Snapshot
A summary of key UK legal and market developments affecting businesses
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// Edition 2, March 2024
Economic Crime and Corporate Transparency Act 2023 How does the Act change the risk of a business incurring liability as a result of financial misconduct by an individual?
Paul Langford Managing Knowledge Development Lawyer D +44 20 7246 7032
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Adam Pierce Partner D +44 7795 618323
View Business Crime & Investigations
Reforms to UK listing rules and prospectus regime What's changing for issuing companies and investors using the UK public capital markets?
View Capital Markets (Equity) and Capital Markets (Debt)
Commercial contracts - case law update Is it ever possible to exclude liability for fraud? Is a unilateral right to extend a contract repeatedly enforceable? Once a novation has taken place, can it be cancelled?
View Commercial Contracts
International trade - UK importing rules How will changes to rules on EU imports and the proposed UK Carbon Border Adjustment Mechanism affect UK manufacturers and UK importers?
View International Trade & Sanctions
UK AI Roadmap With the EU introducing a statutory legal framework for AI, how is AI regulation progressing in the UK?
View Data Privacy & Cybersecurity
Employment law update How are obligations on employers changing, including obligations to consult staff during a redundancy process, and to offer family friendly employment terms?
View People
// highlights
// CONTACTS
// all developments
Sarah Partridge-Smith, Senior Associate D +44 20 7320 5527
Timeline Expected to come into force in the second half of 2024.
Further material
Economic Crime and Corporate Transparency Act 2023: new failure to prevent fraud offence
View All Developments
Timeline Proposals are currently subject to FCA engagement with market participants, with formal consultations on rules expected in 2024. What does it do? Fundamentally reforms the structure of the UK prospectus regime, by repealing the current UK Prospectus Regulation and introducing a new regime which gives the FCA enhanced rule-making powers. An overarching aim is to improve the flexibility and responsiveness of the markets by providing a prospectus regime better tailored to the type of capital raising (e.g. on regulated market, off-market primary, rights issues, acquisition related). How might a UK business be affected? Companies accessing public markets for the first time and those raising further capital should benefit from more proportionate and streamlined processes. While a prospectus will remain a key feature of an IPO in the UK, the FCA will have greater discretion to determine when a prospectus is required and power to make rules on disclosure requirements, allowing for a more proportionate disclosure regime.
DGA Quotes/written commentary
Further materials
DGA Video
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Timeline From 26 December 2023. What does it do? The ECCTA has expanded the "identification doctrine" for all UK firms, by attributing criminal liability for financial crime offences – including fraud, money laundering, sanctions breaches and bribery – to a corporate entity where the offence is committed with the involvement of a "senior manager" of that entity. Previously, corporate criminal liability could only attach where a prosecuting agency could evidence that the "directing mind and will" of the company possessed the required state of mind. How might a UK business be affected? This expansion will deliberately make it much more straightforward for criminal prosecutions to be taken against firms as a result of individual misconduct. Where senior managers are involved, it will be harder for firms to distance themselves both financially and reputationally. If charged, firms face potentially unlimited financial penalties from the court. We expect a significant increase in corporate crime prosecutions across each of the key economic crime offences (fraud, bribery and money laundering). Senior individuals within a firm with responsibility for financial crime compliance and oversight will want to ensure the firm's internal controls are robust, to ensure that risks are managed effectively and any misconduct identified early. Where misconduct is identified, firms will want to consider their own potential criminal liability as part of any internal investigation.
Economic Crime and Corporate Transparency Act 2023: extension of the identification doctrine
Jessica Thorpe, Dentons Global Advisors, Business Intelligence
DGA's Business Intelligence team anticipates that the new failure to prevent fraud offence will lead to increased requests for pre-employment checks or due diligence reports for executive management. It may also lead to increased internal investigations into suspected or alleged violations of FCPA or the UK Bribery Act.
What does it do? The ECCTA has introduced a new corporate offence of failure to prevent fraud. Following the failure to prevent offences set out in the Bribery Act 2010 and Criminal Finances Act 2017, the ECCTA has introduced strict corporate liability (with no requirement to show misconduct by senior managers or the "directing mind and will" of the company) where: In these circumstances, the relevant corporate entity will be deemed to be liable for failure to prevent it, unless it can show that it has reasonable systems and controls in place at the time of the offence. How might a UK business be affected? The "failure to prevent" offence will initially only be applicable to "large firms" (those with at least two of the following: more than 250 employees; more than £36 million in annual turnover; more than £18 million in assets). However, all firms in scope or approaching those metrics should think about reviewing their internal financial crime control framework to ensure that it is sufficiently robust to provide a potential defence in the event of a fraud. Guidance on government expectations of "reasonable systems and controls" will be published this year. Firms should consider this carefully as part of their compliance horizon scanning. We are already working with clients on what this review work should cover.
a fraud is committed by a person "associated" with the business; and the fraud is intended to benefit the business, its subsidiaries, or a person to whom services are provided on behalf of the business (e.g. customers or clients of the business).
David Cohen, Partner D +44 20 7246 7535
Timeline The Regulations were made on 29 January 2024, but will have limited practical effect until the FCA has made new rules on public offers and admissions to trading. The FCA will consult on these proposed rules in summer 2024. What does it do? The Regulations provide the framework to allow the FCA to make the rules that will replace the UK Prospectus Regulation. This forms part of the UK's Smarter Regulatory Framework. An overarching aim is to improve the flexibility and responsiveness of the markets by providing a prospectus regime better tailored to the type of capital raising (primary, secondary etc.) and facilitate greater access to capital for companies that are not publicly traded. How might a UK business be affected? Debt issuers may be concerned about potential divergence between the new UK regime and the EU Prospectus Regulation. However, they should take comfort from various FCA statements acknowledging that the pan-European wholesale debt market must be allowed to continue to function effectively. As such, it is expected that the exemptions from the requirement to publish a prospectus under the new UK rules will be aligned with those in the EU regime. Until the new FCA rules come into effect, the UK Prospectus Regulation continues to apply to any public offers of securities in the UK, or applications to list securities on a UK regulated market.
Reform of the UK Prospectus Regime – the Public Offers and Admissions to Trading Regulations 2024
Timeline The Regulations were made on 29th January 2024, but will have limited practical effect until the new FCA and PRA rules regarding securitisations are made. The PRA and FCA launched consultations on their proposed new rules in July and August 2023 respectively. What does it do? The Regulations provide the framework to allow the FCA and PRA to make the rules that will replace the UK Securitisation Regulation. This forms a part of the UK's Smarter Regulatory Framework. Based on the 2023 PRA and FCA consultations, this will include changes to the form of the information that UK institutional investors must receive as part of their due diligence on third country securitisations (i.e. the new UK rules make clear that UK templates are not required for third country securitisations). Changes to the UK reporting templates are not proposed in these initial consultations but may follow in further consultations. How might a UK business be affected? UK institutional investors in securitisations will welcome several of the proposed clarifications in the FCA and PRA consultations, in particular with regard to due diligence requirements for third country securitisations.
The Securitisation Regulations 2024
Multiple Further Materials
UK Prospectus Regime Review Outcome: replacement of the UK Prospectus Regulation
Timeline The application window closed on 6 February 2024. What does it do? The financial promotions regime has been tightened up to ensure that Financial Promotions Approvers (FPAs) are not able to approve financial promotions relating to products and services that are outside the scope of their expertise. Existing FPAs had to apply to become permitted approvers by 6 February 2024. FPAs that have made applications for approval as a permitted approver may continue approving financial promotions unless their application is unsuccessful, at which point they must immediately cease approving relevant financial promotions. How might a UK business be affected? Firms that rely on an exemption to the Financial Promotions Order in relation to any financial promotions are unaffected. Firms that rely on approval by an authorised person for financial promotions should ensure that their approver has submitted an application for approval and also that they have not had their application refused. The Financial Services Register of the FCA has been updated to show whether a firm is authorised to approve financial promotions.
Conclusion of the application period for existing Financial Promotions Approvers
Neil Nicholson, Partner D +44 20 7246 7624
Timeline The FCA is currently consulting and working towards substantial progress by the end of 2023, though there is no firm date for adoption. What does it do? The core proposal is for a single listing category for equity shares in commercial companies (ESCC) to replace the current prem ategory, the ESCC will be a simpler, more disclosure-based regime, including reduced eligibility criteria for companies seeking to IPO. The proposal is designed to streamline and enhance the competitiveness of the UK listing regime for equity shares and promote access to listing for a wider range of companies. How might a UK business be affected? Commercial companies (wherever incorporated) with an existing UK premium or standard listing of equity securities will move to the new ESCC segment (subject to transitional arrangements). Separate listing categories and rules will remain for equity shares issued by investment vehicles and for issuers of non-equity securities. However, certain proposed changes will cut across listing categories and therefore may, to some extent, affect issuers outside the n ew ESCC segment.
No Further Material
Timeline The Financial Conduct Authority expects the new rulebook to be in force early in the second half of 2024. What does it do? The key change is a new single listing category for equity shares in commercial companies (ESCCs) which will replace the current premium and standard categories. Compared with the current premium listing category, key features of the ESCC listing category are reduced eligibility criteria for companies seeking to IPO and a simplified, more disclosure-based continuing obligations regime. How might a UK business be affected? The change is designed to encourage a more diverse range of companies to list and grow on UK markets and promote more investment opportunities for investors. Commercial companies with an existing UK premium listing of equity securities will automatically move to the ESCC category. A new transition category will preserve the status quo for existing standard listed companies (pending any decision to move into the ESCC category). For other issuers not falling within the ESCC category (such as companies with a secondary listing, investment vehicles and issuers of non-equity securities), separate listing categories will remain.
New UK Listing Rules
Nik Colbridge, Partner D +44 20 7246 7102
Timeline The Regulations were made on 29 January 2024, but will have limited practical effect until the FCA has made new rules on public offers and admissions to trading. The FCA will consult on these proposed rules in summer 2024. What does it do? The Regulations provide the framework to allow the FCA to make the rules that will replace the UK Prospectus Regulation. This forms part of the UK's Smarter Regulatory Framework. An overarching aim is to improve the flexibility and responsiveness of the markets by providing a prospectus regime better tailored to the type of capital raising (primary, secondary etc.) and facilitate greater access to capital for companies that are not publicly traded. How might a UK business be affected? Equity issuers should benefit from more proportionate and streamlined processes. While a prospectus will remain a key feature of an IPO in the UK, the FCA will have greater discretion to determine when a prospectus is required and power to make rules on disclosure requirements, allowing for a more proportionate disclosure regime. Until the new FCA rules come into effect, the UK Prospectus Regulation continues to apply to any public offers of securities in the UK, or applications to list securities on a UK regulated market.
Timeline Published in January 2024, applicable from 2025. What does it do? The 2024 Code updates the 2018 edition. The substantive changes largely focus on those parts of the Code that deal with risk management and internal controls. Most significantly, there are new reporting obligations which will require a board to include in its annual reporting a declaration as to the effectiveness of the company's material controls. New guidance providing advice, further detail and examples of good practice accompanies the updated Code. How might a UK business be affected? Premium listed and other companies that apply the UK Corporate Governance Code will have to apply the 2024 Code for financial periods beginning in 2025 onwards. However, the requirement for the new board declaration will come in one year later, giving boards additional time to strengthen their internal control processes and implement the new arrangements.
New UK Corporate Governance Code
James Melville Ross, Dentons Global Advisors, Complex Communications
Given the ongoing uncertain macroeconomic picture and political landscape, we anticipate a lag in IPOs until year end 2024, with 2025 seeing a possible capital markets rebound. DGA's Complex Communications team is on hand to guide companies through the listing process, providing an effective communications strategy throughout.
Paul Langford, Managing Knowledge Development Lawyer D +44 20 7246 7032
Timeline High Court decision – 12 January 2024. What does it do? The law has established that liability for fraudulent misrepresentation cannot be limited, on the basis of public policy reasons. For other types of fraud, the position is not completely clear-cut. This case looks closely at this very issue. The claim by Innovate concerned an academic research paper published in a well-respected scientific journal, which was alleged to have been infected by errors. The contract between the parties contained comprehensive limitation of liability provisions, but Innovate argued that these could not apply where the errors had been the product of dishonesty. It also fully excluded liability for loss of profits, unless due to fraudulent representation – but made no reference to fraud generally. Did this mean that dishonesty was therefore excluded? Innovate maintained that, as the breaches were committed dishonestly, the exclusion and limitation clauses could not apply. It relied on established case law which provided that "once fraud is proved, it vitiates judgments, contracts and all transactions whatsoever". The court considered that the exclusion of liability for loss of profits was applicable to all claims apart from fraudulent representation (and claims in respect of death and personal injury). Loss of profits caused by a breach of contract not involving a representation were therefore excluded, even if that breach was committed fraudulently. In any event, the court found no actual dishonesty. How might a UK business be affected? Key lessons from this case:
Is it ever possible to exclude liability for fraud? Innovate Pharmaceuticals v University of Portsmouth
Single Further Material
Timeline High Court decision – 16 November 2023. What does it do? Are contracts, which can unilaterally be repeatedly renewed, unenforceable since effectively they are perpetual contracts? The key question in this case was whether two franchise agreements, entered into in the early 1980s, were capable of being extended for ongoing five-year periods by Burke, or whether they had become terminable by Body Shop on reasonable notice. The problematic clause provided as follows: "This Agreement shall … continue in force for a period of Five Years … [Burke] shall be entitled to extend the term of this Agreement on the same terms and conditions as are herein provided including the provisions of this Clause for a further period of Five Years from the expiration of the term of this Agreement by giving to [Body Shop] a written notice at least three months before the expiration of the term of this Agreement". Did the agreements provide for an initial period of five years with one, single five-year extension, or repeated five-year extensions? If so, were the agreements terminable by Body Shop on reasonable notice? The court decided that the agreements did not limit Burke to one single extension of its original five-year terms. The court rejected Body Shop's case that a term should be implied into the agreements that after a reasonable time they would be terminable by Body Shop on reasonable notice. How might a UK business be affected? Key lessons from this case:
Is a repeatedly renewable term unenforceable as a perpetual contract? The Burke Partnership v The Body Shop International
How might a UK business be affectedTimeline High Court decision – 28 June 2023. What does it do? This case centred around a loan agreement which Oldham Athletic FC claimed had been novated to Simon Corney, the chairman, director and 97% controlling shareholder of the football club. The disputed novation was by way of a letter addressed to "Mr Corney, Oldham Athletic FC" which stated as follows: "We write to confirm that we have now made an agreement with Simon Corney. We can confirm that upon completion of the sale of Oldham Athletic (2004) Association Football Club Ltd the debenture with ourselves will be satisfied personally by Simon Corney". Oldham's view was that the letter had the legal effect of extinguishing the loan agreement and replacing it with a newly novated agreement under which the liability was borne exclusively by Mr Corney; or, alternatively, it contractually varied the loan agreement so as to relieve Oldham FC of any liability under it. Oldham had made a number of payments to Mr Corney. Necarcu claimed that consent was not provided from all three parties (Oldham, Necarcu and Mr Corney), so there could be no novation. Necarcu had also sent a further letter (again, addressed to Mr Corney, Oldham Athletic FC) attempting to cancel the disputed novation. The issues included: who were the parties to, and what were the terms of, the agreement referred to in Necarcu's first letter? Was there a novation of the agreement? Did the cancellation letter remove the effect of the novation? The court decided the agreement in the letter amounted to an express novation of the debt from Oldham to Mr Corney, and that the cancellation letter was ineffective to remove the effect of the novation in the earlier letter agreement. How might a UK business be affected? Key lessons from this case:
What is required for a valid novation? Can a novation ever be cancelled? Necarcu Ltd v Oldham Athletic
Variation or novation of a contract cannot be achieved by unilateral notification by one party to the other. Variation and novation require mutual agreement between the parties. Where an agreement is subject to such a condition, whether either party may withdraw is a question of construction of the agreement. Once a novation takes place, a new contract exists – novation therefore cannot be "cancelled", as it extinguishes the original contract.
A perpetual contract can exist, because there comes a time under every contract when the performance of both parties is no longer needed. In some situations, a contract which appears to be perpetual and irrevocable may be terminable on reasonable notice. Unless it operates in your favour, resist any attempt to include a one-sided termination renewal clause (or, conversely, termination for convenience) as the commercial implications can be very onerous. Even if a clause providing for unlimited, one-sided extensions/renewals operates in your favour, while this may seem like an excellent position, there is a risk that it could be successfully challenged. This sort of provision also has the potential to cause commercial tension over time, where one party clearly wants to exit the arrangement into which it is inextricably tied.
A contracting party cannot exclude liability for its own fraud in inducing a contract. However, it may be able to exclude liability for fraud in performing the contract, but case law suggests only where such fraud is undertaken by an agent or employee. Any such exclusion needs to be clear and unmistakable. However, most of us would never agree to a term which excludes liability for any type of fraud. Make sure any liability clauses in your contracts include a carve-out for fraud, rather than merely for fraudulent misrepresentation.
Rebecca Owen-Howes, Counsel D +44 77 3330 7375
Increased competition law enforcement in labour markets
DGA's Public Affairs team expects the Act to lead to more SMEs being awarded major contracts through 2024 with suppliers focusing more on their supply chain and its values, and how to communicate these credentials to potential partners.
William Wallace, Dentons Global Advisors, Public Affairs
Timeline Court of Appeal decision – 17 January 2024. What does it do? In January 2024, the Court of Appeal in CMA v Volkswagen AG & BMW AG Kingdom held that the CMA can require the production of specified documents and information by foreign companies for the purposes of a UK competition law investigation. How might a UK business be affected? This judgment (which may be appealed to the Supreme Court) is significant. It strengthens the CMA's ability to investigate, enforce against and deter anti-competitive conduct in the UK. The implications are as follows: The extraterritorial reach of the CMA's powers is subject to certain safeguards. These include a requirement to respect fundamental rights and a "reasonable excuse" defence for non-compliance. The extraterritorial powers are due to be strengthened in the Digital Markets, Competition and Consumer Bill.
Confirmation of the Competition and Market Authority's extraterritorial powers of investigation and enforcement
Timeline Expected to be law in October 2024. What does it do? The Procurement Act 2023 does the following: The Procurement Act 2023 will be supplemented by secondary legislation and guidance. How might a UK business be affected? The new regime will affect contracting authorities, including private utility companies and suppliers. Businesses that supply goods, works or services to organisations in the public and utility sectors:
The Procurement Act 2023 (limited application in Scotland)
Timeline Ongoing. What does it do? The UK Competition and Markets Authority (and international competition authorities generally) are taking a greater interest in labour markets. The CMA's position is set out in its January 2024 research report on "Competition and market power in UK labour markets" and accompanying speech, from which the following is clear: How might a UK business be affected? All businesses are active in labour markets. This may be through their HR departments, employees who participate in industry forums and events, trade unions and trade bodies. UK businesses therefore need to be aware of the severe penalties for competition infringements in labour markets. These include fines of up to 10% of worldwide turnover, director disqualification and imprisonment.
the CMA can request documents/information from any entity located inside or outside the UK; the recipient of a document/information request is assumed to have access to all documents and information of the "undertaking" as a whole, including a parent company outside the UK; for these purposes, the defining characteristic of an "undertaking" is joint and several liability or responsibility; a foreign company can be fined for failing to comply with a document/information request.
Timeline Expected to be law in October 2024. What does it do? The Procurement Act 2023 does the following: introduces a new consolidated public procurement regime regulating public, utilities, concessions and defence contracts (replacing the current four sets of procurement regulations); requires contracting authorities to have regard to a new set of objectives. These include acting, and being seen to act, with integrity when procuring public contracts; increases the level of transparency of the procurement and contract operation, with significantly more notices required to be published by contracting authorities on a central digital platform (such as a contract termination notice). The Procurement Act 2023 will be supplemented by secondary legislation and guidance. How might a UK business be affected? The new regime will affect contracting authorities, including private utility companies and suppliers. Businesses that supply goods, works or services to organisations in the public and utility sectors: will be able to register on a central digital platform; are expected to benefit from simplified bidding processes, which aim to make it easier for them to bid for work; should benefit from more flexible frameworks, so that suppliers are not shut out for long periods of time; should receive prompt payment in public sector supply chains through new terms implied into public contracts; and will be subject to a stronger exclusions framework, including a new discretionary exclusion ground for improper behaviour, and be at risk of being added to the new supplier debarment list which would impact a business's ability to participate in future procurements.
the law and policy on non-compete clauses may need updating, in particular to limit post-term non-competes to three months in Great Britain; the CMA is actively investigating suspected anti-competitive conduct, relating to workers' rates and non-poaching agreements, in three separate cases. It is reported that the CMA has a couple more labour market cases in the pipeline; businesses are at risk if they enter into wage-fixing agreements, non-poaching agreements and information sharing with other businesses; collective bargaining arrangements between self-employed workers and employers will not be prioritised for enforcement action.
introduces a new consolidated public procurement regime regulating public, utilities, concessions and defence contracts (replacing the current four sets of procurement regulations); requires contracting authorities to have regard to a new set of objectives. These include acting, and being seen to act, with integrity when procuring public contracts; increases the level of transparency of the procurement and contract operation, with significantly more notices required to be published by contracting authorities on a central digital platform (such as a contract termination notice).
will be able to register on a central digital platform; are expected to benefit from simplified bidding processes, which aim to make it easier for them to bid for work; should benefit from more flexible frameworks, so that suppliers are not shut out for long periods of time; should receive prompt payment in public sector supply chains through new terms implied into public contracts; and will be subject to a stronger exclusions framework, including a new discretionary exclusion ground for improper behaviour, and be at risk of being added to the new supplier debarment list which would impact a business's ability to participate in future procurements.
Esther McDermott, Partner D +44 20 7733 307 347
Timeline Updated versions of JCT are expected to be published later in 2024. What does it do? The JCT suite of construction contracts is relied on by many in the UK construction sector to allocate risk and responsibility fairly on construction projects. That said, many businesses have their own, preferred amendments to specific, frequently used contracts such as the JCT 2016 DB and the traditional JCT form. Recent legislation, including the Building Safety Act 2022, an increased focus on environmental considerations, sustainable development, and collaborative working and societal changes have prompted the JCT to undertake a review of its various standard forms. The aim of this review is to modernise, streamline and future proof their terms, such as by including gender neutral language and reflecting the terms of the UK government's Construction Playbook. How might a UK business be affected? The JCT suite of contracts is one of a number of standard form contract families that are commonly used in the construction sector, as well as FIDIC and the NEC. JCT users will need to review their own contracts when the JCT 2024 editions are published. Even if JCT contracts are not relevant to your day-to-day practice or sector, the JCT's decision to undertake a significant update in 2024 is a useful reminder of the need to review contract terms regularly, whether construction or commercial. Changes both to the law and in society can have significant legal implications if your commercial contracts are not updated to reflect such changes. It is simpler and more cost-effective to undertake a contract review than to deal with the potential consequences of changes in liability that are not covered by your contracts and which could lead to expensive, time-consuming disputes.
Expected changes to the JCT suite of construction contracts
Mark Macaulay, Partner D +44 20 7879 485 835
Timeline The new building control regime in England, as provided for by the Building Safety Act 2022 (BSA) and related secondary legislation, came into effect on 1 October 2023. Other BSA provisions (not yet in force) are anticipated, although implementation dates are not yet available. Various transitional periods under the BSA are due to end in April 2024. What does it do?
Ongoing implementation of the Building Safety Act 2022: what lies ahead?
Timeline Processes are underway to formally designate the tax and customs sites within the newly created Freeports areas (or "Green Freeports" in Scotland). Implementation of these processes varies across the UK, as do the dates on which the new tax and customs regimes within those areas will become operational. (See, for example, the UK government guidance on English Freeports: setup phase and delivery model guidance.) What does it do? The UK government established Freeports in early 2020 across the UK to stimulate growth and boost redevelopment and innovation. The UK's Freeport model includes a comprehensive package of measures including customs and tax reliefs, business rates reduction, planning, regeneration, innovation, and trade and investment support. Freeports must have their tax sites formally designated as such by the UK government/devolved Scottish/Welsh government to benefit from the various tax reliefs. These include an enhanced capital allowance of 100% and business rates relief. There are currently eight Freeports in England, two in Wales and two Green Freeports in Scotland, each at different stages of implementation. For example, the Scottish government has published maps and the outer boundaries for both Scottish Green Freeports but the tax sites within those boundaries are still to be announced. The UK government has produced maps of the eight successful English Freeports (updated 18 January 2024) but these are provided as an overview and do not show the legal boundaries of the Freeport tax sites. How might a UK business be affected? UK Freeports are opening up both short- and long-term opportunities across the construction sector. For example, businesses could benefit from government investment in transport and infrastructure projects and the more streamlined planning processes to aid brownfield redevelopment. Businesses moving into Freeport zones will need new/refurbished office/warehousing premises and businesses operating in the offshore renewable energy sector in particular (and particularly in Scotland) may seek to exploit the benefits that operating within those areas could bring. Further, Freeports will likely become hubs for international supply chains. To take advantage of the various tax reliefs, businesses must monitor government announcements and ascertain where exactly the tax site boundaries lie and plan accordingly. In this respect, it most certainly is a case of "location, location, location" as development opportunities "within" the tax site boundaries are likely to attract a higher value. Contractors, construction professionals, local developers and landowners should all be watching with keen interest.
Construction opportunities arising from the creation of UK Freeports
Methuselah Tanyanyiwa, Dentons Global Advisors, Complex Communications
The ongoing implementation of the Act remains complex. With the ongoing public pressure surrounding cladding issues, DGA's Complex Communications team expects construction entities to engage PR companies to ensure a more defined approach to stakeholder engagement and clearer communication strategies.
The transitional provisions under the BSA have enabled both Higher-Risk Building (HRB) works and non-HRB works to continue under the old, pre-1 October building control regime subject to certain conditions being met (such as the initial notice having been served on the local authority before 1 October 2023). The transitional period ends on 6 April 2024. The transitional provisions are complex but, in essence, parties who want to continue works under the old regime after 6 April 2024 must ensure that notice is served of the works being "sufficiently progressed" before 6 April 2024 (for HRBs) or of the works having started before that date (for non-HRBs). The transitional provisions that apply to changes to the building control profession also end on 6 April 2024. For example, the role of approved inspector is replaced with the new role of registered building control approver (RBCA) on that date, and approved inspectors must register as RBCAs before then. Second staircases will become mandatory in new residential English buildings higher than 18 metres, subject to certain transitional arrangements announced by the government in October 2023. The Scottish Cladding Bill was introduced in November 2023 and consulted upon by the Scottish government. Proposals include giving Scottish ministers powers to arrange "single-building assessments" to identify unsafe cladding in certain types of residential buildings higher than 11 metres.
How might a UK business be affected? The BSA has effected radical changes both to design and construction requirements and to the types of claims that can be established against those responsible for cladding (and other) defects. More change lies ahead. Building control is a complex area of law – should you be in any doubt as to whether your business or your supply chain can comply with the new laws, seek legal advice, including on whether your contracts protect you from the commercial risks.
Timeline Implementation is in progress with some provisions already in force, but not all key dates are yet known. What does it do? The Act introduces wide-ranging changes to Companies House and the information it keeps, with a view to improving corporate transparency. Companies House now has new and enhanced powers to query information supplied to it, request supporting evidence and remove incorrect information. There will also be some changes to Companies House filing and company law administration requirements for UK companies, limited liability partnerships and limited partnerships. How might a UK business be affected? Businesses will need to ensure that they are ready for the new filing and administration requirements as they come into force. Most significant, but with little yet known about the timing or detail, will be the requirement for UK company directors, persons with significant control over UK companies and those delivering information to Companies House to verify their identities through a designated process. For what is already in force and an overview of the other changes, please see the link on the right.
Economic Crime and Corporate Transparency Act 2023
Brian Moore, Partner D +44 131 228 7181
As a result of the Act, we expect requests for enhanced due diligence on commercial partners, or possible M&A or JV targets, to increase. DGA's Business Intelligence unit provides enhanced due diligence reports comprising publicly available information and source-led intelligence.
Antonis Patrikios, Partner D +44 20 7246 7798
Timeline The UK currently has no concrete plans for comprehensive AI regulation. By contrast, the EU is a significant step ahead, courtesy of the AI Act. However, there are various domestic AI activities and actions currently in motion. We set out below a snapshot of key aspects, as flagged in the UK government's recent response to its consultation on AI regulation, in our UK AI roadmap/timetable for 2024. What are the key components of the UK AI roadmap?
UK AI roadmap 2024
Nick Graham, Partner D +44 20 7320 6907
Dr. Kuan Hon, Counsel D +44 20 7320 3940
The UK government now considers that "some mandatory measures" will be necessary in all jurisdictions to address potential AI-related harms. How might a UK business be affected? Nothing has yet materialised in terms of domestic legislation. This is despite plenty of activity and discussion in this important area, as illustrated by the roadmap. We can expect to see proposals put forward and developed in 2024, particularly for advanced AI systems such as foundation models. In the meantime, businesses are advised to keep track of the above developments and make use of the numerous resources available, so that they are in the optimal position when UK AI regulation eventually arrives.
Ben Lewis, Dentons Global Advisors, Complex Communications
Cyber risk is also reputational risk. A business is judged on its ability to keep people's data safe, maintain business continuity and provide a safe operating environment for its people and customers. It is important to have a robust playbook which can be deployed during cyber-related crises, as the quality, timeliness and transparency of communication all feed into the regulatory process where penalties are assigned after major breaches.
DRCF AI and digital hub cross-regulatory advice: Pilot launch, where organisations can seek advice on innovative AI/digital issues that engage at least two UK regulators and benefit consumers, businesses or the UK economy. AI Safety Institute: Update on the new UK Institute's approach to evaluating/testing advanced AI systems – this update is now out. AI assurance introduction: For practitioners interested in finding out how assurance techniques can support the development of responsible AI. Also now out. An outline summarises this introduction. Monitoring/evaluation plan: The UK government will conduct a targeted consultation with a range of stakeholders on its proposed plan to continuously assess the effectiveness of the regulatory framework.Monitoring/evaluation plan: HR/recruitment AI use: Updated DSIT guidance is due in the spring. AI management essentials: For AI vendors to the public sector – there will be a consultation on whether this should be mandatory. Science of AI safety: An international report is due out. Securing AI models: A consultation will consider issues such as a potential Code of Practice for AI cybersecurity based on the NCSC AI cybersecurity guidelines. (Note that the UK PSTI Act applies from April, affecting consumer smart IoT products such as smartphones.) Regulators' approach to AI: UK regulators must issue updates on their approach to AI by 30 April. Responses from UK regulators and other UK public bodies have just been published.
Summer 2024
AI guidance to regulators: The UK government's initial guidance to UK regulators on implementing the UK's AI principles is to be expanded "by" the summer.
During 2024
AI-related risks to trust in information, deepfakes, disinformation etc.: There will be a call for evidence ("shortly", possibly in the spring). Regulatory powers/remits: There will be a review to highlight any gaps. Cross-economy AI risk register: There will be a targeted consultation on the register, which will include risk assessment methodology. Democracy and electoral interference risks: We now have the Online Safety Act and an international dialogue will be promoted before the next AI Safety Summit. Creative industries: The government will explore the approach to take here (e.g. transparency on IP rights holders' content input into AI models). Bias/discrimination in AI systems – solutions: Further work with the Equality & Human Rights Commission and ICO. Criminal law scope: To consider AI-enabled offences/harms.
Probably in 2024
Automated decision-making (ADM): The Data Protection and Digital Information Bill will clarify various aspects of ADM and provide more lawful bases for ADM. AI-driven markets' competitiveness: The CMA will have tools in this regard, under the Digital Markets, Competition and Consumers Bill. Automated Vehicles Bill: This will regulate self-driving technologies.
By end of 2024
Highly capable general-purpose AI systems: There will be an update on possible developer responsibilities/obligations in relation to such systems. Frontier AI safety emerging processes guide: An update will be issued.
Ongoing
AI Safety Institute: This will continue its testing and other work. There will be broad information sharing, including with other countries. AI lifecycle accountability: Consideration may be required with regards to the possible legal responsibilities and liability for other actors in the AI supply/value chain, including data or cloud hosting providers. Potentially, this could also extend to AI users. AI governance: The UK is working on increasing international collaboration on AI governance.
Spring 2024
Ultimately
Highly capable AI systems, including their open release: The government will engage on possible interventions regarding such systems. On possible scenarios that may arise in the context of AI development, proliferation and impact, a "non-policy" report is to be published "shortly".
Dan Bodle, Partner D +44 20 7246 7540
Timeline Ongoing. What does it do? This promises to be a significant year for group actions in the English courts. Justin Le Patourel v BT Group, the first opt-out collective proceeding to head to a full trial, was recently heard in the Competition Appeal Tribunal. This will be followed later in the year by the first of three trials in trains litigation relating to the sale of "boundary fares" by railway companies and by trial in Municipio de Mariana v BHP Group, the largest opt-in class action in the UK to date. In February 2024, the Tribunal also granted a collective proceedings order in Dr Gormsen v Meta Platforms, an opt-out class action against Facebook and Meta, following a revised application by the proposed class representative. How might a UK business be affected? The courts' approach to these group actions will likely set the tone for other claims down the line. The government has also recently announced plans to introduce a new law to reverse the impact of the PACCAR judgment on litigation funding agreements, which it notes will make it easier for the public to access third party funding when launching complex claims against large corporates.
A key year for group actions
Timeline Ongoing. What does it do? We expect the risk of climate change and other ESG disputes to remain a key concern for UK businesses in 2024. Activist groups and individuals are continuing to pursue a variety of actions for perceived ESG failings, including through derivative actions, claims of misrepresentation or mis-selling of financial products, and judicial review – which, despite being a challenge brought against the decisions of public bodies, has the potential to indirectly affect corporates. Regulators are also increasingly willing to scrutinise green claims made by businesses. How might a UK business be affected? Even where an action is unsuccessful and no damages or fines are imposed, widespread coverage of proceedings can cause significant reputational harm and indirectly impact on a business's financial performance. It is important that businesses devote sufficient resources to monitoring ESG compliance, both internally and across their subsidiaries and suppliers.
ESG disputes – a continuing risk
Louisa Caswell, Partner D +44 20 7320 6084
Timeline Ongoing. What does it do? Cyber attacks represent a growing risk to businesses. In particular, increased outsourcing practices can make businesses more vulnerable to cybersecurity threats which originate from third party systems. Meanwhile, a rise in the use of AI tools is expected to contribute to more sophisticated and frequent cyber threats. How might a UK business be affected? Cyber threats have the potential to affect every corporate regardless of industry sector. A breach of a business's cyber systems can have widespread repercussions for that business, including actions against it for breach of contract, regulator fines and reputational damage. The risk can be mitigated by putting in place adequate processes for the detection of cyber threats, an effective plan for addressing any data breach, and a thorough due diligence assessment of the cybersecurity of proposed suppliers before any contracts are concluded.
Data privacy and cyber disputes – a rising concern
We expect to see an increase in ESG supply chain investigations related to breaches by responsible parties, inaccurate reporting and poor governance through 2024. Where relevant, DGA's Business Intelligence team provides ESG-specific due diligence investigations to ensure that companies are complying with current guidelines and are not linked to parties with poor ESG records.
Emma Walsh, Dentons Global Advisors, Complex Communications
Greenwashing accusations, valid or not, also remain in play. DGA's Complex Communications team helps companies build a clear ESG strategy, enabling corporates to respond accurately to accusations and navigate crises when they arise.
Helen Bowdren, Partner D +44 20 7246 4866
Timeline EPR fees will now start to apply from October 2025, but data collection obligations remain live. What does it do? Extended producer responsibility (EPR) for packaging was introduced in the UK in 2023, with various data collection requirements kicking in throughout last year. Significantly, the implementation of EPR fees for packaging has now been postponed by one year, meaning no fees will be charged in 2024. The delay represents an acknowledgement of current economic pressures and sensibly allows more preparation time for businesses, local authorities and waste management companies. New recyclability markings, including the "Recycle Now" symbol and clear instructions on how packaging can be recycled, are set to become compulsory from 31 March 2026. How might a UK business be affected? The updated EPR regime will shift the full cost of packaging waste disposal to producers, significantly raising their fees. Despite the deferral, organisations must still comply with the current guidelines and report their 2023 packaging data this year.
EPR packaging fees delayed by one year
Timeline The UK government plans to finalise UK sustainability disclosure standards (UK SDS) by July 2024. What does it do? The EU Corporate Sustainability Reporting Directive requires companies to report on their sustainability practices, enhancing transparency for stakeholders and allowing them to assess non-financial performance. UK companies with EU subsidiaries may be impacted by the EU rules, which extend beyond direct scope, affecting entities along supply and value chains. The UK government has now confirmed that it is developing its own reporting standards (UK SDS), which will be based on the IFRS® Sustainability Disclosure Standards issued by the International Sustainability Standards Board. The UK government has confirmed that UK-endorsed standards will only divert from the global baseline if absolutely necessary for UK-specific matters. How might a UK business be affected? UK SDS will require corporate disclosures on sustainability-related risks and opportunities. They will apply to UK listed companies, large UK registered private companies and large LLPs. Precise disclosure requirements will be developed by both the UK government and the Financial Conduct Authority.
UK confirms development of its own sustainability disclosure standards
Adrian Yeo, Counsel D +44 7552 353994
Timeline 1 July 2025 with a transitional period ending on 1 January 2030. The PRA intends to publish its near-final policy statement on the UK implementing rules in Q2 2024. What does it do? Banks must have minimum levels of eligible capital to absorb potential losses on their exposures to customers. The regulatory capital requirement for an exposure is determined by its risk weighting. Basel 3.1 (also known as "final Basel 3" and "Basel 4") reduces the gap between the risk weights calculated under internal models (typically used by larger banks) and the standardised approaches (typically used by smaller banks). It also changes the risk weighting on certain products in an attempt to better reflect the real risks. The UK implementing rules will apply to all PRA-regulated firms. How might a UK business be affected? Some products provided by UK banks and other PRA-regulated firms are likely to become more capital intensive and so may become more expensive. Based on CP16/22, the PRA's consultation paper published in November 2022, this could include:
Bank regulatory capital rules – UK implementation of Basel 3.1
Greg McEneny, Partner D +44 7557 099381
Adam Pierce, Partner D +44 7795 618323
Timeline Legislation and new rules finalised by end of 2024, transitional period still unclear. What does it do? The forthcoming reforms to capital rules for UK insurance companies (known as the UK Solvency reforms) are designed to allow UK insurers to secure favourable capital treatment on a wider range of assets than at present, and therefore to utilise their capital to increase the available pool of assets into which they can invest. In particular:
Insurer regulatory capital rules – UK implementation of UK Solvency
uncommitted facilities, such as overdrafts; letters of credit; and loans to large, unrated corporates that are not "investment grade".
How might a UK business be affected? The government intends that these reforms will allow insurers to invest more money in large-scale UK infrastructure projects. Accordingly:
the requirement that assets that fall within the matching adjustment must have a fixed cash flow will be replaced with a requirement that assets should have a "highly predictable cash flow"; and assets whose rating falls below BBB will no longer be penalised (removing the so-called "BBB-Cliff").
non-financial services firms involved in the provision of infrastructure, or other long-term projects, might well now find themselves with a new source of investment; and insurers will find it easier to invest in firms which have considerable construction phases, and where cash flows carry a significant pre-payment risk.
Adam Pierce, Partner
Luci Mitchell-Fry, Counsel D +44 7795 618258
Use of CIGA procedures (nearly) four years on The first quarter of 2024 has seen a rise in UK insolvencies, particularly in the real estate, retail, leisure and construction sectors. With this trend predicted to continue, insolvency professionals and businesses are testing the robustness of the restructuring mechanisms introduced in the UK during the COVID-19 pandemic by the Corporate Insolvency and Governance Act 2020.
Market update
The Hunt v Singh decision introduces a new test. Where a company is challenging a liability but the company is insolvent if the challenge fails, the directors must consider the interests of creditors as well as members where they know or ought to know that there is a real risk of the challenge failing. This is distinct and different from the "real risk" of insolvency test which was rejected in Sequana. In the coming year, we hope to get further guidance from the courts on the knowledge test, which will provide more certainty to directors of companies in financial distress on the extent and timing of their duties.
a potential risk of insolvency (where the company owes its duty to members); a probable insolvent administration or insolvent liquidation (where the board has a duty to consider and have regard to the creditors' interests); or there being no prospect of avoiding insolvent administration or insolvent liquidation (where creditors' interests become paramount).
Directors' duties Following the Sequana Supreme Court decision in 2022, 2023 saw the first decision applying Sequana in an insolvency situation. The Sequana test concerns whether the company is in the territory of:
Restructuring plan. These have become increasingly popular (with their use doubling year on year) but have met with varied success. The government had proposed a streamlined procedure to reduce the cost for mid-market companies, but this appears to have been shelved for now. This and the robust approach to restructuring plans taken by HMRC in its recent guidance may make the use of restructuring plans an unrealistic prospect for mid-market companies that cannot pay HMRC in full. However, we predict that larger distressed companies, particularly those incorporated overseas, will continue to find the flexibility of restructuring plans attractive. The Court of Appeal's decision in Adler in January was welcome. Although the court overturned the previous sanction of the plan in question, the judgment showed support for the use of restructuring plans and paved the way for more creative and flexible plans to be used in large domestic and cross-border restructurings in future. Statutory moratorium. This has proved less popular, particularly for larger companies with capital market arrangements, or those looking to achieve a financial restructuring. This prompted the UK government to review the procedure in 2023, with a view to amending it. Unfortunately, we do not see any likelihood of any changes being implemented in 2024. However, the recent Grove case has provided much needed clarity on the use of the moratorium and may help to make them more attractive to small businesses on the verge of insolvency – at least where secured creditor support is in place. 2023 saw an increase in the numbers of monitors appointed, which looks set to continue in 2024. We remain optimistic that the tool will be used to plug the gap between administration and restructuring plans for smaller companies seeking to restructure their business in 2024.
Dan Lund, Partner D +44 20 7320 3754
Timeline To be implemented by 2027. What does it do? On 18 December 2023, the UK government announced its intention to introduce a UK Carbon Border Adjustment Mechanism (UK CBAM) under which a levy is imposed on imports of certain goods from countries with a lower or no carbon price. This follows the introduction of a similar measure in the EU (which is currently in a transition phase). The objective of the UK CBAM is to level the playing field between domestic producers and importers by ensuring that products manufactured outside the UK face a comparable carbon price to those produced within the UK. How might a UK business be affected? The UK CBAM could significantly increase the cost of importing certain products manufactured outside the UK. As a result, it could improve the competitiveness of UK manufacturers within the relevant product market. The design and delivery of the UK CBAM will be subject to further consultation in 2024, including the precise list of products in scope. We recommend that UK importers monitor carefully and participate actively in the consultation, as well as monitoring the evolution of EU CBAM.
UK Carbon Border Adjustment Mechanism
Roger Matthews, Partner D +44 20 7246 7469
Timeline The outstanding checks on EU imports are to be gradually rolled out in 2024. What does it do? On 29 August 2023, the UK government published its final Border Target Operating Model. This outlined a new risk-based approach to sanitary and phytosanitary (SPS) checks for food, animal and plant products entering the UK. It also set out new milestones relating to checks on EU imports, including:
New border controls for EU imports in 2024
Timeline Ongoing (latest sanctions package effective from 22 February 2024). What does it do? With effect from 22 February 2024, the UK has designated more than 50 new sanctions targets under its Russia-related sanctions regime, including Arctic LNG 2 (see here). On 15 December 2023, the UK introduced a whole new package of substantive measures, including a prohibition on the import, acquisition, supply and delivery of Russian diamonds and diamond jewellery (effective from 1 January 2024), and a new prohibition on the import and acquisition of certain Russian metals (effective from 15 December 2023). On 22 February 2024, the UK government also published its first sanctions strategy, explaining how the UK uses sanctions as a foreign and security policy tool, including in response to Russia's invasion of Ukraine. How might a UK business be affected? We recommend that all businesses consider the extent of their potential exposure to sanctions and take appropriate steps to ensure compliance. The UK's sanctions on Russia in particular are now very broad, potentially impacting activities with little or no direct nexus with Russia. Businesses that operate internationally should also consider the sanctions laws of other jurisdictions and regions, such as the US, EU, Canada, Australia, Japan and Switzerland. Sanctions enforcement is a regulatory priority in the UK.
Our recent publication "Sanctions Year-in-Review 2023" provides an overview of the key sanctions developments in 2023 as well as looking ahead to 2024. Note that there have already been substantive new UK (and EU and US) sanctions since this publication was issued.
UK Russia Sanctions
DGA's Business Intelligence team expects the UK to increase sanctions designations in 2024 and 2025. As a result, the demand for source of wealth reports for corporates and HNWs is likely to grow. Similarly, we envisage an upsurge in investigations into parties linked to transactions with a Russian (or other sanctioned state) nexus.
How might a UK business be affected? Despite digitisation of some processes, the new processes for EU imports will increase the paperwork required for importing goods to the UK from the EU and will, at least initially, increase the trading costs of importers. This, in turn, will likely impact the supply chains of UK businesses. To avoid any unnecessary delays and costs at the border, UK importers should familiarise themselves with the new customs processes and be prepared to comply with the import controls well in advance of their implementation in 2024.
30 April 2024: Introduction of full SPS and further document checks on medium-risk animal products, plants, plant products and high-risk food and feed of non-animal origin from the EU; and 31 October 2024: Requirement for safety and security declarations for EU imports enters into force.
Eleanor Hart, Partner D +44 7741 323250
Timeline The code is expected to come into force on 27 March 2024. What does it do? The new general code of practice (previously called the single code) brings together and updates 10 existing codes of practice into one set of clear, consistent expectations on scheme governance and administration. The code sets out how pension schemes should comply with the 2018 Governance Regulations and establish and operate an effective system of governance. The code also contains new sections on cybersecurity. These make clear that trustees and scheme managers are accountable for the security of scheme information and assets – research indicates there has been a 4,000% rise in data breach reports to the Information Commissioner's Office in 12 months (six in 2021/22; 246 in 2022/23). The Pensions Regulator has also updated its guidance on cybersecurity for the first time since 2018, to help trustees and scheme managers meet their duties to assess risk, ensure controls are in place and respond to incidents. How might a UK business be affected? UK businesses with occupational pension schemes can expect their scheme trustees to be evaluating how the scheme governance structure measures up against these new expectations and to be addressing any gaps. Employers can expect trustees to seek their input in areas such as cybersecurity and ESG, which extend beyond the scheme. Employers who indemnify their scheme trustees (as most do) should welcome this rigour.
The Pensions Regulator's new general code of practice
Timeline Many of the reforms will require new legislation and the timing of implementation is currently uncertain. What does it do? In July 2023, the Chancellor of the Exchequer, Jeremy Hunt, announced a package of proposed pension reforms in a speech at Mansion House. These have become known as the "Mansion House reforms". The proposed reforms aim to boost returns for pensions, unlock investment and strengthen financial services. They include:
Mansion House reforms
Timeline The new Defined Benefit Funding Regulations will come into force on 6 April 2024 and will apply to scheme valuations with an effective date on or after 22 September 2024. What does it do? The Regulations set out the requirements for defined benefit pension schemes when determining their funding and investment strategy. The new regime is expected to be the biggest change in defined benefit funding and investment strategies in nearly 20 years. It will impose new obligations on trustees, such as in relation to risk management, with a view to avoiding the need for further employer contributions as schemes near maturity. However, the Pensions Regulator's revised defined benefit Funding Code of Practice has yet to be published in its final form and we are also awaiting revised covenant guidance. Until we have these, it is difficult to assess the full impact of the changes. How might a UK business be affected? The new Funding Code may significantly change how trustees of pension schemes assess employer covenant and analyse risk. It may also result in employers having to provide stronger covenant support.
New defined benefit funding regime set to launch in 2024
In his 2023 Autumn Statement, the Chancellor announced further measures that build on the above proposals. These included a call for evidence on moving defined contribution schemes to a "lifetime provider model", under which an individual has one pension pot for life. How might a UK business be affected? These reforms are likely to encourage pension schemes to consolidate to give them the scale needed to invest in assets that support the UK economy. Employers should keep up to date with developments in this space and review their current pension offerings to consider whether they will align with the new reforms.
a commitment by many of the UK's largest defined contribution pension providers to allocate at least 5% of their default funds to unlisted equities by 2030; a joint consultation response with the Pensions Regulator and the FCA on a new Value for Money Framework for defined contribution schemes; a consultation response on a permanent superfunds regulatory regime for defined benefit schemes; and simplification of the UK's financial services rulebook to prioritise growth-friendly regulation without compromising the commitment to stability.
Alison Weatherhead, Partner, Head of People, Reward & Mobility – UK D +44 141 271 5725
Timeline Now. What does it do? When dealing with larger-scale redundancies involving 20 or more employees, statutory collective consultation rules apply. However, in situations where collective consultation obligations are not triggered, it is rare for consultation at a workforce level to be undertaken. In such cases, employers generally conduct consultations on an individual basis, adhering to established principles. However, a recent Employment Appeal Tribunal decision introduces the potential requirement for an employer to carry out "general workforce consultation" when redundancy proposals are still at a formative stage. How might a UK business be affected? This is an important case for employers as the approach of the Employment Appeal Tribunal differs from current common practice. Employers will now need to ensure that they consider whether to consult the workforce more broadly, at an early stage, even if the statutory collective consultation obligations have not been triggered. If employers do not conduct general workforce consultation, this will not automatically make any subsequent dismissal unfair, but the employer will need to justify why this did not take place.
General workforce consultation in individual redundancy processes – Employment Appeal Tribunal decision
Timeline From 6 April 2024. What does it do? Changes rules on flexible working, carer's leave, maternity, adoption, shared parental leave and paternity leave by:
Family friendly legislation
Timeline The new regulations came into effect on 1 January 2024. What does it do? The government has introduced new legislation to reform and codify certain employment law previously based on EU rules. Changes include:
Reform of holiday, record keeping and transfer consultation rules
General workforce consultation requires a new communications framework, mixing the highly targeted approach, generally advised in redundancies, with wider activations. Heightened speculation and engagement from external parties needs to be closely managed.
How might a UK business be affected? Employers should consider their current practices and make any necessary or desirable changes. This will be particularly important for those with part-year and irregular hours workers and/or employee populations who receive variable remuneration. These legislative changes come hot on the heels of a recent Supreme Court ruling that a three-month gap does not necessarily interrupt a series of unlawful deductions (as previously thought). This decision increases employers' exposure to claims for underpayment of holiday.
codification of "normal pay" for EU-based holiday entitlements; a new method of calculating holiday accrual plus "rolled-up" holiday pay permitted for part-year and irregular hours workers (these new rules apply to holiday leave years which start after 1 April 2024); removal of daily working time monitoring requirements under certain conditions; and amendments to employers' consultation requirements in the context of a transfer of an undertaking (which will apply to transfers from 1 July 2024).
How might a UK business be affected? Employers are advised to review their current policies and procedures in advance of April 2024, and ensure managers understand the practical impact of the changes.
granting the right to request flexible working to employees from their first day of service and making a number of other changes to the flexible working requests regime; introducing a right to unpaid carer's leave; extending existing redundancy protection to apply during pregnancy and for a period of 18 months after the birth or placement for adoption for those taking maternity, adoption or shared parental leave; and amending paternity leave rules so that the two-week period of leave can be taken in non-consecutive weeks at any time in the year following birth or adoption.
Michele Vas, Partner D +44 20 7320 5448
Roy Pinnock, Partner D +44 20 7246 7683
Timeline Applies to most large developments from 12 February 2024, small sites from 2 April 2024 and 'Nationally Significant Infrastructure Projects' from November 2025. What does it do? Planning consent granted for most development in England will be granted subject to a condition prohibiting commencement of development until a biodiversity gain plan has been submitted to the planning authority and the planning authority has approved the plan. The biodiversity gain plan will secure a 10% net increase in biodiversity (as measured in the statutory metric) against the site's pre-development baseline. Biodiversity enhancements can be secured by section 106 planning obligations relating to the development site, or other land, as well as conservation covenants (which allow positive covenants related to conservation to run with the land). A register for biodiversity gain sites is open. Landowners can record their land that is available for developers to draw on for biodiversity 'units' where off-site provision is being relied on. Planning application forms have been updated to include relevant BNG questions, with BNG guidance on gov.uk. How might a UK business be affected? Development now needs to consider BNG when masterplanning to maximise BNG onsite. Development relying on purchasing BNG to meet the legal requirement will be more costly. Land which can be enhanced for biodiversity is now a serious financial opportunity.
Biodiversity Net Gain in action
Timeline High Court decision – 17 January 2024. What does it do? The case provides guidance on the practical implications of the Hillside decision. It confirms that, when applying the established Pilkington principle:
Separate is not severable - R (on the application of Dennis) v London Borough of Southwark [2024] EWHC 57 (Admin)
How might a UK business be affected? Developers and practitioners should proceed with care when applying for planning permission, purchasing parts of development projects, and (re)financing projects that could give rise to Hillside as well as severability issues. Inserting the word 'severable' into a description of development of an already granted planning permission is insufficient to indicate severability, phased developments are not automatically severable, and local planning authorities should express unequivocally where a permission is intended to be severable.
the mere inclusion of phasing in a development does not in itself indicate that the consent for that development is severed into discrete planning permissions (i.e. intended to be able to operate as a 'mix and match permission' with other future permissions for discrete parts of the site); and an amendment making a planning permission severable is material in planning terms (meaning it cannot be made using the process for 'non material amendments').
Brian Hutcheson, Partner D +44 141 271 5431
Timeline Regulations likely in 2024 and expected to come into force in 2026 with some retrospective effect. What does it do? The Act contains powers to require disclosure of certain information relating to dealings and interests in land in England and Wales for permitted purposes. One such purpose is to increase transparency around contractual control agreements (CCAs) over development land, such as options, conditional contracts, pre-emption agreements and other contractual rights restricting dispositions. Information about the parties, type and length of agreement (but not, as currently proposed, price) would have to be publicly disclosed. How might a UK business be affected? Where an organisation has a CCA within scope, it will be required to publicly disclose information about it, irrespective of any confidentiality terms agreed with counterparties. Once in force, that disclosure exercise is likely to extend to CCAs entered since April 2021.
Levelling-up and Regeneration Act 2023 – disclosure of contractual control agreements over land in England and Wales
Bryan Johnston, Partner D +44 20 7320 4059
Timeline Regulations expected in 2024. What does it do? The Act creates powers for local authorities in England to hold rental auctions and subsequently contract to let vacant high street and town centre premises without requiring the prior consent of the owner, superior landlords or mortgagees. How might a UK business be affected? As proposed, premises in England:
Levelling-up and Regeneration Act 2023 – English high street rental auctions
Timeline Regulations for the English levy are expected in the next 6-12 months. There is currently no timeframe for the Scottish levy. What does it do? Each levy:
Proposed building safety levies in England and Scotland
How might a UK business be affected? When implemented, the levies will be an additional cost to be factored into the development of buildings with a residential element (including build-to-rent and purpose-built student accommodation) in England and Scotland, on top of existing costs such as Residential Developers Property Tax. Current proposals are for the levies to be charged on a development's floorspace, subject to various exemptions.
will form part of the building control process for buildings with a residential element within the relevant jurisdiction; and is designed to enable the government to recoup expenditure it has incurred, or will incur, in providing financial assistance for the remediation of building safety defects.
that are on a designated high street or in a designated town centre; that have not been occupied for a year (or for less than 366 days in the preceding two years); and for which the local authority is satisfied that occupation for a suitable high street use would be beneficial to the local economy, society or environment, will be vulnerable to the local authority initiating the process for a high street rental auction to let them to a third party for up to five years at the rent determined at auction, without the consent of the owner, superior landlords or mortgagees.
Mark Galea-Salomone, Senior Associate D +44 7552 719236
Timeline Came into force on 28 March 2023. What does it do? The UK's implementation of the OECD Mandatory Disclosure Rules for Common Reporting Standard Avoidance and Opaque Offshore Structures replaced the UK's DAC6 rules. These new rules have, as their primary focus, the disclosure by intermediaries of schemes that are intended to avoid or circumvent the Common Reporting Standard, or which obfuscate beneficial ownership via opaque passive offshore structures. They apply when the intermediary has a sufficient nexus with the UK. In many ways, these new UK rules align with the previous DAC6 regime, specifically the Hallmark D categories. How might a UK business be affected? Initially, the new rules did not always receive due attention, following the UK's decision to move away from the DAC6 regime. However, we are now seeing an increase in queries on how these rules apply, in particular in relation to finance transactions. A lender is likely to be considered an intermediary when providing finance, so may be within scope of UK Mandatory Disclosure Rules (UK MDR). In practice, there are instances when another intermediary involved in a transaction may need to report the transaction. All finance parties should nevertheless review their respective roles on an ongoing basis and keep an audit trail of any UK MDR analysis they have undertaken.
Mandatory Disclosure Reporting, one year on
Alex Tostevin, Partner D +44 7867 500979
AI guidance to regulators: The UK government's initial guidance to UK regulators on implementing the UK's AI principles is to be expanded "by" the summer. Highly capable AI systems, including their open release: The government will engage on possible interventions regarding such systems. On possible scenarios that may arise in the context of AI development, proliferation and impact, a "non-policy" report is to be published "shortly".
