing looks at IP rights in AI systems
and in AI-generated content, the potential infringement risks that
can arise from training AI and from its outputs, as well as at the
UK Government’s response to these issues.
6. Debt Finance
Defaulting Lenders
The recent intervention by the Bank of England to transfer
ownership of Silicon Valley Bank UK Limited to a private sector
purchaser, HSBC UK Bank Plc, highlights the risk that a corporate
borrower might be faced with a non-performing lender.
In our briefing What happens when a lender fails to fund?, we
explore the risk that a lender might renege (voluntarily or
involuntarily) on its funding commitments. Touching upon the
different types of lender entities in the market, we examine why
there are often varied reasons behind such a failure to fund. We
also revisit market standard provisions designed to mitigate the
risk posed by so-called “defaulting lenders” and explore
the options for a borrower faced with a lender that is unable to
honour its lending commitments.
Calling time on Sterling Libor
Sterling LIBOR (the reference rate of interest for many UK-based
financial contracts) was discontinued from 31 December 2021 and,
for a limited time period, a synthetic version of the rate is now
published for use in legacy contracts. The Financial Conduct
Authority recently announced that the 3-month synthetic sterling
LIBOR setting (which is the last remaining tenor) will cease at
end-March 2024. This means that there will be no
sterling rate quoted after this date. Most companies have already
worked with their lenders to remove any remaining LIBOR-related
exposures in their loans.
What about other contracts that reference
LIBOR?
Companies need to identify any remaining contracts (not just
financial instruments) which reference LIBOR and engage with
counterparties to amend affected provisions. Read our updated commentary on the consequences for
commercial contracts which reference LIBOR (for instance in late
payment clauses). We also discuss alternative rates such as central
bank rates, Term SONIA (for sterling) and Term SOFR (for
dollars).
7. Dispute Resolution
UK Dispute Resolution Quarterly Round-Up
Read our latest quarterly Dispute Resolution newsletter
covering recent key developments in the UK dispute resolution
sphere. This edition considers a number of cases on contractual
construction – from force majeure and good faith to valid
notification of potential warranty claims. We also spotlight the
recent increase in creative collective proceedings applications
before the Competition Appeal Tribunal and the European
Parliament’s proposals on the regulation of litigation funding
in the EU.
The Dispute Resolution Yearbook 2023
Meet the people who make up our Dispute Resolution practice and
learn more about the market-leading work we do with our 2023 Dispute Resolution Yearbook .
8. UK Employment Law
Changes to non-competes
The UK Government has announced plans to limit the
length of non-compete clauses in employment contracts to
three months. The proposed three-month limit, once made law, will
be a significant change. It will result in employers being unable
to enforce, in the UK, a non-compete lasting longer than three
months. The usual UK common law rules on enforceability will still
apply to any non-compete of three months or less, i.e. the employer
will still need to show the restriction goes no further than
necessary to protect a legitimate business interest.
On the UK Government’s own estimate, around 5 million
employees are subject to a non-compete clause in Great Britain,
with a typical duration of around six months. In the UK
Government’s view, such periods can adversely impact the worker
affected (as their future mobility is restricted) and also the
wider economy (due to the impacts on competition and
innovation).
Read this briefing for more.
Fire and Rehire
The UK Government recently consulted on a draft statutory Code
of Practice on the use of “fire and rehire” to
change terms of employment. “Fire and rehire” is
a tactic used to implement changes when employees do not agree to
them – the employer dismisses the employee and then offers
re-employment on a new contract with the revised terms.
The draft Code emphasises that “fire and rehire”
should only be used as a last resort, after the employer has
engaged in meaningful consultation and explored all alternatives.
Where an employer unreasonably fails to follow the Code, the
Employment Tribunal will have the power to increase compensation
awarded for any relevant claim by up to 25%.
Workplace Sexual Harassment
The UK Government plans to introduce a new positive duty
on employers to take reasonable steps to prevent workplace sexual
harassment. The duty will be enforceable by the Equality
and Human Rights Commission, under its existing powers, and will be
backed up with a statutory code of practice detailing the steps
employers should take. UK employers who fail to take reasonable
steps to prevent sexual harassment could also face an uplift in
compensation if an employee brings a successful claim. The duty is
contained in draft legislation, which is currently
progressing through the UK Parliament.
Third Party Harassment
In addition to the new duty to prevent sexual harassment, a
proposed new UK law will impose on employers a new duty to
prevent all forms of harassment of staff by third parties.
Employers will be liable if they fail to take reasonable steps to
prevent any form of harassment of staff by someone outside the
organisation, such as a customer, client, supplier, or contractor.
As with existing harassment laws, a single incident will be enough,
and the employee does not need to be the target of the
harassment.
The new law is likely to have a particular impact on the service
sector such as hospitality and retail, where employees could be
harassed by simply overhearing offensive conversations between
customers.
Zero hours, casuals and short-term workers
Following a June 2022 report showing that 3.7 million workers in the UK were in insecure
employment, to improve job security for individuals labelled as
casual and zero hour workers, the UK Government is now introducing
a new right for certain workers to request a more
predictable working pattern.
Workers with at least 26 weeks’ service, and who have a lack
of certainty in terms of the hours, days, or times of their work,
or if they are on a fixed contract of 12 months or less, will be
able to make an application to their employer to vary their terms
and conditions to provide more certainty. Employers would have to
follow a set procedure when considering such requests and only
reject a request on specified business grounds.
In practice, the new right will capture many casuals and zero
hours workers, as well as agency workers and those on short
fixed-term contracts. The proposal is contained in the Workers (Predictable Terms and Conditions)
Bill, which is currently making its way through Parliament, but
there is no date for implementation yet.
Holiday and Business Transfers (Post-Brexit
changes)
The UK Government has recently consulted on proposed changes in
relation to statutory holiday and the rules on employee information
and consultation on a business transfer. In summary the proposals
are:
- Holiday: employers will be able to pay
rolled-up holiday pay, which is currently unlawful under EU case
law, and holiday pay may be limited to basic pay only (currently EU
case law requires employers to include regular payments, such as
overtime and commission, when calculating holiday pay); - Business transfers: employers will be able to
inform and consult employees directly on a transfer of a business
or service provision change where fewer than ten employees are
affected (currently employers who do not recognise a trade union
must arrange for employee representatives to be elected regardless
of how many employees are affected).
For more information about these changes, please see this
briefing: Post-Brexit employment law: evolution, not
revolution? | Travers Smith
Family friendly rights
The UK Government is introducing new rights as follows:
- Carers’ leave: employees will be able to
take up to one week of unpaid leave per year to care for an adult
dependent (such as an elderly relative) - Neonatal leave: parents of premature babies
will have a right to up to 12 weeks’ neonatal leave (in
addition to maternity/paternity leave)
There is no confirmed date for when these changes will come into
effect.
Keeping you on track with regulatory change
Catch-up on the latest news with this podcast from our Employment Law Bitesize
Series.
Our In the Pipeline timeline guides you through
forthcoming developments in UK employment law and business
immigration.
Stay tuned for future podcasts and briefings by following the
Employment team on LinkedIn.
9. Equity Capital Markets
London Calling – Reform of UK Capital
Markets
Reform of the UK listing, prospectus and secondary fundraising
regimes continues with the UK Financial Conduct Authority (FCA)
publishing its proposals for a radical overhaul of the listing
regime earlier this year and HM Treasury having recently published
a revised draft of the Public Offers and Admissions to Trading
Regulations 2023. In this briefing, we take stock of the wider
package of reforms which are aimed at making London a more
attractive and trusted place to list and at striking a balance
between achieving transparency and market integrity, whilst
removing some of the complexities and key frictions that are often
seen as too burdensome. We look at the changes that have already
been made as well as others that are yet to come.
10. ESG
Updated ESG timeline: helping you steer your ESG
agenda
A reminder of our interactive ESG timeline, designed to help
businesses navigate the rapidly evolving UK and EU regulatory
landscape. Setting out recent and expected UK and EU legal and
regulatory developments relating to ESG and wider sustainable
business topics, the timeline can be filtered according to your
business type or by ESG theme. Look out for an updated version of
the timeline, due in the Autumn.
International Sustainability Standards Board (ISSB):
Global Sustainability Disclosure Standards
The ISSB has recently issued its inaugural standards concerning
sustainability-related disclosures for international capital
markets: IFRS S1 General Requirements for Disclosure of
Sustainability-related Financial Information and IFRS S2
Climate-related Disclosures (ISSB Standards).
In response to this, the UK’s Financial Conduct Authority
has also published a statement emphasising that it intends to
update its climate-related disclosure rules to reference the ISSB
Standards stating that the ISSB Standards answer “the
clear market demand for complete, consistent, comparable and
reliable corporate sustainability disclosures”.
Whether or not the ISSB Standards eventually become the
international harmonising framework for corporate sustainability
disclosures is certainly debateable, but it is worth noting that
the UK Government has consistently signalled its strong support of
the ISSB Standards and with over 40 jurisdictions backing the
creation of the ISSB, it suggests that the ISSB Standards may
eventually fill the role of the global sustainability standards
leader, in what is currently a frustratingly fractured reporting
landscape for many. For more about the ISSB, the new ISSB
Standards, implementation and alignment, read this insight.
UK Labelling Regime for investment products
Labelling investment products is a tricky business. It is
important to make the labels clear and meaningful to investors, and
to guarantee some minimum standards so that even unsophisticated
investors know what they are getting. At the same time, too much
prescription will limit investor choice and narrow the range of
products in the market. If done badly, labels can also distort
investment and capital allocation decisions in ways that undermine
policy objectives and increase investor risk. However, if done
well, fund labels can increase investor confidence and, with
sustainability-focused products, curb “greenwashing”. For
more on the UK labelling regime for investment products, read or
listen to the latest episode in our Sustainability Insights
series.
Climate Change Case Law Round-up
The principal aim behind many climate change claims may not be
to “win” but to draw attention to activities that cause
and contribute to climate change, litigation being just one tool in
an activist’s toolbox. In this briefing, we look at several high-profile
climate change claims from courts in different jurisdictions over
the past few years and look at how the litigation has, in fact,
developed. While more attention may be given to successful claims
(or even pending claims) than unsuccessful ones, there may be some
benefits in giving attention to “failed” claims as well
as successful ones.
The Future for UK environmental initiatives
In line with its public commitment to promote environmental
sustainability and help accelerate the transition to a net zero
economy, the UK Competition and Markets Authority (CMA) has
published its draft Guidance on the application of the Chapter 1
prohibition to environmental sustainability agreements. Once
implemented, the Guidance will provide business with greater
comfort in assessing the legality and risk profile of their
environmentally focussed agreements – at least in the UK.
Following consultation, the final version of the Guidance is
keenly awaited. It is expected to be published by the end of the
summer. However, given the numerous steps that the CMA has already
engaged in, significant changes are not expected. Meanwhile, the
European Commission has published its final, revised horizontal
guidelines, which came into force on 1 July 2023.
The UK and EU positions are broadly consistent. However, important
differences have emerged, for example in the CMA’s explicitly
more permissive approach to ‘climate change agreements’.
The scope of the UK and EU guidance also differ: with the
Commission covering the concept of sustainability to include not
only environmental/’net zero’ goals, but also other
activities that support social development (including labour and
human rights). By contrast, the CMA’s focus is specifically on
environmental agreements. In our briefing we explore the CMA’s proposals in
more detail.
UK 2023 Green Finance Strategy
The UK Government has published its 2023 Green Finance Strategy
setting out its proposals for mobilising green finance and
investment in the UK. With five key objectives:
- UK financial services growth and competitiveness;
- enhancing investment in the green economy;
- ensuring financial stability to manage risks from climate
change and nature loss; - incorporation of nature and climate adaptation; and
- aligning global financial flows with climate and nature
objectives,
the Strategy includes a number of proposals and future actions,
which this briefing explores.
Corporate Sustainability Reporting Standards edge
closer
The EU is in the final stages of preparing the European
Sustainability Reporting Standards (ESRS) that organisations in the
scope of the Corporate Sustainability Reporting Directive (CSRD)
will need to use for reporting.
The previous version of standards are considered in detail in
our February briefing; important changes between the
previous and current drafts are summarised in our subsequent briefing. The Commission has proposed that
there will be no mandatory disclosures, but rather every
organisation will need to consider all data points amongst the 12
ESRS and assess the topics using a “materiality
assessment”. This will need to consider not just financial
materiality (how the sustainability topic impacts the
business’s bottom line) but also how the business’s
operations affect the sustainability topic (“impact
materiality”). The double materiality aspect makes CSRD
reporting particularly challenging.
Further guidance is expected from technical advisory body,
EFRAG, on how to conduct the materiality assessment as well as how
to draw the boundaries of the business’s “value
chain”, another key but challenging aspect of reporting.
We will be presenting a webinar on CSRD and the ESRS in
September; sign up to our mailing list to receive our
invitation.
Human Rights and ESG
In the last few months, there have been several significant
updates relevant more to the “S” and “G” of ESG
than the “E”. In particular:
- The OECD released a revised version of its Guidelines for
Multinational Enterprises, rebranding the latest text as
“Guidelines for Responsible Business Conduct”. The
revision places greater emphasis on the identification and
management of environmental and climate impacts that the business
causes, contributes to or is directly linked to. An increasing
number of EU initiatives in particular imply reference to or
directly reference international regimes on responsible business
conduct such as the OECD Guidelines or UN Guiding Principles. Read
our full briefing. - The Principles for Responsible Investment (PRI) has recently
issued Human Rights Due Diligence for Private Market Investors, for
private equity firms signed up to the UN-sponsored PRI. Similarly
to the OECD Guidelines, the PRI guide relies on an organisation
causing, contributing to or being directly linked to a human rights
impact, which should be identified through a robust due diligence
programme. Read or listen to our update here.
Changes to and completion of the EU’s Environmental
Taxonomy
The EU Taxonomy Regulation was enacted in 2020 but remains
somewhat incomplete. Under the Regulation, an investment may be
“environmentally sustainable” if it promotes one of six
environmental objectives. Until recently, criteria were only
published for the two objectives of climate change mitigation and
climate change adaptation. The Commission has now published
technical screening criteria which will enable businesses to
demonstrate alignment with the remaining environmental objectives
relating to water, circular economy, pollution prevention and
control, and biodiversity (known as “TAXO4”). The
screening criteria are awaiting final publication and expected to
enter into force for those reporting under the Taxonomy on 1
January 2024 (which will include any companies newly in the scope
of non-financial reporting obligations under CSRD).
At the same time, the Commission has updated the technical
screening criteria for the first two climate-related objectives.
New economic activities will be included (thus becoming
“Taxonomy-eligible”), including some controversial
entries, particularly around transport.
Both developments are summarised in our briefing.
Product Regulation in the EU
The EU is working at a rapid pace to ensure that product
manufacturers and importers adhere to the highest standards of
performance – with much of the body of product regulation
being 10 to 20 years old, several updates were needed to better
reflect today’s technological understanding and societal
values. These include an update to the Batteries Regulation and
Product Safety Regulation, and new regulations on the prohibition
of products made with forced labour and linked to deforestation. We
will shortly be publishing a briefing examining some of the many
developments product manufacturers and importers should be aware
of, so watch this space.
11. UK Pensions
What’s on the Pensions Radar?
Read our quarterly listing of expected future
changes in the UK law affecting work-based pension schemes.
Pensions Dashboards
Pensions dashboards will fundamentally change the way
individuals in the UK will access information about their pensions,
allowing people to see all of their future pension entitlements in
one online place. Regulations have added detail to the framework
set out in the Pension Schemes Act 2021, including the staging
timetable for pension schemes to connect and provide data and
information to the dashboard ‘ecosystem’.
Technical issues have meant that the UK Government recently
paused the programme and new scheme connection dates will be
announced in due course. Despite the delay, schemes should continue
their preparations, as our ’10 actions for getting to grips with pensions
dashboards’ explains.
Employer Covenant
This briefing discusses ten key questions that
the trustees of a UK defined benefit pension scheme should ask
themselves when considering their employer covenant (i.e. the
employer’s obligation and ability to support the scheme),
including when there is proposed corporate activity within the
employer’s group.
Pensions Climate Change Disclosures
The Pensions Regulator has recently published a review of the
first wave of UK pension scheme climate change disclosure reports,
applauding some examples of good practice but noting potential
areas for improvement.
In our article, we give a brief reminder of the
pensions climate change governance and disclosure requirements,
together with five key messages to take away from the
Regulator’s review in readiness for the next (and, for many
schemes, the first) reporting cycle.
12. Real Estate
Reforming privately rented property
The Renters (Reform) Bill is designed to boost the rights of the
UK’s large and increasing population of tenants with a view to
creating a rental sector that provides secure, high-quality homes.
Key features include:
- removing fixed term tenancies and introducing a simpler tenancy
structure where all assured tenancies are periodic –
improving security for tenants; - reforming possession grounds making it easier for landlords to
repossess their property, including where tenants are at
fault; - establishing an ombudsman to resolve renting disputes;
- setting up a landlord and tenant portal and database to inform
both sides of their rights and duties; - requiring homes to comply with the Decent Homes Standard;
- introducing a new process for rent increases.
Overseas Entities Regime: Update
The Register of Overseas Entities went live at the UK’s
companies’ registry, Companies House, on 1 August 2022, and the
transitional period expired on 31 January 2023. Following this
date, overseas entities which own UK real estate must have
registered their beneficial ownership at Companies House.
In addition, all of the restrictions on title that have been
entered on existing property titles have come into effect and so
the Land Registry will only register sales, charges, and leases
with terms of more than 7 years if they have evidence of any
Overseas Entity ID. For further details, see our briefing.
We understand that there are still a sizeable number of overseas
entities that have not registered, even though criminal and
financial penalties can apply. From June 2023, the Register of Overseas Entities (Penalties and
Northern Ireland Dispositions) Regulations 2023 have given
Companies House the power to levy financial charges on
non-compliant overseas entities, which they indicate will range
from £10,000 to £50,000 per property owned. Read more
about Companies House’s approach to enforcement here.
Transparency in the real estate sector: is it worth
it?
The last few years have seen the development of several new
initiatives designed to increase transparency in the real estate
sector. In this briefing, we explain what these are, why
they are being pursued and whether the benefits justify the extra
compliance burden for business.
MEES Regime: Update
The Minimum Energy Efficiency Regulations 2015
(MEES) are intended to reduce harmful emissions from the built
environment, with a view to achieving net zero by 2050. The MEES
regime refers to the rating that a property was given in its energy
performance certificate (EPC). Since April 2018, landlords of
qualifying commercial properties in the UK have been unable to
grant a new lease of a property that scores F or G unless
exempt. Some UK properties do not require an EPC
and therefore fall outside the regime.
From 1 April 2023, these rules apply to existing leases
of non-domestic private rented property in the UK unless
there is a legitimate reason permitted by the MEES Regulations and
registered on the PRS Exemptions Register. This means that
landlords must not continue to let a sub-standard property (i.e.
where the EPC rating is F or G) to existing tenants (even where
there has been no tenancy renewal, extension, or indeed new
tenancy) or grant a lease to new tenants, unless one of the
permitted exemptions apply and has been registered. It is
anticipated that the next step is that all the minimum requirements
for landlords letting commercial property will shift to C by 2027
and B by 2030, although this has not yet been confirmed by the UK
Government.
Protecting reputation and who picks up the
tab?
Landlords and tenants of UK commercial premises affected (and
their respective investors/funders) will be concerned to check the
terms of their relevant leases to determine who between them is to
pick up the cost of making the necessary improvements. When it
comes to altering commercial premises, landlords are increasingly
sensitive about the effect of any works on the energy efficiency of
their buildings and tenants should expect to provide detailed
information on how their fit out, occupation and use of commercial
premises affects energy performance.
A lease granted or continued in breach of these rules is still
legally valid but the landlord risks enforcement action including
fines and “naming and shaming” by means of the
publication of the details of the breach.
Building Safety
The Building Safety Act 2022 is now in force in the UK, although
many of its provisions will be put into place via future secondary
legislation. It will impact on the design and construction of all
buildings, and the operation of higher-risk residential buildings.
It establishes a new safety regime which will be overseen by a new
Building Safety Regulator, and imposes safety-related duties that
will apply throughout the whole lifecycle of a building. Read our
Real Estate Briefing for more general detail
and also our briefing on the duty to register
higher-risk residential buildings on or before 30 September
2023.
New Fire Safety Regulations
Landlords, operators and managers of buildings in England that
contain two or more residential units which share communal spaces
are impacted by the Fire Safety (England) Regulations 2022
(Regulations) that came into effect in January this year. Brought
in as a response to the 2017 Grenfell Tower fire in a high-rise
residential building in London, the Regulations impose additional
fire safety duties on ‘responsible persons’, with criminal
sanctions for non-compliance. For more, read this briefing.
13. Taxation – Corporate
UK Tax Spring Budget
The UK Spring Budget 2023 firmly focused on economic growth and
investment, with a move to a generous new annual expensing regime
for capital expenditure and the abolition of the pensions lifetime
allowance, all aimed at increasing business investment and boosting
the workforce.
Less prominent were the raft of smaller measures and changes
aimed at reducing administrative burden and addressing practical
challenges in applying the law, many of which have come out of
consultations between HMRC and the UK business community. This Briefing looks at the Budget
announcements in further detail.
Multinational top-up tax
The UK Government has gone ahead with its implementation of OECD
BEPS Pillar Two, also known in the UK as “multinational top-up
tax”. This measure is aimed at large multinational corporates,
but there are various exclusions, including for investment funds
and pension funds.
The income inclusion rule was implemented into UK law by the
Finance (No.2) Act 2023 and will take effect in relation to
accounting periods commencing on or after 31 December
2023.
The Act also implements a domestic top-up tax requiring large
groups or standalone entities (groups or entities that meet a
€750m turnover threshold test) to pay a top-up tax where their
UK operations have an effective tax rate of less than 15%. Unlike
multinational top-up tax, domestic top-up tax will apply to large
domestic groups and entities in additional to large multinational
groups and entities. This will also take effect in relation to
accounting periods commencing on or after 31 December
2023.
A first draft of the undertaxed profits rule (UTPR) was
published in July 2023. The UTPR is expected to be included in
Finance Bill 2024, but it is not yet clear when it will come into
force. The UK Government has previously stated that the UTPR will
not come into force before 31 December 2024.
Permanent establishments
The UK Government is currently consulting on changes to the
definition of permanent establishment and profit attribution rules
relating to permanent establishments to more closely align them
with the current position in the OECD model tax convention. If
adopted, changes would be made to the UK’s domestic rules,
including introducing the expanded definition of permanent
establishment contained in the model convention. The UK’s
starting position when negotiating tax treaties would also change
to adopt that definition, but its existing treaties would be
unaffected.
Travelling. Seamlessly. global mobility podcast
series
Our Travelling. Seamlessly. global mobility podcast series
explores the implications of moving your people and operations into
and out of the UK, in a variety of contexts.
Listen to the latest episode discussing the
key features that distinguish UK and US approaches to structuring
of management incentive plans in a private equity context. Catch-up
on the whole series here.
14. Taxation – Personal and Incentives for UK-based
Employees
CSOP Individual limit doubled and rules for UK companies
with Multiple Share Classes relaxed
From 6 April 2023, the maximum value of shares an individual can
hold under a tax-advantaged Company Share Option Plan (CSOP) has
doubled from £30,000 to £60,000 (calculated by
reference to the value of the shares at the time of grant). This
increase is welcome news for UK companies operating CSOP plans as
the previous limit, which had not changed for nearly 30 years, was
soon reached by employees.
Also, CSOP is now accessible to a wider range of companies
because the rules on the shares that can be used for options have
been relaxed. Previously, UK companies with more than one class of
ordinary share could only grant CSOP options over the class that
either gave employees control of the company or was majority held
by non-employees. From 6 April this rule has been removed, meaning
that UK companies are now able to grant CSOP options over any
ordinary class of share for employees, including so called
‘growth shares’, should they wish to. The changes apply to
options in existence on 6 April that have not yet been exercised as
well as those granted on or after that date.
Save As You Earn (SAYE) bonus rate
calculation
The UK tax office, HMRC, has announced that the mechanism for calculating
bonus rates for SAYE participants will change from August which is
expected to result in a bonus being provided to new participants
for the first time in nearly 10 years. Read this briefing for more.
Review of SAYE and Share Incentive Plans
(SIP)
The UK Government has launched a Call for Evidence on the two
tax-advantaged all-employee plans, SAYE and SIP, to consider
opportunities to simplify and improve the schemes. It is likely
that the UK Government will be asked to consider increasing the
financial limits on individual participation and perhaps reducing
the vesting/holding periods for tax relief to be available.
Official Rate of Interest for employment tax purposes
increased to 2.25% from 6 April
Where a company makes a loan to an employee (for example, to
fund the purchase of shares) there will be UK income tax and
national insurance contributions to pay if the interest charged is
at less than the “official rate”. From 6 April, the
official rate rose from its previous level of 2% to 2.25% so
companies with such arrangements in place should consider the
implications this will have.
Enterprise Management Incentives (EMI): HMRC guidance on
discretion and improvements to the grant process
At the end of last year, HMRC provided some welcome
clarification on the use of discretion within EMI plans by
publishing guidance on the circumstances in which it can exist or
be exercised without putting the tax-advantaged status of an award
at risk. Since 6 April, the grant process for EMI has been improved
by removing the need to state restrictions attaching to shares in
option agreements and dispensing with the requirement for
participants to sign a working time declaration (although they must
still meet the statutory working time conditions).
Changes to the Capital Gains Tax (CGT) annual
exemption
The reduction in the annual CGT exempt amount (down to
£6,000 from £12,300
on 6 April and then halved again to £3,000
from 6 April 2024 onwards) is unwelcome news for participants in UK
tax-advantaged share option plans. This is because many of them
have been able to use the allowance against gains realised when
they sell their option shares to make participation in the plan
effectively tax free. Some participants can transfer their shares
to a spouse or civil partner first, to take advantage of double the
allowance. The same issues arise for participants in share
incentive arrangements that are not tax favoured but benefit from
capital gains tax treatment.
Tax.Simplified. On air
Listen to our Incentives Team share their thoughts and
experience on topical UK incentives and employment tax issues in
our Tax.Simplified podcast series (also available
on Spotify and Apple Podcasts). Our latest podcast discusses two recent cases
involving intermediaries linked to Gary Lineker and Eamonn Holmes
and considers what this might mean for other workers providing
their services in this way and their clients.
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