UK Legal Update - Spring 2024

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Travers Smith LLP

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Our round-up of recent and forthcoming developments in UK law and practice for our international stakeholders.
UK Corporate/Commercial Law
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Our round-up of recent and forthcoming developments in UK law and practice for our international stakeholders.

Highlights

  • Beyond Brexit - New border controls for importing EU goods into the UK and the latest on the revocation of retained EU Law
  • UK signs the 2019 Hague Convention heralding the reciprocal recognition and enforcement of judgments
  • AI regulation, data and cybersecurity – UK's approach to AI regulation, data-sharing and improving cyber resilience
  • ESG – we discuss mandatory climate-related disclosures and reporting standards, new sustainability due diligence requirements and anti-greenwashing measures
  • ECCTA now in force – new UK corporate governance measures
  • UK employment law – ethical workplace issues and new rules on holiday entitlement and pay
  • Digital Markets, Competition and Consumers Bill - a tougher regulatory environment for digital platforms in the UK
  • Private equity - increased scrutiny by UK and US competition authorities
  • Investing in the UK - recent National Security and Investment Act trends
  • Real estate – biodiversity net gain planning requirement for new UK developments and reforming the UK leasehold ownership regime
  • UK tax - recent announcements in the UK Spring Budget, including the Non-Dom regime reforms and the latest on personal taxation and incentives for UK-based employees

AI, data and cybersecurity

1. The UK's approach to AI regulation

Governments across the globe are still grappling with how to balance promoting innovation and economic growth with protecting citizens' privacy, safety and other human rights.

In contrast to the approach adopted by the European Union, last year's UK AI White Paper proposed relying on the existing regulatory framework to address the risks posed by AI, with regulators guided by five cross-sectoral principles.

A year on, and the UK Government is still in no rush to regulate. Overall, the UK Government continues to believe that a non-statutory, context-based approach to regulating AI is the best way forward because it offers "critical adaptability" but acknowledges that the risks posed by general-purpose AI could still fall through the cracks. Read this update for more.

Smart AI Regulation

Our Smart AI Regulation series of briefings explores the UK's approach to the regulation of AI, highlighting its key differences from the EU's proposed AI Act.

2. EU Data Act now in force: what's the impact for UK data holders?

The EU Data Act (EDA) sets out new data-sharing rules in respect of connected products and came into force in January 2024. While its provisions are not yet applicable, we are advising our UK business clients to plan for the impact that the EDA will have on product designs, commercially sensitive information, terms and conditions, costs and GDPR compliance. Read this briefing for more.

3. Cybersecurity update

As the digital economy and emerging technologies, continue to grow at an exponential rate, so do cyber security risks.

Earlier this year, the UK Government called for views on its Cyber Governance Code of Practice, urging boards and directors to place the same importance on governing cyber risk as they do with other principal risks.

The EU's "NIS2" aims to strengthen cybersecurity for essential services and infrastructure and will be implemented by member states by October 2024. There has been no similar progress on the UK equivalent - the Network and Information System Regulations - initially announced by the Government in November 2022. However, cyber resilience for connected products is making headway, with the publication of regulations under the Product Security and Telecommunications Infrastructure Act in the UK for consumer connectable products (see our briefing) and the EU reaching political agreement on the Cyber Resilience Act, which covers similar ground.

As well as gearing up to comply with new legislation, we are advising businesses on their cyber incident response plans. Find out more about responding to cyber incidents and data breaches with our Mitigating a Data Breach: Insider Threats podcast series.

DORA: Cybersecurity for financial entities in the EU

Companies based in the UK or elsewhere who provide tech services to EU asset management firms should be factoring in new measures, coming into force in January 2025, designed to improve the operational resilience of the financial services industry.

Under the far-reaching EU Regulation on Digital Operational Resilience (DORA), "critical" providers of ICT services to financial services firms will be subject to EU oversight and UK and other non-EU entities may face restrictions in providing these services to EU financial firms. Firms have a substantial "to do" list to prepare for DORA over the coming months and, to be ready in time, they should be identifying and triaging their ICT contracts, reviewing them against those requirements and negotiating with service providers any contract amendments necessary to comply. Read our briefing for more.

Beyond Brexit/Regulatory reform

1. Retained EU law: what's changed and why does it matter?

From 1 January 2024, EU law which was retained on the UK statute book (previously referred to as "retained EU law") has a new name in the UK, "assimilated law", and different rules apply when interpreting it (as a result of the Retained EU Law (Reform and Revocation) Act 2023). This is important because there are still over 4,000 EU-derived measures on the UK's statute book – and following these changes, some of those laws may not mean quite the same as they did before the start of this year. For example, from 1 January 2024, UK legislation implementing EU Directives no longer has to be interpreted in line with the EU concept of direct effect.

Our briefing explains what has changed and what the impact on businesses in the UK and elsewhere is likely to be. It also provides a handy glossary of the new terminology, together with a timeline highlighting key dates in the development of retained EU law. For a "deeper dive", see our updated client guide Retained EU law: 10 key questions.

2. Importing EU goods into the UK: what's changing?

After much delay, the UK is finally introducing full border controls on imports of goods from the EU.

Since the end of the Brexit transition period on 31 December 2020, goods imports from the EU have continued to be treated differently from imports originating in the rest of the world but not for much longer. The following changes are expected to be introduced this year:

All EU goods (including agri-food)

Safety and security declarations to be required from 31 October 2024; this will bring EU imports into line with the documentary requirements for imports from elsewhere.

EU agri-food products only

Phasing in of additional controls to bring the following EU imports into line with the requirements applied to imports from elsewhere: (i) medium risk animal products, plants, plant products and (ii) high risk food and feed of non-animal origin:

  • 31 January 2024: health and/or phyto-sanitary certificates required;
  • 30 April 2024: documentary and risk based identity and physical checks to be extended to the same range of products (NB for medium risk products, physical checks will only be carried out in 1-30% of cases, as compared with the 100% inspection rate for high risk products).

EU suppliers need to be prepared for these changes. If goods arrive at the border without the correct documentation, they may be refused entry, leading to delays and extra costs.

Beyond Brexit Hub

For more on navigating the post-Brexit legal framework and business environment, including what's changed on retained EU law and why it still matters, visit our Beyond Brexit Hub.

3. Looking ahead: improvement to the UK-EU Trade and Cooperation Agreement (TCA)?

Following the next UK general election (likely to be in autumn 2024), should they win, a Labour government may seek improvements to the UK's trading relationship with the EU. These measures could include an agreement to ease imports/exports of agri-food, a better deal on temporary visits for business purposes and a youth mobility scheme to ease labour shortages for certain sectors, for example hospitality. Our guide to the TCA, as it stands, is here.

Spotlight on Regulatory reform

Take a look at Spotlight on Better Regulation, where we explore the opportunities and challenges for the UK as it looks to reform its regulatory framework following Brexit. The latest briefings in the series include:

Sign up to be notified of more content in this series. You can also use our Regulatory reform portal to check for the latest updates on changes to regulation across all areas on which we advise.

Company law

1. ECCTA: what's the latest?

All UK business organisations will be impacted by the Economic Crime and Corporate Transparency Act 2023 (ECCTA), a significant new piece of companies' legislation designed to clamp-down on the misuse of corporate entities in the UK, which passed into law in October 2023.

Key changes include:

  • extensive new powers for the UK's register of companies, Companies House, to check, query, remove or decline information submitted to, or already on, the companies register and share information with law enforcement bodies, where appropriate;
  • changes to the rules for registered office addresses and a new requirement for a registered company email address;
  • enhanced measures to improve the quality of financial information on the register;
  • new compulsory identity verification for all new and existing registered company directors, PSCs, LLP members and those delivering documents to the Companies House registrar; and
  • greater protection of personal data on the register to protect individuals from fraud.

The implementation of ECCTA is staggered. The first ECCTA-related measures came into force on 4 March. Our briefing Economic Crime and Corporate Transparency Act 2023 - what to do now | Travers Smith sets out which provisions are already in force and what UK businesses need to do now to get ahead on ECCTA.

2. ECCTA: new failure to prevent fraud offence

ECCTA also introduces a new UK corporate criminal offence for failure to prevent fraud. Although the new offence is not in force yet, large UK businesses should be looking to strengthen their governance arrangements now in preparation for the new offence coming into force later this year.

'LARGE" MEANS

250

more than 250 employees

£36m

more than £36m turnover and/or

£18m

more than £18m assets

Fraud, for these purposes, extends to fraudulent accounting, fraudulent trading and false statements by directors. Liability for the new offence may arise where an employee or agent commits fraud for the benefit of the organisation and the organisation did not have reasonable fraud prevention procedures in place. Furthermore, liability (with potentially an unlimited fine) can attach to:

  • the group company directly responsible for failing to prevent the fraud; or
  • the UK parent company, even if the relevant subsidiary/employee is based overseas and the fraud took place without the knowledge, consent or connivance of the UK parent.

Guidance on what those procedures should look like is expected from the UK Government before the offence comes into force, expected to be in late 2024.

For more on ECCTA, read Getting tough on corporate abuse: the Economic Crime and Corporate Transparency Act passes into law | Travers Smith.

Consumer protection

1. Digital Markets, Competition and Consumers Bill: update

The UK Digital Markets, Competition and Consumers Bill (expected to be brought in force later this year or in the first half of 2025) is expected to raise the stakes considerably for 'business to consumer' (B2C) businesses, as infringements will be punishable by fines of up to 10% of worldwide turnover. It will also impose new requirements on subscription contracts, which are key to the business models of many consumer-facing businesses. For more, read our briefing and take a look at our Competition section.

2. Anti-greenwashing measures

EU B2C businesses will be aware that the EU is pursuing tougher measures to combat misleading "green" claims about consumer products and services in the form of the Green Transition Directive (GTD) and the Green Claims Directive (GCD).

These initiatives underline the need to ensure that the evidential basis for any green claims is robust. Although, this is already a requirement even under current EU and UK legislation, the new legislation is likely to raise the bar even higher. Having left the EU, the UK will not be under any legal obligation to change its national law to reflect either the GTD or the GCD. However, the following points should be noted:

  • Could the UK follow the EU's lead? In 2022, the UK Competition and Markets Authority (CMA) recommended legislating to require businesses to disclose information on the environmental impact of their products and services, so as to enable consumers to make better informed choices. It also recommended adding certain types of misleading green claims to the list of blacklisted practices in the UK's unfair practices legislation (which is derived from the EU equivalent, discussed above). The UK Government has yet to respond to the CMA's report but if it were to take up the recommendation, this could result in measures similar – at least in some respects – to the GTD and the GCD.
  • Impact of the EU measures: As a third-country for EU purposes, traders in the UK are still likely to feel the effects of the GTD and the GCD, either where they are selling products or services into the EU, or through rising prices to reflect their suppliers' increased costs associated with substantiating and verifying green claims.
  • Tailing the EU's verification regime? The EU legislation is likely to create a new market for the provision of verification services. Some UK businesses may want to explore whether it is worth using the expertise developed by EU verification bodies in assessing environmental claims to substantiate their own claims – even where they don't propose to use those claims in the EU. Although the UK has yet to introduce a requirement for verification, this may happen in the future. Additionally, existing UK consumer law prohibits misleading claims – and an independent certification of the claim, if obtainable at a reasonable price, is likely to be helpful in defending it against challenge.

Even if the UK Government declines to follow the EU's lead in this area, the overall direction of travel in the UK towards higher scrutiny of environmental claims is already apparent – and in that respect, it mirrors developments in the EU. In 2021, the UK's CMA published the Green Claims Code (Code) to help "businesses understand and comply with their existing obligations under consumer protection law when making environmental claims" (see our briefing on the draft code here).

3. UK Court of Appeal looks at fairness of online B2C "click-wrap" contracts

After a software glitch incorrectly showed that a player had won £1 million in an online game, the UK Court of Appeal has ruled that former National Lottery operator Camelot did not need to make the £1 million payout, based on its "click-wrap" terms and conditions. Although this case is a useful confirmation that B2C click wrap terms work, it also highlights the importance of ensuring that relevant terms are clearly presented and that consumers have a reasonable opportunity to read them (even if they ultimately choose not to do so). The Court of Appeal also called for the Law Commission (the independent UK body responsible for ensuring UK law is fair, accessible and effective) to conduct a fresh review of this area of law, noting that there is a tension between achieving fairness to consumers and enabling traders to protect themselves contractually. Our briefing looks at the lessons for other B2C businesses, particularly where the contract is made online.

Competition

1. Digital Markets and Competition: EU and UK regulation of Big Tech

The past year has seen rapid development in tech regulation. Whilst the EU is ahead of the UK (with the Digital Markets Act (DMA) which came into force in November 2022) the UK's equivalent (the Digital Markets, Competition and Consumers Bill (DMCC Bill)) is expected to come into force in Autumn 2024, making far-reaching changes in these areas:

  • Digital markets: giving the UK Competition and Markets Authority (CMA) new powers to regulate "Big Tech". See our briefings on the new regime for scrutiny of Big Tech and what recent CMA activity tells us about the rationale for the new legislation.
  • Competition law and merger control: a series of changes designed to strengthen the UK's existing regimes.
  • Consumer protection: a significantly tougher enforcement regime, enabling the CMA to impose fines of up to 10% of worldwide turnover.

Whilst the EU and UK aim to tackle the same types of harm, the UK and EU regimes differ in form. The EU requires firms to proactively notify the Commission where a set of thresholds are met. There is a (rebuttable) presumption that such firms will be designated as "gatekeepers" and are therefore subject to the prescribed rules of the DMA in respect of their designated activities. The UK regime, in contrast, does not require proactive notification: it will be for the CMA (through its Digital Markets Unit) to investigate the question of designation where the regime's own (but similar) thresholds are met.

The DMA provides prescriptive ex ante rules that apply in a uniform way to all gatekeepers (with the potential for further specification), whereas the DMCC Bill will set tailored ex ante rules for each designated firm (albeit these need to be drawn from a wide list of options) and permit the CMA to remedy adverse effects on competition through ex post 'pro-competition interventions'. Whilst some firms will welcome the flexibility of tailoring, others may be more sceptical to the extent that different firms risk being subject to differing obligations within the UK, or a given gatekeeper being subject to different obligations as between the EU and UK. A further important development is that the UK DMCC Bill introduces a new, widely drawn reporting obligation on designated firms to report possible mergers and acquisitions activity before it takes place. Both the EU and UK allow for public enforcement (by the Commission/CMA) and private enforcement.

2. Private equity: A new enforcement area for US and UK competition regulators

Increased scrutiny of private equity investment is firmly on the radar for competition authorities, both in the US and UK. US antitrust enforcers are targeting the degree of leverage and market power that private equity firms have, in their view, amassed in certain sections of the US economy.

The UK CMA has, to date, taken a broadly neutral stance. However, 'roll up' acquisitions (whereby Private Equity firms buy up, and merge, multiple smaller or independent players in the same industry to benefit from economies of scale and valuations at higher multiples) are now likely to come in for closer scrutiny by the UK CMA. For more, read Private Equity: A new enforcement priority for the UK competition & markets authority? | Travers Smith

3. NSI Act trends

In the first two years of the UK's National Security and Investment Act 2001 (NSI Act) regime, the UK Government has readily taken strong action where UK national security concerns arise, prohibiting transactions in the case of acquirors linked to politically sensitive states and sectors that are key to the UK's national security. However, the UK Government has also demonstrated a pragmatic stance when considering the appropriateness of remedies packages even where politically sensitive states are involved.

To date, prohibitions have related to acquirors with links to China (or, in one case, to sanctioned Russian individuals) and transactions that pose risks to the UK defence sector, semiconductors (within the 'advanced materials' sector) or telecommunications. However, notifications have been received across all sectors covered by the NSI Act and therefore it is only a matter of time before the scope of sectors in which action is taken broadens. Indeed, clearances subject to remedies have now been seen, for example, in the emergency services, energy, satellite communications, critical national infrastructure (specifically for quantum timing and atomic clocks), software, aerospace and semiconductor spheres. A broad range of remedies have been imposed, typically including restrictions on the sharing of information and the maintenance of strategic capabilities in the UK.

The UK Government's action to date also reflects the focus of the NSI Act on the activities of the target, rather than purely the nationality of the investor. UK-based investors and acquirors based in politically friendly nations are not exempt from notification or from facing in-depth probes into their deals.

Where deals which do not raise material UK national security issues, the new system appears to be working efficiently. Filings are generally accepted by the UK Government within a few days, with clearance received within the initial review period without significant requests for further information. During the first two years of the regime, over 90% of notifications were cleared without detailed assessment.

Against this backdrop, the UK Government is considering potential changes to the regime, reviewing the sectors subject to mandatory notification and improving processes.

The UK Government recently approved a minority stake held in Vodafone Group Plc by Emirates Telecommunications Group Co. PJSC subject to conditions to mitigate the national security risks. The decision is an interesting example of the fact that even minority investments can give rise to concerns under the UK's NSI Act, and that sectors falling within the UK's 'Critical National Infrastructure' (including telecoms and telecoms infrastructure) are likely to remain of particular sensitivity for the UK Government in terms of national security. Read more here.

4. Competition litigation

Consumer-facing businesses active in the UK should be aware that there has been a huge increase in claims brought and collective proceedings orders (CPOs) granted in the UK in the past year.

The collective proceedings regime established by the Consumer Rights Act 2015, enables claimants to bring claims for redress for breaches of competition law, if the Competition Appeal Tribunal make a CPO.

In a landmark ruling, the UK Competition Appeal Tribunal (CAT) approved a settlement for the first time since the collective proceedings regime was introduced. The settlement relates to the 'roll on roll off' (RoRo) claim, following-on from the European Commission's 2018 infringement decision against several shipping firms. The class representative (Mark McLaren) brought an opt-out claim against 12 defendant shipping firms on behalf of UK consumers and businesses who had purchased or leased new cars or vans. In short, Mr McLaren's case is that vehicle shipping costs were unlawfully inflated as a result of the anti-competitive conduct, and that these inflated charges were passed on through delivery charges ultimately paid by end customers.

Whilst the judgment provides some clarity on the way in which the CAT will approach settlement (for example on the importance of parties setting out all of the pros and cons of the settlement before the CAT, and advancing expert evidence on the quantum and merits), key questions remain because the relatively small sums involved meant that the CAT and parties were prepared to take a pragmatic approach. In particular, some of the more difficult issues (on contribution and the reversion of unclaimed sums) did not have to be determined, so guidance from future cases is keenly awaited. For more, read this briefing.

Commercial contracts

1. Benchmarking clauses: getting the balance right

Benchmarking mechanisms in commercial contracts and agreements are intended to help customers to assess whether they are getting a good deal. But both suppliers and customers can sometimes end up feeling that the whole process is more trouble than it is worth. We recently published a briefing looking at how businesses can strike the right balance.

2. Liability: a new lease of life for UCTA?

It is relatively rare for contractual limitations of liability to fall foul of the UK's Unfair Contract Terms Act 1977 (UCTA) – so you could be forgiven for thinking that businesses with a UK presence do not need to be too concerned about UCTA. But a recent ruling by the UK Court of Appeal challenges some commonly held assumptions about the legislation and may mean that it becomes more of an issue in future – particularly for suppliers using standard terms.

As a result, businesses operating in the UK and supplying on standard terms may find that customers will be more successful in claims that wide-ranging exclusions of liability are unreasonable under UCTA. It is best to avoid exclusions which are so sweeping that they remove any possibility of a meaningful remedy for serious breaches. Alongside that, suppliers contracting under UK law should look to ensure that they always include a free-standing cap on liability – with a view to ensuring that even if certain blanket exclusions are found to be unenforceable under UCTA, the cap should survive (because without the cap, suppliers may face unlimited liability). Read this briefing for more.

Spotlight on Outsourcing

The hottest topic in outsourcing is the impact of artificial intelligence. To find out more, take a look at the latest issue of our Outsourcing Spotlight which also considers:

  • Pricing issues in the current high inflation environment;
  • Proposed reforms to UK employment law, including TUPE.

Our outsourcing video series also covers:

Dispute resolution

1. UK signs 2019 Hague Judgments Convention

2024 got off to a flying start with the welcome news that the UK Government had signed the 2019 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (2019 Hague Convention), a framework of rules facilitating the recognition and enforcement of civil and commercial court judgments between contracting states.

Since the end of the post-Brexit transition period in 2020, there has been no comprehensive reciprocal regime in place between the UK and EU member states for the enforcement of each other's civil and commercial judgments. A regime for the recognition and enforcement of civil and commercial judgments arising from disputes governed by qualifying exclusive English jurisdiction clauses does exist in the form of the 2005 Hague Convention on Choice of Court Agreements (2005 Hague Convention). However, judgments arising from disputes governed by non-exclusive or asymmetric English jurisdiction clauses are outside that regime's scope. One of the benefits of the 2019 Hague Convention, to which all EU member states except Denmark are parties, is that the need to draw distinctions between judgments arising from disputes governed by exclusive jurisdiction clauses, and those arising from disputes governed by non-exclusive or asymmetric jurisdiction clauses, will fall away. The 2019 Hague Convention will therefore go a long way to ensuring that all types of English civil and commercial judgments can be quickly and easily enforced in both the EU and, as other states join the Convention, around the world. The 2019 Hague Convention will come into force 12 months after ratification, which has not yet happened.

Spotlight on Investigations

Our Investigations Round-Up covers the latest trends and developments in the UK in the field of Investigations (i.e. regulatory and internal investigations, enforcement actions and disciplinary proceedings). In this edition we consider recent UK privilege case law, how to mitigate the tensions that can arise when both an employee and employer are under investigation by a regulator, and practical pointers to support those involved in investigations.

Listen to this podcast for a discussion of the circumstances giving rise to investigations in an ESG context and considerations around legal professional privilege when conducting an investigation.

2. Dispute Resolution round-up

Read our quarterly Dispute Resolution round-up for more about developments in the dispute resolution sphere from a UK perspective. This edition considers reforms to the UK's Arbitration Act 1996 and the consequences of the UK Supreme Court's recent decision in PACCAR (on which our firm acted) for the enforceability of certain litigation funding arrangements. And finally, the long tail of Italian swaps cases continues to play out in the financial markets disputes arena, generating an important UK Court of Appeal decision.

UK Employment law

1. Whistleblowing and investigations

The new EU Whistleblowing Directive, setting minimum requirements for whistleblowing policies and protections across the EU, applies to businesses in Europe with 50 or more employees as of December 2023. While the directive does not apply in the UK, some of our clients are in-scope and we are advising them to consider their global whistleblowing policies to ensure compliance, as well as delivering whistleblowing "speak up" training for staff and "listen up" training for managers on how to handle complaints.

The focus on whistleblowing and "speak up" reflects a wider expectation from regulators, investors and the media that workplace complaints, on issues such as bullying and harassment, are escalated and properly investigated.

2. Pay equality and transparency

The UK already has mandatory gender pay gap reporting for large employers (250+ employees). A new EU Pay Transparency Directive will introduce an EU-wide gender pay gap reporting regime from 2026, with stronger enforcement mechanisms. If there is a gender pay gap of 5 percent or more, employers will be required to conduct a joint pay assessment with their workers' representatives and EU member states will be required to introduce penalties for employers that break the rules. While the directive will not apply in the UK, UK businesses with operations in Europe may be caught. The directive will initially require annual reporting for businesses with 250+ employees and reporting every three years for businesses with 150+ employees.

In the UK, the Government is encouraging voluntary ethnicity pay gap reporting and a Labour Government would introduce mandatory ethnicity and disability pay gap reporting for large businesses.

International employment law: Spotlight on Hong Kong

In our latest podcasts, we are joined by our friends at Deacons to discuss some of the key considerations of employing staff in Hong Kong, including the hiring process, the end of employment and other key aspects of Hong Kong employment law.

These podcasts are part of our International employment podcast series, in which we speak to friends from law firms in a variety of jurisdictions and ask them about the key employment law issues and things to think about when employing staff in their country. Catch up on the rest of the podcast series here.

3. New sexual harassment duty

From 26 October 2024, employers in the UK will come under a new positive duty to take reasonable steps to prevent workplace sexual harassment. This new duty will apply to all UK employers regardless of their size or sector. Failure to do so could expose the employer to an uplift in compensation of up to 25 percent in a successful claim or – even where there is no claim – potential enforcement action by the Equality and Human Rights Commission (EHRC).

The EHRC is updating its statutory guidance to take account of the new duty but employers should begin preparing now by reviewing anti-harassment policies and training, thinking about implementing a standalone sexual harassment policy and also considering a wider culture audit to identify risk areas. For more information, please see our briefing on the new duty.

4. Flexible working and family friendly changes

On 6 April 2024, a number of changes to flexible working and family friendly rights will come into effect in the UK:

  • the right to request flexible working will become a "day one" right and employers will have a shorter period to respond to requests;
  • a new right to unpaid carer's leave will come into force for employees with caring responsibilities;
  • redundancy protection will be extended for pregnant employees and employees returning from maternity, adoption or shared parental leave; and
  • changes will be made to the way statutory paternity leave is exercised.

Employers should ensure their flexible working and family friendly policies are updated to reflect the changes. For more details of the changes see our January 2024 Employment Update.

5. Holiday entitlement and pay

A number of changes are coming into force in the UK in relation to some UK workers' holiday entitlement and pay for holiday years starting on or after 1 April 2024. The changes affect workers with irregular hours (such as casuals, zero hours workers and agency workers) and workers who work part of the year (such as term-time workers). For such workers, holiday will accrue at the rate of 12.07 percent of hours worked and employers will be allowed to pay "rolled up" holiday pay, by including an element for holiday pay in the worker's hourly rate.

Additional changes to the holiday rules came into force for all workers in the UK on 1 January 2024. They confirm what additional payments (such as commission and overtime) must be included in holiday pay and the circumstances in which statutory holiday entitlement may be carried forward from year to year.

Employers may wish to review their policies and practices on holiday and holiday pay in view of the above changes. Our November 2023 Employment Update has more details.

6. Competition issues for employers

While the US has long taken a strict approach to competition compliance in labour markets, the UK and the EU are now beginning to follow suit. No-poach agreements (where businesses agree not to approach or hire each other's employees) and wage-fixing agreements (where businesses agree to fix employees' pay or benefits) are particular areas of focus for enforcement. Please see our briefing for more details.

Keeping you on track with regulatory change

Catch up on the latest employment and business immigration developments by listening to our latest Employment update podcast.

Our In the Pipeline timeline guides you through forthcoming developments in UK employment law and business immigration.

Stay tuned for future podcasts and briefings by following the Employment team on LinkedIn.

Equity capital markets

1. Revised UK Corporate Governance Code

UK-listed company boards should be scrutinising their risk management and internal controls frameworks to ensure they are in a good place to meet the requirements of the revised UK Corporate Governance Code.

Following a lengthy consultation period, the UK Financial Reporting Council (FRC) unveiled its revised UK Corporate Governance Code (Code) in January. Listed company boards will have to take greater responsibility, not only for establishing the company's risk management and internal controls framework, but also for reviewing and maintaining its effectiveness on an ongoing basis. Also, as part of a trend towards greater board accountability, they must report on this in the annual report.

The revised Code will apply to accounting periods beginning on or after 1 January 2025 except for the new requirement for a board declaration on internal controls, which will apply to accounting periods beginning on or after 1 January 2026 – for more, read this briefing.

2. UK capital market reforms: update

The UK Financial Conduct Authority (FCA) is carrying out a radical overhaul of the rules applicable to UK capital markets to make London a more attractive place to list, and remain listed, for a broader range of companies. New UK Listing Rules are expected to take effect this summer. Take a look at our updated briefing for more.

ESG and Impact

1. CSRD (Corporate Sustainability Reporting Directive)

Larger companies with EU operations will be starting to think in earnest about how to tackle sustainability reporting under the CSRD, with most reports due in 2026 (but as early as 2025 for certain large, listed companies).

CSRD represents a step change in sustainability reporting, with more companies in scope, more data required and more stakeholder scrutiny than ever before and extraterritorial effect means that large multinational corporates with significant operations in the EU will be caught. Against this already challenging backdrop, updates to size thresholds for EU companies (and impacting which companies are in scope) and reports of potential "changes" to the regime over the last year have not helped companies with their reporting preparations.

Disclosures are required on material impacts, risks and opportunities (IROs) within a business's own operations and its value chain. In-scope businesses will need to carry out a "double materiality" assessment to determine which IROs will reportable.

Read our briefings CSRD – Getting to grips with the latest (and greatest?) corporate sustainability reporting | Travers Smith and CSRD: a moving target? | Travers Smith for more.

Sustainability Insights... in conversation

Listen to our new podcast series: Sustainability Insights ... in conversation. In the first edition, Simon Witney discussed topical issues – including the global ESG landscape and responsible AI – with Cornelia Gomez, Global Head of ESG at General Atlantic. Listen to the podcast here, and sign up here if you want the second edition to land in your inbox.

2. The EU Corporate Sustainability Due Diligence Directive: revived but reduced

After significant political turmoil, as EU-based firms will be aware, a revised draft Corporate Sustainability Due Diligence Directive was approved by EU Member States on 15 March 2024, meaning that it is likely to eventually become law later this year. While the obligations within the directive remain largely as previously proposed, the companies due to fall into scope have been significantly reduced in number.

Under the new draft, only those EU companies with 1000 employees and EUR450m worldwide turnover and those non-EU companies with EUR450m EU-derived turnover will be in scope. Once enacted, the CS3D will require EU and non-EU companies to conduct environmental and human rights due diligence across their operations, subsidiaries and chain of activities, and act on any impacts they identify. It will also be the first piece of EU legislation that mandates companies to adopt a climate transition plan.

The final steps of passage required for CS3D to come into force are expected to take place in late April. In a reaction against the continued delays to this legislation, there remains an ever-increasing list of countries refusing to wait for the EU and introducing corporate due diligence requirements into their own national law. Various sector-specific EU regulations also incorporate new due diligence obligations. Read this briefing for more.

Meanwhile, in the UK, a private members bill has been introduced in the House of Lords that would impose on UK entities similar obligations to those proposed under CS3D. The bill remains at very early stages and while it is generally considered that it is unlikely to pass, it is another indicator of the growing importance of international supply chain issues and the need for companies to put in place appropriate diligence processes in place to manage the risks it faces.

3. UK Sustainability Disclosure Regime

The UK is forging its own path on sustainability disclosures. The UK's answer to the EU SFDR is the FCA's UK Sustainability Disclosure Regime (SDR) which will start to apply (on a phased basis) from 31 May 2024 to FCA-authorised firms.

There will be an anti-greenwashing rule for all FCA-authorised firms, but the most significant changes will be for UK AIFMs, UK UCITS managers and distributors. These include sustainability disclosures and a product labelling regime. Read our briefing for more.

4. US SEC climate-related disclosure rules: worth the wait?

As UK firms will be aware, after much discussion in the market about how far the US Securities and Exchange Commission (SEC) would go in requiring companies to expand disclosure on emissions and climate-related risks, strategy and expenditure, the SEC has released the final, highly anticipated climate-related disclosure rules (Final Rules). The Final Rules are scaled back significantly from those proposed, resulting in far more limited requirements and less onerous disclosure than some markets participants feared (or hoped for).

Already adopted by the SEC, the Final Rules will go into effect this spring. One of the most controversial aspects of the proposed rule was the requirement to disclose scope 3 emissions – that requirement does not feature at all in the Final Rules.

The legal challenges to the rules have already begun. The Final Rules were adopted on 6 March 2024. The first suits were filed that day and by the end of the day on 8 March 2024, a combined 13 states had challenged the rules in two different U.S. Courts of Appeal, taking issue with the process through which the Final Rules were adopted, arguing that the Final Rules exceed the SEC's authority and challenging the required disclosure as impermissible compelled speech under the First Amendment to the US Constitution. Indeed, the 5th Circuit put the implementation of the Final Rules on hold on 15 March. More challenges are expected to be filed, from both the left and right. This is not a surprise. Given the certainty of future challenges in court, the SEC pared back the Final Rules significantly from what was originally proposed in order maximise the possibility that the Final Rules would survive. Whether this was enough to ensure safe passage through the legal challenges is uncertain. Time (and the Supreme Court) will tell. For more, read this briefing.

UPDATED ESG TIMELINE: HELPING YOU STEER YOUR ESG AGENDA

Our interactive ESG timeline is designed to help businesses navigate the rapidly evolving UK and EU regulatory landscape. Setting out recent and expected UK and EU legal and regulatory developments relating to ESG and wider sustainable business topics, the timeline can be filtered according to your business type or by ESG theme.

Finance

1. UK finance: What lies ahead for the rest of 2024?

Here's a brief snapshot of what to expect during the remainder of this year:

  • Sterling LIBOR: Sterling LIBOR (the reference rate of interest for many UK-based financial contracts) was discontinued from 31 December 2021 and, for a limited time period, a synthetic version of the rate was published for use in legacy contracts. The 3-month synthetic sterling LIBOR setting (which is the last remaining tenor) ceases on 28 March 2024. This means that there will be no sterling rate quoted after this date. Most companies have already worked with their lenders to remove any remaining LIBOR-related exposures in their loans. Read this briefing for more.
  • The International Organization of Securities Commissions is soon expected to finalise a new set of good practices in the leveraged loan and collateralised loan obligations markets.
  • The Financial Collateral Arrangements (No 2) Regulations 2003 are due to be repealed under the framework for the revocation of all EU retained law relating to financial services in the UK, established by the Financial Services and Markets Act 2023. There is currently no information on timing, but we are told the FCARs will not be repealed until suitable replacement legislation has been drafted.

Financial Services Regulation: what to expect in 2024

With elections around the world, the scope and volume of regulatory change is immense. This briefing takes a look at what's in the pipeline for 2024, including:

  • UK Financial Services Regulation
  • ESG and sustainable finance
  • Investment funds
  • MIFID II and investment firms
  • Prudential regulation
  • Financial markets infrastructure and payments
  • Fintech and AI
  • Organisational regulation
  • Markets and trading
  • Money laundering and financial crime

2. EMIR 3.0

Planned reforms to EMIR this year will impact all users of derivatives in the EU (and, indirectly, UK and other non-EU users of derivatives that face EU counterparties), especially banks, investment firms and asset managers.

Financial institutions should be looking to build the rule changes into their operations and expect enhanced scrutiny in some areas where, historically, non-compliance has been most widespread.

The UK's version of EMIR is also being revised to align with the EU. The opportunities for arbitrage between the EU and UK rules are likely to be limited, but there will be an increased compliance burden for businesses with a multi-jurisdictional footprint. Read this briefing for more.

UK pensions

1. Automatic enrolment extension

A new UK statute, the Pensions (Extension of Automatic Enrolment) Act 2023, lays the ground for extending employers' pensions automatic enrolment duties. The changes will mean that contributions must be paid on all basic pay as the lower threshold (£6,240pa) will be removed. In addition, the minimum age for automatic enrolment, currently 22, will be lowered to 18. These changes are not yet in force and will be implemented by regulations in due course. However, businesses should be considering how to manage the potential cost of this extension.

2. Pensions dashboards: update

The UK Government has recently published its guidance on dates for schemes to connect to the pensions dashboards central infrastructure, and the UK Pensions Regulator is urging schemes to continue their preparations. Read our updated article "10 actions for getting to grips with pensions dashboards" and watch these useful video discussions.

Spotlight on UK Pensions

Catch up on the latest developments by listening to the latest edition of What's happening in Pensions. Use our Pensions Radar to keep track of future changes in UK law affecting work-based pension schemes.

UK real estate

1. Residential leasehold reform

The King's Speech in November 2023 included further announcements about leasehold reform. In the UK, leasehold title is a common form of property ownership. In comparison with freehold title, leasehold title is limited, as leasehold owners are tenants of a property for a fixed period of ownership. Far-reaching reforms are proposed, as this briefing explains.

2. CMA housebuilding report

The UK Competition and Markets Authority (CMA) has opened a new investigation into eight UK-based housebuilders - Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey and Vistry – in light of evidence suggesting that they may be sharing non-public information between them, including sales prices and details of incentives for buyers. As explored in this briefing, this investigation stems from a recent CMA report which concluded that significant intervention is needed to ensure that a sufficient quantity of good quality homes are delivered, and recommended streamlining the planning system and increasing consumer protection.

3. Biodiversity net gain

Since January 2024, certain planning permissions in England have been subject to a new pre-commencement condition requiring a biodiversity gain plan for the development. The condition will require the developer to submit, and have approved, a plan which demonstrates how a 10% gain in biodiversity value will be achieved.

10%

10% is the statutory minimum – many local planning authorities will set higher targets

Biodiversity net gain represents a significant new requirement and there have been concerns amongst developers and local planning authorities alike about how the current English planning system will cope. Read this briefing for more.

UK tax

1. UK Tax Spring Budget 2024

The UK Spring Budget 2024 delivered a fairly muted set of tax proposals. The abolition of the UK's current tax regime that applies to non-domiciled individuals (Non-Doms) and cuts to National Insurance contributions (NICs) were the most significant changes announced. Other measures included an extension of the energy profits levy, a reduction in the capital gains tax rate on residential property disposals and new anti-avoidance provisions to the complex transfer of assets abroad regime in relation to transfers by close companies. This Briefing looks at the Budget announcements in further detail.

Insights '24

Insights '24 is our annual asset management round up of what to expect in the year ahead. Insights explores what we think will be the strategic priorities for the year and risks to watch out for, in addition to the most important legal, tax and regulatory issues relevant to the challenges and opportunities for the industry. Read it here.

Travelling. Seamlessly.

Our Travelling. Seamlessly. global mobility podcast series explores the implications of moving your people and operations into and out of the UK, in a variety of contexts.

Listen to the latest episode discussing we discuss with our friends at Choate Hall & Stewart the key features that distinguish UK and US approaches to the structuring of management incentive plans in a private equity context. Catch up on the whole series here.

UK Incentives and Remuneration: Winter update

Our Winter 2024 Update looks at the latest developments in the broad field of employee incentives and remuneration and consider what is in store for the year ahead.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

UK Legal Update - Spring 2024

UK Corporate/Commercial Law

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It’s not just law at Travers Smith. Our clients’ business is our business. Independent and bound only by our clients’ ambitions, we are wherever they need us to be. We focus on key areas of work where we are genuinely market leading. If it’s hard – ask Travers Smith.
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