GENERAL COUNSEL UPDATE - A MULTIJURISDICTIONAL GUIDE 28 JULY 2020 - Herbert Smith Freehills
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GENERAL COUNSEL UPDATE A MULTIJURISDICTIONAL GUIDE 28 JULY 2020
HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 01
Contents
page
UK developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 05
1. Covid-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06
1.1 What has happened so far? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06
1.2 What next? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06
1.3 What should businesses consider? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 06
2. Brexit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 07
2.1 Where are we now? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 07
2.2 UK and EU Free Trade Agreement drafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 07
2.3 Ratification of the future relationship deal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 07
2.4 EU “readiness notices” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 07
3. Competition, Regulation and Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 08
3.1 Significant amendments to UK merger control regime targeting foreign investment . . . . . . . . 08
3.2 Supreme Court ruling in MIFs provides key clarifications for UK competition litigation . . . . . . 08
3.3 CMA’s continued focus on resale price maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 08
4. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09
4.1 Amendments to Approved Document B: Fire safety regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . 09
4.2 Domestic reverse VAT charge for building and construction services
(the “reverse charge”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09
4.3 BIM: A new Information Protocol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 09
5. Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Contractual disputes arising out of Covid-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1.1 Listing regime – new obligation to file details of share rights in force . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Merger and acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2.1 Takeover Panel ruling on bid conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2.2 CMA provisionally clears Amazon investment in Deliveroo on basis of
“failing firm defence” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 Banking litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1.1 Commercial Court dismisses challenge to exercise of options in swap confirmations
incorporating 2000 ISDA Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1.2 Court of Appeal upholds High Court contractual construction of CLO transaction . . . . . . . . . . 11
7.1.3 Litigation funder fails in attempt to obtain trading data from the
London Stock Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
02 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 03
Contents
page page
7.2 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2.1 The impact of Covid-19 on commercial litigation in England and Wales . . . . . . . . . . . . . . . . . . . . 12 13.1 Opportunities to acquire IP assets in a changing world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2.2 Disclosure pilot extended by a year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13.2 Copyright in functional designs – extended protection for manufacturers? . . . . . . . . . . . . . . . . . 21
7.2.3 Expansive view of when reference to legal advice may result in broader waiver . . . . . . . . . . . . 12 14. Real Estate and Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8. Employment, Pensions and Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14.1 Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14.1.1 Restrictions on landlords in recovering possession of commercial premises . . . . . . . . . . . . . . . . 21
8.1.1 Coronavirus Job Retention Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14.1.2 Restrictions on landlords in recovering rent arrears under
8.1.2 Important TUPE rulings on beneficial changes to terms and transfers leases of commercial premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
to multiple transferees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14.1.3 Relaxation of Land Registry rules on execution of documents amid
8.1.3 Supreme Court rules that employers not vicariously liable for actions of Covid-19 pandemic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
“rogue employee” and self-employed contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14.2 Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1.4 Court of Appeal ruling that no inducement of breach of restrictive covenant where legal 14.2.1 Temporary changes to the planning regime in response to the Covid-19 pandemic . . . . . . . . . 22
advice that covenant “probably unenforceable” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 14.2.2 Planning reform and permanent changes to the planning system . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1.5 Growing support for mandatory ethnicity pay gap reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15. Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15.1 Covid-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2.1 New insolvency laws could seriously undermine position of DB schemes . . . . . . . . . . . . . . . . . . 14 15.2 Summer Economic Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2.2 Pensions Regulator opens door for schemes to transfer to DB consolidators . . . . . . . . . . . . . . . 15 15.3 April 2020 tax changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9. Energy and Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 15.4 OECD’S global digital services tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 16. Technology, Media and Telecommunications, Sourcing and Data . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1.1 OGA’s proposed changes to MER UK Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 16.1 Revised ePrivacy Regulation draft published . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 16.2 The Omnibus Directive: a new deal for EU consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2.1 Consultation on ending the sale of new petrol, diesel and 16.3 Schrems II: ECJ Invalidates Privacy Shield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
hybrid cars and vans by 2035 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.2.2 UK Government intending to establish UK Emissions Trading System post Brexit . . . . . . . . . . . 16
International developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2.3 Brexit and environment law update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17. Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10. Finance: Banking, Insolvency and Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
17.1 Long-awaited reforms to Australia’s corporate governance regime . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.1 LIBOR transition: The next steps in the loans market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
17.2 Product Intervention Powers – First judicial challenge to ASIC’s use of
10.2 Environmental, social and governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 its new product intervention powers fails . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.3 Corporate Insolvency and Governance Act 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 17.3 Unfair Contract Terms – further case under Australia’s relatively new UCT regime . . . . . . . . . 29
11. Finance: Debt Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 17.4 General update on the implementation of regulatory reforms resulting from
11.1 LIBOR transition: Debt capital markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 the Royal Commission recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.2 The Covid Corporate Financing Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 17.5 Australian licensing changes for foreign financial service providers . . . . . . . . . . . . . . . . . . . . . . . . . 30
12. Financial Services Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 17.6 Product intervention powers tested and design and distribution obligations deferred . . . . . . . 30
12.1 Operational resilience – from theory to practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 17.7 Negative interest rates – Could financiers be required to pay interest? . . . . . . . . . . . . . . . . . . . . . 30
12.2 Brexit update – Financial services after the Transition Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 17.8 Covid-19: Governance: Electronic execution of transaction documents – the
current state of play . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
04 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 05
Contents
UK developments
18. China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
18.1 Litigation in Mainland China under New Evidence Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19. Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19.1 Hong Kong court sanctions an innovative method to serve court documents
using a data room . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19.2 Hong Kong updates on wages subsidy, discrimination laws, occupational requirement
schemes ordinance requirements and maternity leave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
19.3 Covid-19 Governance: Signing documents using electronic signatures (Hong Kong) . . . . . . . . 31
19.4 Hong Kong Court continues to recognise and assist Mainland insolvency proceedings . . . . . 32
19.5 Hong Kong Monetary Authority proposes mandatory reference checking scheme
to address “rolling bad apples” phenomenon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.6 Hong Kong SFC and Competition Commission sign MoU to strengthen cooperation . . . . . . . 32
19.7 Hong Kong Monetary Authority publishes report on bank culture self-assessment . . . . . . . . . 33
20. Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
20.1 Russian Ministry of Justice clarifies Russian arbitration legislation upon joint request
of HKIAC and VIAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
20.2 Russian courts to have exclusive jurisdiction over sanctioned persons . . . . . . . . . . . . . . . . . . . . . . 33
21. United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
21.1 Federal Appeals Court extends wire fraud law to conduct outside the US . . . . . . . . . . . . . . . . . . 34
21.2 Supreme Court limits SEC enforcement action disgorgement remedies . . . . . . . . . . . . . . . . . . . . 34
21.3 Southern District of New York rejects impossibility defense based on
financial difficulties arising out of the Covid-19 pandemic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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06 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 07
UK developments
1. Covid-19 wages. The Chancellor’s Summer Statement stressed that it is 2. Brexit Please see our updated Beyond Brexit Legal Guide 2020.
highly unlikely that the furlough scheme will extend beyond
1.1 What has happened so far? 2.1 Where are we now?
October 2020, but announced a series of measures and incentives For further information, please contact Lode Van Den Hende
Rarely have events accelerated so rapidly or so radically as they for employers to retain staff. On 5 June 2020, the UK and the EU concluded the first set of or Eric White.
have in the course of the Covid-19 pandemic. Governments around negotiations on their future trade relationship. As both sides
the world have taken exceptional measures to protect citizens and 1.2 What next? acknowledged, no substantial progress had been made and they 2.3 Ratification of the future relationship deal
suppress the spread of the coronavirus disease. It has seen them Looking ahead, we expect the crisis to operate as a catalyst, confirmed plans to intensify talks with a revised negotiating timetable Any future relationship arrangements need to be ratified by both
pass emergency legislation that has restricted the movement of its accelerating changes in human behaviour, driving forward scientific during July, August and September with the objective to finalise a deal the UK and the EU before they come into force.
citizens, and required businesses to close. In tandem, fiscal support and technological advances and ushering in further digitalisation before the end of 2020. Given that the agreement would need to be in
schemes of historic proportions have been introduced to preserve and some tough choices on automation. This is likely to create force on 1 January 2021 and thus ratified in time before that (see The new relationship will be negotiated on the basis of Articles 207,
skills and stave off business failure. opportunities for businesses in some sectors, but also bring below), the expectation is that a deal would need to be approved by 217 and 218 of the Treaty on the Functioning of the European Union in
difficulties in others. the European Council during its summit on 15–16 October 2020. the same way as a free trade agreement with any other country
The UK Government’s response to the pandemic evolved in Despite the Covid-19 outbreak, there is a mutual understanding outside the EU. It will require approval of the Council of the EU by
various stages, the first of which was focused on containment of The wider consequences – including the anticipated transfers of between the UK and the EU that there will be no extension to the qualified majority and the consent of the European Parliament. If such
the spread of the virus, followed by a delay phase which was wealth – are likely to drive a reordering of public policy priorities transition period beyond 31 December 2020 (as could have been an agreement is a “mixed” agreement dealing with matters that are in
introduced on 12 March 2020 and saw the first social distancing and bring about a significant shift in the relationship between the agreed by 1 July 2020 under the EU-UK Withdrawal Agreement). the shared or sole competence of the individual Member States, it
measures. A nation-wide lockdown came into force on 23 March individual, corporations and the State. Clients should keep an eye will also require the approval of all continuing Member States of the
and it involved, amongst other things, closure of all non-essential on the Government’s response to the crisis, particularly in terms of Please subscribe to our Beyond Brexit blog to get the latest updates. EU in accordance with their individual processes for treaty approval.
shops, businesses and venues and mandatory working from home long-term support for businesses and employees. This may sometimes require additional approvals (for example, in
for all businesses where that was possible. For further information, please contact Paul Butcher. Belgium the approval of its regions would also be necessary). If such
1.3 What should businesses consider? individual ratification is required on specific aspects of the
The first easing of the lockdown came on 13 May when people who 2.2 UK and EU Free Trade Agreement drafts
agreement, any provisional application of the new trading terms
could not work from home were encouraged to go back to work For our latest analysis and updates in relation to the Covid-19
On 18 March 2020, the EU released its version of the draft UK-EU would exclude these matters until full ratification was obtained.
(apart from those businesses which had been ordered to close). pandemic, please visit our Catalyst hub.
free trade agreement and the UK had reportedly sent its draft to the
Primary schools (Reception, Year 1 and Year 6), nurseries and other In the UK, any new trade treaty with the EU will need to be ratified
Our hub has been divided into four key themes that clients may EU earlier in the spring, but had only made it publicly available on
early years providers as well as outdoor markets and car by the UK Parliament.
wish to keep a close eye on: 19 May 2020.
showrooms were allowed to re-open from 1 June. From 15 June,
non-essential shops, zoos and some outdoor attractions were also •People issues in relation to protecting health and safety of For further information, please contact Lode Van Den Hende
The drafts evidence some key differences between the parties’
permitted to re-open, followed by further easing on 4 July when employees, jobs and personal data. In addition to other articles, or Eric White.
proposed approaches. The EU considers the Political Declaration as
most businesses and venues (except for certain close contact we discuss these issues in our multi-jurisdictional Protecting and the starting position and is keen to achieve a wide-ranging economic
businesses) could restart operations, subject to guidance on social reshaping landing page. 2.4 EU “readiness notices”
partnership underpinned by robust level-playing commitments in
distancing and to any local lockdowns in place (see below). The
state aid, competition law, worker’s rights, environment and other During the negotiations for the Withdrawal Agreement, much
attention has now therefore shifted to returning to the workplace. •Pressure points in relation to relieving pressure on businesses,
“level playing-field” issues by reference to the standards embedded attention was paid to no-deal Brexit preparations. Both the
liquidity and supply chains. In addition to other articles, we have
in EU law, which would also involve dynamic alignment of UK European Commission and the UK Government issued large
After some delay, the Government introduced a 14-day quarantine multi-jurisdictional landing pages on Managing liquidity, Supply
legislation with EU law. The EU also seeks to conclude a single free numbers of sectoral “preparedness notices” warning participants of
for all people entering the UK from 8 June (apart from those chain difficulties, Repairing the balance sheet and Disputes risks.
trade agreement with a single governance system. the consequences of exiting the EU with no deal and insisting that
coming from the Common Travel Area and in some other limited •Governance issues in relation to assuring decision making,
circumstances), but this has been lifted from 10 July for people all operators need to prepare.
reporting and disclosure. In addition to other articles, we The UK, however, is aiming for a simpler free trade agreement
arriving from any of the 59 countries considered by the UK comment on how to ensure a robust governance response in the based along the lines of the Canadian FTA (CETA), the EU/Japan Whilst the UK and the EU aim to reach an agreement before the end
Government to present reduced risk of Covid-19. multi-jurisdictional Assuring and sustaining and ESG: Building a Economic Partnership Agreement and the EU/South Korea FTA. It of the transition period, it is possible that no such deal is concluded in
resilient future landing pages. envisages a comprehensive free trade agreement covering all trade,
However, the Government has repeatedly stressed the possibility time and a situation similar to a no-deal Brexit occurs where the UK
followed by a suite of separate draft agreements in a range of areas, and EU trade relationship is governed solely by WTO terms.
that lockdown measures may need to be reintroduced if community •Exploring opportunities in relation to refocusing, investing,
including energy, fisheries, and law enforcement and judicial
transmission increases. Any such measures are likely to be digitising and decarbonising, because despite the ongoing
cooperation in criminal matters. To prepare for such scenario, the EU Commission has been
targeted. For example, following a rise in cases in the city, a local challenges, businesses are not standing still. In addition to other
lockdown is currently in place in Leicester. articles, we have a multi-jurisdictional landing page on gradually replacing its Brexit preparedness notices with what
Our latest View from Brussels commentary compares the EU and it now calls “readiness notices”. In this View from Brussels, we
Investments and acquisitions and Digital transformation.
UK draft free trade agreements, discusses some of the key comment on those notices and how they built up on the previous
Alongside those measures, the Government has put forward
problematic issues and comments on the potential routes to resolve preparedness notices.
various support mechanisms to help businesses, including a job For further information, please contact your usual
them, while the December edition of the same series looks into
retention scheme, grants and loans. The job retention scheme, Herbert Smith Freehills’ contact.
some of the practical options for getting a deal done before the end For further information, please contact Lode Van Den Hende
originally due to end on 31 May and then 30 June, will now remain
of transition in the very limited time available and the implications or Eric White.
in place until the end of October 2020. However, from 1 July,
that this might have for the kind of deal that can emerge.
employers will be required to start sharing the cost for employees’
08 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 09
UK developments
3. Competition, Regulation and Trade merchants to bring damages claims against MasterCard and Visa, they may be found to be infringing competition law. Although The changes focus on two specific fire safety provisions in blocks of
it will also assist the card system operators with their arguments addressed to the musical instruments sector, the open letter sets out flats: sprinklers (a reduction in the trigger height from 30m to 11m),
3.1 Significant amendments to UK merger control
that the merchants’ losses were reduced to the extent they practical guidance relevant to suppliers and retailers in all sectors. and wayfinding signage for the fire service (a new recommendation
regime targeting foreign investment
managed to recoup these losses through higher retail prices. for floor identification and flat indication signage within blocks of
The UK Government has announced two significant amendments It is also interesting to note that the infringing conduct was picked flats with storeys over 11m).
to the UK merger control regime, intended to enhance its powers to Key findings of the judgment in relation to pass-on: up through the CMA’s in-house price monitoring tool, which was
scrutinise certain foreign direct investment (FDI) into the UK, developed by its Data, Technology and Analytics unit in order to For further information, please contact Tim Healey.
•The Supreme Court confirms the compensatory nature of
against the backdrop of the Covid-19 pandemic and wider national detect suspicious online pricing activity.
damages in competition cases.
security concerns. The changes consist of: 4.2 Domestic reverse VAT charge for building and
•The “broad axe” principle that can be used in assessing damages See our blog post here. construction services (the “reverse charge”)
•the addition of “to combat and mitigate the effects of a public
equally applies to the quantification of pass-on.
health emergency” as a criterion for intervention in a transaction The reverse charge comes into effect on 1 March 2021. The reverse
•Once pass-on is raised by the defendants, there will be a heavy For more information, please contact Susan Black or
by the Government on public interest grounds, under the existing charge means that the customer receiving the supply of a specified
burden on the claimants to provide evidence as to how they have Kristien Geeurickx.
public interest merger regime contained in the Enterprise service will have to pay the VAT to HMRC, instead of the supplier.
Act 2002 – to be implemented by way of a statutory instrument. dealt with the recovery of their costs to their business, given that
The Enterprise Act 2002 (Specification of Additional Section 58 this evidence will usually be exclusively in the hands of the 4. Construction Please see the tax section below for more information, or
Consideration) Order 2020 took effect from 23 June 2020; and direct purchasers. 4.1 Amendments to Approved Document B: Fire contact Tim Healey.
•the introduction of lower jurisdictional thresholds for review of
safety regulations
Much of the Supreme Court’s ruling is specific to the facts of the 4.3 BIM: A new Information Protocol
transactions in three specific sectors: artificial intelligence, case, but its findings on pass-on are of wider application and will Approved Documents are issued pursuant to the Building
cryptographic authentication technology and advanced materials benefit both defendants and indirect purchaser claimants in Regulations and give practical guidance on how to meet the An “Information protocol to support BS EN ISO 19650-2, the
– also to be implemented by way of two statutory instruments competition damages claims who rely on the pass-on arguments. Regulations’ requirements. In the case of Approved Document B, delivery phase of assets” (Edition 1: May 2020) has been published
(the Enterprise Act 2002 (Share of Supply Test) (Amendment) they address fire safety precautions which must be adhered to, to by the UK BIM Framework, in association with the Construction
Order 2020 and the Enterprise Act 2002 (Turnover Test) See our e-bulletin here. ensure the safety of occupants, firefighters and others, in the event Industry Council.
(Amendment) Order 2020). of a fire.
For more information, please contact Kim Dietzel or It serves as an example of a protocol that can be used with BS EN
These amendments come ahead of the National Security and Stephen Wisking. On 20 May 2020, an amendment booklet to guidance previously ISO 19650-2. It relates to BIM Level 2.
Investment Bill, which is expected to be brought before Parliament set out in Approved Document B was published. This booklet is
shortly to create a new distinct FDI regime in the UK, introducing 3.3 CMA’s continued focus on resale entitled: Fire safety, Volume 1 – Dwellings and Volume 2 – Buildings The Protocol is designed to be read in conjunction with the
standalone powers enabling the Government to review a broad price maintenance other than dwellings, 2019 edition. The changes set out in the publication: Information Management According to BS EN ISO
range of transactions on the grounds of national security. booklet will be incorporated into both the online and paper 19650, Guidance, Part 1 Concepts, Section 3 and Annex C and to be
On 29 June 2020 the Competition and Markets Authority (CMA) versions of Approved Document B, Volume 1 and Volume 2. used with minimal amendments or the need to produce, attach or
See our e-bulletin here. imposed total fines of £5.8 million for resale price maintenance complete additional documents.
(RPM) in the musical instruments and equipment sector, in The changes take effect on 26 November 2020 for use in England.
For more information, please contact Veronica Roberts or three separate cases. This follows the fines imposed in August last Versions from before the changes take effect will need to be read It should be incorporated into every “appointment” used on the
Ruth Allen. year on Casio (£3.7 million) and in January this year on Fender (£4.5 alongside the changes as set out in the amendment booklet. project, ie every contract and appointment of every tier.
million) for similar conduct and brings the total of RPM infringement The online versions will be the most up to date and should
3.2 Supreme Court ruling in MIFs provides key cases in this sector (in the UK) to five in less than a year. always be checked. There are rules for using the Protocol set out in the document. For
clarifications for UK competition litigation example, parties must give effect to the Protocol by completing the
The CMA has also, for the first time, imposed a fine for RPM on a The 2019 edition will continue to apply where a “building notice” or "Information Protocol Information" (otherwise it will have no effect)
The Supreme Court ruling of 17 June 2020 in the multilateral retailer who agreed to implement the agreement despite previously an “initial notice” are given, and where “full plans” are deposited and give priority to the protocol (to ensure it has its intended effect,
interchange fees (MIFs) cases is an important milestone in the having received a warning letter from the CMA making it aware that with a local authority before 26 November 2020, and either the and that it is applied consistently throughout the project contracts).
long-running MIFs litigation saga, and for competition litigation in there was evidence it might be engaging in RPM. Although in the building work to which it relates has started before that day; or is The document is available free to download.
the UK more generally. The Supreme Court confirms the position in case of RPM, retailers are party to the anti-competitive agreement,
the EU Commission’s and CJEU’s MasterCard ruling that the MIFs started before 29 January 2021. The terms “building notice”, “initial
the CMA has so far only imposed fines on suppliers on the basis that notice” and “full plans” are defined in the Building Regulations 2010. For further information, please contact Tim Healey.
were in breach of Article 101(1) TFEU, thereby bringing clarity to a the restrictions are imposed by them on the retailers. In its open
number of inconsistent decisions on this issue. In addition, the case letter to the musical instruments sector the CMA advises retailers
also provides welcome guidance on the issue of pass-on in that, if they agree with suppliers to sell at fixed or minimum prices,
damages claims. Thus whilst the judgment opens the door for10 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 11
UK developments
5. Contract the rights attached to their listed securities, the limitations on such consumers than permitting the Amazon investment to proceed. 7.1.2 Court of Appeal upholds High Court contractual
rights and the procedure for the exercise of such rights. Read more here. construction of CLO transaction
5.1 Contractual disputes arising out of Covid-19
Each time an issuer changes the rights attaching to the securities, The final decision is expected shortly following a The Court of Appeal upheld the High Court’s decision that no
As a result of the Covid-19 pandemic and associated restrictions,
it will need to file an updated document, such as its articles of consultation process. incentive fee was payable to a collateral manager in a collateralised
many businesses may have found themselves unable to meet their
association, with the NSM. It should also announce that it has done loan obligation (CLO) transaction following the exercise of a right of
contractual obligations, or may find that counterparties are unable
so (in accordance with LR 9.6.3). For further information, please contact Sarah Hawes or early redemption by the holders of the equity notes: Barings (UK) Ltd v
or unwilling to perform. Parties may want to claim damages for any
Antonia Kirkby. Deutsche Trustee Company Ltd & Ors (Rev 1) [2020] EWCA Civ 521.
breach, or conversely may look to rely on contractual provisions to
suspend their obligations or avoid liability. In some cases, parties For further information, please contact Sarah Hawes or
While the Court of Appeal conducted the necessary iterative
may seek to terminate the contract, whether under an express Gareth Sykes. 7. Dispute Resolution
process of comparing the rival constructions and their commercial
provision or under a legal right to terminate for breach, or may
7.1 Banking litigation consequences, it was prepared to deal with the appellant’s various
argue that the contract has been brought to an end automatically. 6.2 Merger and acquisitions
arguments in a robust but short form judgment. It will be interesting
6.2.1 Takeover Panel ruling on bid conditions 7.1.1 Commercial Court dismisses challenge to exercise
to see if the Court of Appeal’s willingness to do so leads to a trend
Against that background, we have published a guide which provides of options in swap confirmations incorporating
In May 2020 the Takeover Panel refused to allow a bidder to invoke of greater reluctance in giving permission to appeal contractual
a general overview of the common bases for avoiding contractual 2000 ISDA Definitions
a condition to its takeover offer in light of the Covid-19 pandemic. interpretation judgments than we have seen over the last few years.
obligations in commercial contracts, as well as an interactive tool
The Commercial Court dismissed a challenge to the exercise of The decision is also noteworthy for emphasising that in a complex
designed to assist in evaluating the availability of force majeure
Brigadier Acquisition Company Limited (the bidder) announced its options contained in five extendable interest rate swaps which negotiated transaction, the contractual documents reflect the
relief under English law.
firm intention to make an offer for Moss Bros Group plc (the target) incorporated the 2000 ISDA Definitions: Alfred Street Properties Ltd negotiated trade-offs agreed by the parties.
For further information, please contact Natasha Johnson, on 12 March 2020. On 22 April 2020, citing the impact of the v National Asset Management Agency [2020] EWHC 397. The
Covid-19 pandemic, and the related government measures, the challenge was brought on the basis that notice was either not given See our banking litigation blog post for more details.
Emma Schaafsma or Richard Mendoza.
bidder lodged a formal submission with the Panel Executive setting by a contractually prescribed method or at all, despite the resultant
swap transactions having been performed to term without For further information, please contact Simon Clarke or
6. Corporate out the reasons why it believed that it should be permitted to invoke
challenge by either party. Ceri Morgan.
certain conditions (including the no material adverse change
Rarely have events accelerated so rapidly or so radically as they condition) to completing its offer.
have in the course of the Covid-19 pandemic. A number of pieces of The decision provides some helpful guidance on the approach to 7.1.3 Litigation funder fails in attempt to obtain trading
legislation and guidance have been published in relation to UK The Panel Executive ruled that the bidder had not established that the contractual interpretation of the ISDA Master Agreement and the data from the London Stock Exchange
corporate law over the last few months as a direct result of the circumstances were of material significance to it in the context of its 2000 Definitions. The court noted that while a strict approach,
Burford Capital, one of the largest litigation funders, has been in the
pandemic. Our corporate law experts have summarised them here. offer (as required by Rule 13.5 of the Takeover Code) and as such, the favouring clarity, certainty and predictability is required in
press regularly since the publication of a series of tweets and
bidder should not be permitted to invoke any of the conditions. interpreting the terms of standard market agreements, any
opinion pieces by Muddy Waters (the US investment firm) which
6.1 Corporate governance questions as to incorporation and variation of such provisions
also short-sold Burford shares. These events triggered a period of
Following the Panel Executive’s ruling, the bidder requested a should be interpreted according to the recognised principles of
6.1.1 Listing regime – new obligation to file details of share weakness in Burford’s share price. Burford contended that its share
review of the ruling but subsequently withdrew that request. general contractual interpretation as confirmed by the Supreme
rights in force price fell not only as a result of the legitimate short-selling activity,
Court, eg in Wood (Respondent) v Capita Insurance Services Limited
but also that Muddy Waters was implicated in an alleged
As of 27 April 2020, premium listed companies are required to file For further information, please contact Sarah Hawes or (Appellant) [2017] UKSC 24 (see our litigation blog post).
conspiracy to manipulate the market unlawfully, through
a document disclosing the rights attached to their listed securities Antonia Kirkby. “spoofing” or “layering” activity.
with the Financial Conduct Authority (FCA). Adopting a “unitary” approach, which involves an iterative process
6.2.2 CMA provisionally clears Amazon investment in by which rival interpretations are checked against the provisions of
In this judgment, the High Court rejected Burford’s Norwich
Under Listing Rule (LR) 9.2.6E companies must ensure that Deliveroo on basis of “failing firm defence” the contract and the commercial consequences investigated, the
Pharmacal application (a disclosure application made pre-action
accurate information on the rights attached to their listed shares is court considered (in particular) Article 10 of the 2000 Definitions
On April 2020 the UK Competition and Markets Authority (CMA) against a non-party) against the London Stock Exchange to identify
available on the National Storage Mechanism (NSM). Equivalent (which sets out the definitions of “Option Transaction” and
announced that it provisionally cleared Amazon’s proposed persons involved in the alleged unlawful market manipulation: Burford
requirements elsewhere in the Listing Rules apply the obligation in “Swaption”). The court held that there is no requirement under
acquisition of a stake in Deliveroo. The transaction was referred for v London Stock Exchange [2020] EWHC 1183 (Comm). As part of its
relation to other securities, such as listed debt securities. Article 10 for parties to use the precise name or label “Option
an in-depth Phase 2 investigation in December 2019, in light of decision, the court concluded (on an obiter basis) that the Market
Transaction” or “Swaption” in the confirmation evidencing the swap
concerns about the impact on competition. However, the ongoing Abuse Regulation was not directly actionable by the issuer (Burford)
Companies that had already published a prospectus containing the transaction. It is sufficient for a transaction to be identifiable as
Covid-19 pandemic has resulted in significant changes to the in this case. In doing so, the court emphasised the role of regulators,
requisite information, and that had not subsequently changed the such, eg by defining or describing either the transaction or its
competitive environment since the start of the CMA’s investigation. rather than private parties, in enforcing the rules around market
rights attached to its listed securities, were already in compliance operation, in terms which “make it clear that it falls within the
abuse. The judgment also contains some other snippets of interest
with the new requirement. provisions dealing with those transactions”.
The CMA provisionally concluded that the transaction will not be for those who follow developments in securities litigation in the UK.
Companies that had not filed a prospectus were required to file a expected to result in a substantial lessening of competition on the See our banking litigation blog post for more details.
basis of the so-called “failing firm” defence: it has accepted that See our banking litigation blog post for more details.
document containing the requisite information with the NSM.
Most companies in this position forwarded a copy of their articles of Deliveroo is likely to exit the market unless it receives additional For further information, please contact Rupert Lewis or
funding through the transaction, and the loss of Deliveroo as a For further information, please contact Harry Edwards or
association to the NSM, while others created a document describing Ceri Morgan.
competitor would be more detrimental to competition and to Ceri Morgan.12 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 13
UK developments
7.2 Litigation 7.2.3 Expansive view of when reference to legal advice may 8. Employment, Pensions and Incentives changes agreed post-transfer may need to focus on establishing a
result in broader waiver commercial reason for the variation which can be distinguished
7.2.1 The impact of Covid-19 on commercial litigation in 8.1 Employment
from the transfer itself, or in some cases may be able to argue
England and Wales In PCP Capital Partners LLP v Barclays Bank Plc [2020] EWHC 1393
estoppel. See our blog post for further information.
8.1.1 Coronavirus Job Retention Scheme
(Comm), the High Court took a broad view of the principle of
The Business and Property Courts have adapted quickly to the
collateral waiver, or the “cherry picking rule”, which provides that a Employment law issues have been dominated by the impact of In ISS Facility Services NV v Govaerts [2020] C-344/18, the Court of
challenges posed by the Covid-19 crisis, moving almost entirely to
party who relies on privileged material to support its claim may be Covid-19 over the last few months and in particular the frequent Justice of the European Union ruled that where a cleaning business
remote hearings as soon as lockdown started. On 19 March the
required to disclose other privileged material relating to the same changes to the rules concerning the Coronavirus Job Retention was transferred to two transferees, the employment contract of an
Lord Chief Justice sent a message to judges in the Civil and Family
issue or transaction. The court held that a bank had waived privilege Scheme (CJRS). Changes to the rules from 1 July 2020 mean that employee working for the whole transferring business was
Courts which emphasised the need to continue with the work of the
in all contemporaneous communications with its lawyers relating to employees can now be flexibly furloughed with employers paying transferred and split between the transferees, as two part-time
courts as a vital public service, and to avoid the backlogs and delays
particular transactions that were alleged to be a sham, as the bank for the hours worked and claiming a grant for furloughed hours. contracts in proportion to the tasks performed by the employee
which would inevitably build up if too much court business was
had deployed the lawyers’ advice that the transactions were lawful However, employers can only claim for employees who completed (by economic value or time spent, as determined by the national
simply adjourned. This move to remote hearings has included not
in order to support its case on the merits. The decision is of three weeks’ consecutive furlough by 30 June (with a few court). However, if the division of the contract of employment
just hearings based on written evidence, but also trials where there
particular interest for two reasons: exceptions) and subject to a cap on numbers in one claim period. was not possible or caused a worsening of working conditions or
is cross-examination of factual or expert witnesses.
Employers are required to start sharing the cost from August 2020 adverse effect on the individual’s rights, then the transferees would
•In many previous cases the court has held that privilege will not
until the end of October 2020 when the CJRS will end. be regarded as being responsible for any consequent termination of
In May, the Civil Justice Council published a report on the impact of be waived if a party relies on the “effect” of privileged material
Covid-19 on the civil justice system, following a review undertaken rather than its “content” – though the dividing line in practice has the employment relationship, whether that is an actual dismissal or
Ambiguity and complexity in the CJRS rules is a particular concern
at the request of the Master of the Rolls. The report refers to a high been far from clear. The court in this case equates the “effect” of the individual resigns and claims constructive dismissal.
given that the Finance Bill is due to introduce a regime providing for
level of satisfaction with the experience of remote hearings, legal advice with its conclusion or outcome, but says the
the recovery of claims to which the employer was not entitled, even This ruling represents a significant change for UK law which has not
particularly in the senior and commercial courts “where resources distinction cannot be applied mechanistically. Instead, the
where made in good faith, as well as penalties for deliberate failure previously supported the idea of splitting contracts in this way,
are greater and levels of legal representation are higher”. The report question of whether privilege has been waived depends on an
to notify HMRC of a mistake within a 90 day self-reporting period. instead asking whether the individual can be said to be assigned to
notes that, in the longer term, there is some enthusiasm for the “acutely fact-sensitive exercise” as to whether there is reliance,
The Bill will also give HMRC power to make a company officer one of the transferees; if not, the individual will not transfer. It is
expanded use of remote hearings in commercial litigation, with the purpose of that reliance and the particular context. It’s clear
jointly and severally liable where the officer has deliberately made unclear whether the same approach should now be taken when a
limited exceptions relating to cases where foreign language that, if this approach is followed in other cases, a waiver may
a CJRS claim to which the company was not entitled. transferor transfers only part of its business, retaining the rest, and
interpretation is required. result even if only the conclusion of legal advice is relied on. But
beyond that, the decision arguably makes it no easier to draw a an employee works across both parts pre-transfer. The uncertainty
Employers will also need to bear in mind reputational issues
More recently, the High Court has starting taking tentative steps line between references that will result in a waiver and those that highlights the importance of considering bundling employees
when determining whether it is appropriate to continue to access
toward restarting physical hearings, with a number of hearings held will not. pre-transfer and of ensuring appropriate indemnities are in place
the CJRS.
in person or as a “hybrid” with some participants attending in covering the risk of claims.
•Unusually for cases involving waiver, the documents relied on in
person and some remotely. The majority of hearings are, however,
this case had already lost their privileged status by the time the The Government has announced a one-off payment of £1,000 to
still taking place remotely. For further information, please contact Tim Leaver or
bank deployed them, as they had been provided to the SFO under UK employers for every furloughed employee who remains
Peter Frost.
a limited waiver of privilege and relied on by the SFO in criminal continuously employed and earning above the Lower Earnings Limit
For further information, please see our blog post here, or
proceedings. The court rejected the argument that, because of through to the end of January 2021. Payments will be made from
contact Anna Pertoldi or Maura McIntosh. 8.1.3 Supreme Court rules that employers not vicariously
this, reliance could not result in a waiver. The bank had provided February 2021. Further detail about the scheme will be announced
liable for actions of “rogue employee” and
the documents to the SFO knowing they might be deployed at the by the end of July.
7.2.2 Disclosure pilot extended by a year self-employed contractor
criminal trial. The decision leaves open whether the position
The disclosure pilot which is currently underway in the Business might have been different if the bank had had no involvement at For further information, see our client briefing here, or contact In Morrisons Supermarkets Plc v Various Claimants [2020] UKSC 12
and Property Courts, under Practice Direction 51U, was originally all in their deployment. Tim Leaver, Jenny Andrews or Nick Wright. the Supreme Court overruled the Court of Appeal and
intended to run for two years and so was due to come to an end on re-established that, when determining an employer’s vicarious
31 December this year. However, it was reported in the minutes of For further information, please see our summary of the 8.1.2 Important TUPE rulings on beneficial changes to liability, a key focus is whether the employee was pursuing their
a recent Commercial Court Users Group meeting that the pilot has decision here on our litigation notes blog, or contact terms and transfers to multiple transferees own, rather than their employer’s, objectives when doing the
been extended by a further year, to the end of 2021. The minutes Anna Pertoldi or Maura McIntosh. wrongful act. It is not sufficient for vicarious liability that the
The Employment Appeal Tribunal in Ferguson v Astrea Asset
state that certain aspects of the pilot have attracted criticism and wrongful act is of the same kind as those which it is within the
Management [2020] UKEAT/0139/19 ruled that a variation to an
part of the reason for extending it is to have as good a set of data employee’s authority to do, nor is the mere fact that the job
employment contract will be invalid where the sole or principal
as possible. provides the employee with “the opportunity to commit the
reason for the variation is a business transfer or service provision
wrongful act”. It is also not enough to show that the wrongful act
change within TUPE (the “Transfer of Undertakings (Protection of
For further information, please see the relevant minutes here, was the culmination of an unbroken temporal or causal chain of
Employment) Regulations”), even if the change is to the employee’s
or contact Anna Pertoldi or Maura McIntosh. events regardless of the employee’s motive. Employers should not
benefit. The ruling will be welcome news for clients and incoming
be liable for the acts of employees while pursuing their own rather
contractors on a service provision change, as it will render
than their employer’s objectives.
ineffective the use of “poison pills” by an incumbent contractor
attempting to discourage bidders by enhancing employment terms
and costs just before their contract ends. Parties seeking to rely on14 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 15
UK developments
The Supreme Court also ruled in Barclays Bank plc v Various Claimants introduce new reporting requirements around ethnicity as part of 8.2.2 Pensions Regulator opens door for schemes to
[2020] UKSC 13 that employers will not be vicariously liable for the its Corporate Governance Code, given the lack of progress on transfer to DB consolidators
actions of a self-employed person whom they have engaged, if the diversity targets by large companies. The introduction of
The Pensions Regulator has published details on the interim
individual is genuinely in business on their own account. mandatory reporting seems now to be a matter of when rather than
regulatory regime that will apply to DB consolidators
if, and large employers should be taking steps to plan now given the
For further information, see our blog post on Morrisons (“superfunds”) until the Government introduces a permanent
greater complexity and data privacy issues compared with gender
and Barclays Bank or please contact Tim Leaver or regime. This is a significant development and means that
pay gap data. The CBI have published a helpful guide here.
Anna Henderson. consolidation is now a genuine option for many schemes and
For further information, please contact Tim Leaver or sponsors to consider.
8.1.4 Court of Appeal ruling that no inducement of breach David Palmer.
What is DB consolidation?
of restrictive covenant where legal advice that
covenant “probably unenforceable” 8.2 Pensions DB consolidation involves the transfer of the assets and liabilities of
a DB scheme to a new scheme within a consolidator vehicle usually
In Allen v Dodd & Co [2020] EWCA Civ 258, the Court of Appeal has 8.2.1 New insolvency laws could seriously undermine requiring a payment to be made by the scheme’s sponsoring
ruled that an employer is not liable for inducing a breach of contract position of DB schemes employer. Following the transfer the consolidator takes on the
where it receives (and believes) legal advice that it is “more probable obligation to pay members’ benefits and the ceding sponsor is
The Corporate Insolvency and Governance Act 2020, containing
than not” that a restrictive covenant is unenforceable. This is so even relieved of its ongoing liability to fund the scheme. The sponsor’s
the most far-reaching reforms to UK insolvency law in over 30 years,
if the employer believes that there is a risk that a covenant will be held covenant is replaced by an employer entity within the consolidator,
came into force in June 2020.
to be enforceable and that employing the individual would breach backed by a capital buffer.
that covenant, and the court subsequently finds that to be the case. The Act has been introduced on an emergency basis to try to
Acknowledging that lawyers rarely give unequivocal advice, the court ensure that otherwise financially viable companies survive during Capital adequacy
held that employers should be able to act on legal advice, responsibly this unprecedented economic period. However, the reforms could The most controversial, and most critical, element of the regulatory
sought, even if the advice turns out to be wrong. push liquidity issues through supply chains by upsetting the delicate regime for consolidators are the capital adequacy requirements.
balance between creditors and suppliers under UK law. The Regulator stopped short of requiring consolidators to mirror the
The case highlights the importance of employers asking potential
capital adequacy requirements that apply to buy-out insurers.
recruits about restrictive covenants in their existing employment The Act also undermines the protection afforded to Defined Instead, consolidators will be required to hold sufficient funds to
contracts and seeking early legal advice on enforceability. (Previous Benefit (DB) pension schemes and the Pension Protection Fund ensure that there is at least a 99% probability of members’ benefits
authority has established that making a conscious decision not to (PPF) by introducing: being paid in full.
enquire into whether the relevant act would amount to a breach can
amount to knowledge.) If the legal advice is that it is more probable •New company moratorium: A novel, free-standing moratorium
To achieve a sufficient level of member protection, consolidators
than not that no breach will be committed, and the employer giving a distressed company up to a year’s protection during which
will need to meet a range of requirements relating to the scheme’s
honestly relies on that advice, it will escape liability for inducing a a “payment holiday” will apply to most pre-moratorium debts.
technical provisions, the size of the capital buffer, legally
breach of contract even if that advice turns out to be wrong. Of Restrictions will also apply to the commencement or carrying on of
enforceable intervention triggers and the extraction of value.
course, employers should also bear in mind that disclosure of legal proceedings against the company and the enforcement of
privileged legal advice cannot be done selectively – all advice on security. This could prevent DB schemes from taking steps to
Other key features
the same “transaction” may need to be disclosed. recover debts or enforce security against a distressed sponsor for
up to a year where a moratorium is in force. Two other key features of the interim regime include:
For further information, please contact Andrew Taggart or •Super-priority for bank debts and other lending: The legislation •an expectation that ceding employers will apply for clearance
Tim Leaver. grants super-priority to certain pre-moratorium debts (including before a transfer takes place; and
bank debts and intra-group loans) where a company enters into •an expectation that consolidators will not accept a transfer from
8.1.5 Growing support for mandatory ethnicity pay administration or insolvent liquidation within 12 weeks of a a scheme that is likely to be able to buy-out within the next
gap reporting moratorium ending. These debts will rank ahead of all other five years.
A Government consultation on mandatory ethnic pay gap reporting unsecured debts, including debts due to a DB scheme, and
(see our blog post here) closed in January 2019 and a response is debts secured by way of a floating charge. For further information on DB consolidation see our
yet to be published. However, recent events have propelled the •New restructuring process: Effectively an enhanced scheme of recent blog post, or contact Rachel Pinto, Marcus Fink or
issue of structural racism up the agenda for corporates and arrangement, this will enable a compromise to more easily be Alison Brown.
government alike: Downing Street has ordered a commission into imposed on dissenting creditors (by way of a “cross class
racial equality and a petition for calling for the introduction of cram-down”). This could remove any say that the PPF would
mandatory ethnicity pay gap reporting for companies with otherwise have over the terms of any restructuring.
250 employees or more has reached the 100,000 signature
threshold and will now be considered for debate in Parliament For further information on the impact of these reforms see
(although no date has yet been set). The Financial Reporting our blog post, or contact Rachel Pinto, Marcus Fink or
Council is also to discuss with government ministers its plans to Alison Brown.You can also read
