GENERAL COUNSEL UPDATE

A MULTIJURISDICTIONAL GUIDE

25 FEBRUARY 2021 HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 01

Contents

page UK developments ...... 04 1. Covid-19 ...... 05 2. Brexit ...... 06 2.1 Where are we now? ...... 06 2.2 End of transition and “retained . .EU . . . . .law” ...... in . . . . the UK. . . . 07 2.3 The UK’s “roll-over” free trade ...... agreements ...... 07 3. Competition, regulation and trade ...... 07...... 3.1 Court of Justice confirms Goldman Sachs’ liability . . . . .in . . . . power07 cables cartel 3.2 Proposed EU legislation to overhaul the regulation ...... of . . . . digital08 platforms 4. Construction ...... 08 4.1 Building safety: External wall safety . . .and . . . . .form EWS1 ...... 08 4.2 Building safety: Construction Products Regulation ...... 09 ...... 4.3 Delay liquidated damages: Upcoming Supreme Court judgment on the application of delay liquidated damages where work incomplete at termination ...... 10 5. Corporate ...... 10 5.1 Listing Regime: Final FCA rules on climate change-related ...... 10financial disclosures 5.2 Corporate governance: Consultations on corporate transparency and Companies House ...... 10 6. Dispute resolution ...... 11 . 6.1 Arbitration ...... 11 6.1.1 Supreme Court hands down decision in Halliburton v Chubb ...... 11...... 6.1.2 2021 DIFC-LCIA Rules now in force ...... 11 6.1.3 ICC Rules 2021 now in force with updated Note to Parties . . .and . . . 11Arbitral Tribunals 6.2 Banking litigation ...... 11 6.2.1 High Court confirms current scope of Quincecare duty is limited to protecting corporate customers and does not extend to individuals ...... 11 6.2.2 High Court provides further insights on the risks of Quincecare . claims. . . 12 against banks 6.2.3 High Court considers First Tower judgment in the context of no-advice clauses and confirms UCTA does not apply ...... 12 6.3 Litigation ...... 13 6.3.1 Disputes following end of Brexit transition . . . . .period ...... 13 6.3.2 Witness evidence reforms finalised ...... 13 6.3.3 Damages-Based Agreement (DBA) regime clarified ...... 13. . . . . 02 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 03

Contents

page page 7. Employment and . .pensions ...... 14 14. Real estate and . .planning ...... 21 7.1 Employment ...... 14 14.1 Real estate ...... 21 7.1.1 Further extension of Coronavirus Job Retention Scheme ...... (CJRS) ...... 14 14.1.1 Leasehold reform – abolition of ground rents and the rise of commonhold...... 21 7.1.2 Restrictive covenants: possible reform and impact of probationary period14 ...... 14.1.2 Restrictions on landlords with (let) commercial premises ...... 21 7.1.3 Collective redundancies: increased risk that consultation obligations will 14.2 Planning ...... 21 apply to batches of redundancies ...... 14 14.2.1 Consultation – Supporting housing delivery and public service infrastructure . . .21 . . . . . 7.2 Pensions ...... 14 14.2.2 Consultation – National Planning Policy Framework and National Model Design Code22 . . . 7.2.1 Courts and Ombudsman open door for pension scheme members to 15. Tax ...... 22 claim for investment losses ...... 14 15.1 Office of tax simplification: review of capital gains tax ...... 22...... 7.2.2 M&A, restructuring, re-financing and dividends likely to be hit by new pensions offences and regulatory sanctions ...... 15 15.2 DAC 6 – Disclosable cross-border tax . . arrangements...... 22 8. Finance: banking, insolvency and . . . . . restructuring...... 15 15.3 Spring budget – 3 March ...... 2021 ...... 23 8.1 LIBOR transition ...... 15 16. Technology, media and telecommunications, sourcing ...... and...... data 23 8.2 Environmental, social, and governance ...... (ESG) ...... 15 16.1 International data transfers and Brexit: Deal grants an interim data transfer window and European Commission launches process for adopting adequacy decision ...... 23 8.3 Catalyst and strengthening the . . balance...... sheet...... 15 16.2 European Digital Services Act and Digital Markets Act: A new era for 8.4 Corporate Insolvency and Governance Act 2020 ...... 16...... online regulation in Europe ...... 24 8.5 Cross border insolvencies ...... 16 9. Finance: debt capital . . . . . markets...... 16 International developments ...... 25 9.1 LIBOR transition ...... 16 17. Hong Kong ...... 26 9.2 ESG Bonds: publication of the climate . . . .transition ...... handbook . . . . 17 17.1 SFC releases FAQs simplifying compliance with electronic data . . . storage26 requirements 9.3 Brexit ...... 17 18. Malaysia ...... 26 10. Financial services regulation ...... 17 18.1 BNM opens applications for up to five digital bank licences . . .26 ...... 10.1 Update on Brexit and financial . . . . .services ...... 17 19. Singapore ...... 26 10.2 Woolard Review on unsecured consumer credit market and regulation18 of BNPL ...... 19.1 MAS issues revised guidelines on technology .risk . . . . .management ...... 26 11. Insurance ...... 18 20. UAE ...... 27 11.1 Brexit – implications for insurance ...... sector...... 18 20.1 Timely amendments to UAE Bankruptcy Law introduced to cover 27emergency situations . . 11.2 FCA introduces remedies to address "price walking" in general insurance18 markets . . . . . 21. United States ...... 27 . . . . . 11.3 Supreme Court judgment in FCA’s Covid-19 business interruption . . . insurance19 test case 21.1 US State Department provides guidance on human rights due diligence regarding 12. Intellectual property ...... 20 surveillance-capable products/services ...... 27 12.1 The Trade and Cooperation Agreement and its impact on IP, pharma and 21.2 US agencies clarify due diligence expectations for charities and medical devices ...... 20 non-profit bank customers ...... 27 12.2 Enforcement of IP rights across online platforms and against ...... intermediaries . 20 12.3 The Unified Patent Court commencement process – a short delay while Germany considers further challenges ...... 20 13. Public and administrative ...... law ...... 20 13.1 Government launches independent review of the Human . . .Rights ...... Act20 1998

Please do not hesitate to contact any of the named people for further information on the items set out below . We would also like to hear whether you wish to receive this update more regularly or have other suggestions for its improvement . Please e mail your comments to Alex Wood or your relationship partner . 04 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 05

UK developments

1. Covid-19 The devolved administrations in Scotland, Wales and Northern Ireland put their own rules and plans for ease of restrictions in place . What has happened since the last edition? Scotland and Wales went into lockdowns, with gradual release of New three-tier system measures starting on 22 February and 19 February respectively . After the end of the four week second national lockdown on Northern Ireland entered a 6-week lockdown on 26 December 2020, 2 December 2020, England was placed under a strengthened which has been extended for another four weeks . three-tier system planned to last until the end of March 2021 . Some of the rules under the enhanced system included re-opening Roadmap for release of measures of non-essential retail in all three tiers; closure of pubs and bars On 22 February 2021, the Prime Minister announced England’s unless operating as restaurants in tier 2 and no mixing of four-step roadmap on the gradual release of the lockdown households indoors and most outdoor places in tier 2 and 3 measures . According to the plan, four tests need to be met before respectively . Measures were intended to be eased for Christmas England moves to each stage, namely: Eve and Christmas Day, so that mixing of three households could be •successful deployment of the vaccine programme; allowed . More areas were put in higher tier than there were prior to the November lockdown . •evidence that vaccines sufficiently reduce hospitalisations and deaths in those vaccinated;

On 14 December 2020, Health Secretary Matt Hancock announced •infection rates do not present risk for rapid increase in that a new variant of the virus was fast spreading across southern hospitalisation numbers that would put unsustainable pressure England and London . Following the rapid spread of this on the NHS; “Kent strain”, a new tier 4 was introduced on 19 December 2020 for London and south-east England, which largely reflected the •assessment of the risks is not significantly changed by new restrictions of the second lockdown and cancelled expected easing variants of concern . of measures for Christmas . Households in lower tiers could only mix on Christmas Day . On 30 December, more areas in England Each stage will last at least five weeks . The first step set for 8 March were moved to tier 4, with most schools planned to remain closed includes re-opening of schools and colleges, allowing outdoor at the beginning of January . exercise and recreational activities with one’s household, support bubble or another person . On 29 March, outdoor gatherings of two Third lockdown households or up to six people will be permitted and outdoor sport Despite the tightening of measures, England continued to witness facilities will re-open . The second stage, which will commence no rapid increase in Covid-19 cases with 30% increase in hospital earlier than 12 April, will see various businesses re-open, including patients in a week on 4 January 2021 and 40% more hospital all retail; personal care services, such as hairdressers and nail admissions than the peak numbers of April 2020 . A third national salons; most outdoor attractions, such as zoos and theme parks; lockdown which replaced the tier system was imposed on 5 January gyms; outdoor seating of restaurants and pubs; self-contained 2021, where all non-essential retail, hospitality and personal care accommodation; libraries and community centres . The next stage services, schools and gyms had to close and people were only taking place no earlier than 17 May involves allowing outdoor allowed to leave their homes for five legally permitted reasons . gatherings of up to 30 people; outdoor performances such as The measures were set to last at least until mid-February . cinemas and theatres, up to 10,000 people in the largest outdoor venues; re-opening of indoor hospitality venues and indoor On 15 January 2021, with fears over possible new variants entertainment venues with up to 1,000 people or 50% capacity . becoming resistant to vaccines, the UK suspended all travel The last stage is set to take place no earlier than 21 June and plans corridors meaning that passengers arriving in the UK need to to re-open the remaining businesses, including night clubs and to quarantine for 10 days and have to present negative Covid-19 test lift all restrictions on social contact . taken up to 72 hours before arrival . During quarantine, passengers also need to take a test for variant surveillance on or before day 2 of UK vaccines roll-out programme isolation and present negative Covid-19 test result from a test taken On 2 December, the UK became the first country in the world to on or after day 8 . The Test to Release scheme allows people to take authorise a vaccine that had been tested in a large clinical trial . It did a Covid-19 test after five full days in England and end their so using emergency use authorisation . It then launched its quarantine early, if they test negative (they would still need to have vaccination programme with supplies from three different vaccine a test on or after day eight) . The UK has also introduced 10-day providers, namely Oxford University-AstraZeneca, Pfizer-BioNTech hotel quarantine for individuals arriving from a country on a and Moderna . It hit its target to have offered a first dose of the “red list” (currently consisting of 33 states including Portugal, vaccine by 15 February 2021 to everyone in the top four priority United Arab Emirates and countries in South America and Africa) . groups, which include all residents of care homes for old people and their carers, all 75-year olds and over, frontline health and social 06 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 07

UK developments

care workers, and 70-year olds who are clinically extremely Further Government support may be announced with the Budget Unlike other free trade agreements, the TCA is an agreement that as classes of “retained EU law“ . Now that the transition period has vulnerable . Immunisation then followed in order of priority . The on 3 March 2021 . manages divergence rather than promotes convergence . Its real ended, EU law ceased to apply in the UK and retained EU law came UK’s vaccination programme now looks set to out-perform the rest innovations lay in the emphasis of preserving the so-called level into effect . We discuss in more detail the various forms of retained of the world . What should businesses consider? playing field and the “special procedures” that it creates for the EU law and its effect in our Beyond Brexit Legal Guide section "The agreement’s governance . The nature of the EU/UK relationship, UK’s new legal order post-Brexit: A new class of UK law" . For our latest analysis and updates in relation to the Covid-19 Government support pressure from business and other stakeholders, as well as the pandemic, please visit our Catalyst hub . chosen framework suggest that the EU and UK are likely to be in For further information, please contact Dorothy Livingston . In addition to existing support, the Government announced semi-permanent negotiations on the terms of their relationship in £4 .6 billion worth of grants for businesses following the third The content on the hub has been divided by these key themes: the years to come . 2.3 The UK’s “roll-over” free trade agreements lockdown . The Government’s package provides up to £9,000 1. People issues including how workforces are being Protected one-off support per property for retail, hospitality and leisure As an EU Member State, the UK was automatically part of a and reshaped . We look into the key aspects of the agreement in our initial businesses and a £594 million discretionary fund for local number of free trade agreements with third countries, which ceased commentary here . Our latest View from Brussels discusses the authorities and the devolved administrations to help other 2. Pressure points faced by businesses such as managing liquidity, to apply once the transition period ended . To preserve the existing TCA’s unprecedented level playing field provisions and their business that may also be affected by the restrictions, but are supply chain difficulties and repairing the balance sheet . trade relationships with those countries and to mitigate the enforcement . not eligible for the grants . expected disruption of trade if such agreements came to an end, 3. Governance issues such as assuring and sustaining decision the UK has been negotiating and concluding numerous independent making and building a resilient future through ESG . Please subscribe to our Beyond Brexit blog to get the latest updates . The job retention scheme (or the “furlough” scheme) was once bilateral free trade agreements . Our Beyond Brexit Legal Guide is being updated to reflect the again extended, until 30 April 2021, with employees receiving 80% 4. And finally, also exploring opportunities in relation to refocusing, implications of the TCA and the end of transition across different of their current salary for hours not worked, up to a maximum of investing, digitising and decarbonising, because despite the The new agreements have been “roll-over” agreements, meaning sectors and practice areas . £2,500 . More detail on government employment support schemes ongoing challenges, businesses are not standing still . This that they seek to reproduce the effect of the agreements between is set out in the Employment section of this update . includes a continued focus on Investments and acquisitions, the EU and the partner countries . As such, they are based on a “cut For further information, please contact Paul Butcher . which we look into more detail in our latest global report on and paste” of the corresponding EU agreement with the term M&A in 2021 . “European Union” being replaced by “United Kingdom” and a host What next? 2.2 End of transition and “retained EU law” in of other consequential technical adjustments, such as, to maintain With medium term prospects for the relaxation of the restrictions the UK For further information, please contact your usual Herbert alignment of the timetables for the phasing in of tariff reductions increasing, we expect the pandemic to accelerate and further Smith Freehills’ contact . Since the UK joined the EU in 1973, much of UK law has derived and adjusting the governance arrangements . embed changes in human behavior, to drive scientific and from European law or become directly effective EU law under the technological advances, and encourage further digitalisation and 2. Brexit European Communities Act 1972 (the ECA 1972) . The ECA 1972 All of the most important of these agreements have already been tough choices on automation . This is likely to create opportunities not only gave directly effective EU law, such as EU Regulations, concluded . Amongst the secured agreements are those with Japan, 2.1 Where are we now? for businesses in some sectors, but also bring difficulties in others . legislative effect in the UK, but also provided for UK law to be Canada, Mexico, Vietnam, Turkey and the three non-EU EEA It is already clear that despite ongoing challenges, businesses are On Christmas Eve 2020, the UK and EU finalised the Trade and adapted to ensure compliance with EU Directives that harmonise, Member States, namely Iceland, Norway and Liechtenstein (which is not standing still . Cooperation Agreement (TCA) that governs their future trading or provide for, minimum legal standards throughout the EU, as well trilateral agreement with Switzerland) and came into effect on and security relationship . The TCA came into effect at 11pm on as for the authority of the Court of Justice of the EU in relation to EU 1 January 2021 (the agreement with Mexico will enter into force early We have already seen a reordering of public policy priorities and a 31 December 2020 when the status quo transition period ended . law . Huge amounts of UK legislation have been passed as in the year) . Negotiations are ongoing with various other countries – significant shift in the relationship between the individual, secondary legislation under the ECA 1972 to give effect to EU for example, Serbia and Ghana . corporations and the State . As the crisis continues, Governments At 1259 pages, it is a complex deal that will take time for Directives and to facilitate the smooth operation of directly effective will be under increasing economic pressure and will likely have to businesses, governments and authorities to understand, implement EU law . The European Union (Withdrawal) Act 2018 (the A complete list of the UK agreements (updated from time to time) make difficult decisions on questions such as how long a lockdown and make use of . Notwithstanding some exceptions (particularly Withdrawal Act) repealed the ECA 1972 on 31 January 2020, when is available here . (and associated financial support) lasts . In the UK, the Government the extensive unilateral phased transitional mitigations provided by the UK exited the EU . also faced a legal challenge to the measures it has put in place to the UK), new requirements and restrictions arising from the end of For further information, please contact Lode Van Den Hende control the spread of the virus . the status quo transition period applied immediately . In isolation, the legal consequence of this repeal would have been or Eric White . that all EU legislation applying in the UK by virtue of the ECA 1972 The UK has vaccinated the 15m most vulnerable people and has At its heart is a classic, but not very ambitious free trade and all subsidiary legislation made under the ECA 1972 would have 3. Competition, regulation and trade brought forward targets to offer first jab to all individuals over 50 agreement: tariff and quota-free trade in goods, but little mutual ceased to have effect in the UK on 31 January 2020, leaving an and then to all adults by 15 April and 31 July respectively . 3.1 Court of Justice confirms Goldman Sachs’ recognition and very modest commitments on services . This enormous legislative gap . The European Union (Withdrawal liability in power cables cartel reflects the interplay between the negotiating priorities of the EU Agreement) Act 2020 inserted provisions in the Withdrawal Act While the Government has set out intended dates for the gradual and UK and provides a good basis for restoring a greater depth of which preserved the situation as if the ECA 1972 had remained in In its ruling of 27 January 2021 the Court of Justice of the EU (CJEU) release of the lockdown measures, the four tests outlined above co-operation between the UK and EU in due course . force for the duration of the transition period . upheld the General Court’s findings that the Commission was need to be met before each stage commences . Infection and entitled to rely on the presumption of decisive influence to attribute hospitalisation numbers and the emergence and spreading of new The overarching framework of the TCA contains, amongst other The Withdrawal Act also importantly kept (with necessary liability to Goldman Sachs for the conduct of its subsidiaries, variants of the virus and the potential need for the development of things, a Joint Partnership Council with over 30 sub-councils; amendments) a very high proportion of the corpus of EU law and Prysmian and PrysmianCS, which had participated in the power new versions of vaccines may be treated with most caution due to automatic reviews of the agreement every five years; and the ability EU derived UK law which was in force in the UK at the end of 2020 cables cartel between 2005 and 2009 . the expected increase in the R number following ease of restrictions of either party to terminate the TCA on 12 months’ notice . and concerns around vaccine efficacy against new variants . 08 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 09

In a significant expansion of the previous case-law concerning (EUMR)) of businesses providing any services in the digital sector, By December 2019, the EWS1 process was agreed . As a standard This is part of wider reforms to address systemic failings in relation parental liability for subsidiaries, the CJEU ruled that the regardless of whether they meet the EUMR thresholds . way of recording what assessment has been carried out on to construction products, identified by the Hackitt Review which presumption of decisive influence arose from the fact that Goldman residential apartment buildings over 18 metres (six storeys), or followed the Grenfell Tower disaster . Sachs held all the voting rights in Prysmian and not necessarily as a To ensure that the DMA stays up with the fast pace of digital markets, where specific concerns exist, it was intended to help purchasers, result of its shareholding in Prysmian . This case is a reminder that the Commission will also have the power to carry out market sellers and those re-mortgaging homes . It involved a fire safety In January 2021, further detail about the proposed new the bar to rebut the presumption of decisive influence that parent investigations . The purpose of market investigations is three-fold: assessment being certified by a qualified professional, but issues construction products regulator (the regulator) was provided by companies exercise over their subsidiaries is high and there are in soon became apparent, including: the Government . •designating gatekeepers that are not captured by the fact only a handful of cases in which such arguments have been quantitative thresholds; •too few assessors to carry out assessments and sign EWS1 successful . As a result of the case, it will be very difficult for a The regulator will operate within the Office for Product Safety and (the Government is addressing this with funding towards 2,000 financial investor that holds all the voting rights associated with a •identifying whether other services within the digital sector should Standards, which is to be expanded and given additional funding to additional assessors); portfolio company’s shares, to successfully rebut the presumption of be added to the list of core platform services falling within the establish the new function . To encourage and enforce compliance decisive influence and escape liability for a breach of the competition scope of the DMA; or whether new practices should be added to •delays caused because EWS1 was requested more widely than with the new regime, the regulator will also work with the new rules by its portfolio company . See our briefing here . the list of do’s and don’ts . This is intended to ensure that the was originally intended; and building safety regulator established under the Bill, and Trading DMA keeps up with the fast pace of digital markets; and Standards . It’s powers will include: •the professional indemnity insurance industry's reluctance to For further information, please contact Kyriakos Fountoukakos •designing behavioural or structural remedies where a gatekeeper insure those who signed EWS1 . •ensuring homes are built from safe materials; or Daniel Vowden . has systematically infringed the DMA . •removing products that present a significant safety risk from the From 21 November 2020 EWS1 is no longer required for sales or 3.2 Proposed EU legislation to overhaul the market; and See our briefing here . See also the technology, media, re-mortgages on flats in blocks with no cladding . In January 2021 a regulation of digital platforms telecommunications, sourcing and data section below . consultation was launched by the RICS on guidance to provide •conducting product testing . On 15 December the European Commission announced valuers with clear criteria to decide on the need for the form . far-reaching proposals for regulation of the digital sector in the form For further information, please contact The consultation closed on 25 January . New guidance is expected Powers for the creation of new civil penalties and criminal offences of a Digital Services Act (DSA) and a Digital Markets Act (DMA) . Kyriakos Fountoukakos or Peter Rowland . in the spring . for breach of the new regulations are included in the Bill . For The DSA contains new rules including on illegal content and example, prosecuting companies which flout the safety rules . transparency . It applies to all online platforms, with additional rules 4. Construction For further information, please contact Susannah Davis or for “very large platforms” . The DMA contains ex-ante rules that Nick Downing . Powers to make regulations allowing for the sharing of information 4.1 Building safety: External wall safety and “gatekeeper” platforms must follow to prevent them “imposing about products between regulators are also included . form EWS1 unfair conditions on businesses and consumers and at ensuring the 4.2 Building safety: Construction Products openness of important digital services” . The Grenfell Tower fire brought attention to the need to remove Regulation Businesses must ensure that their products are safe before being Aluminium Composite Material (ACM) from buildings over sold, and must test their products against safety standards . Provisions for a new national construction products regulatory The DMA is concerned with “economic imbalances, unfair business 18 metres . Soon, all types of combustible cladding came into focus regime is set out in the Building Safety Bill, 2020 (the Bill) . The practices by gatekeepers and their negative consequences, such as and the Government issued advice note 14, to help building owners For further information, please contact Susannah Davis or objective is to develop a new, stronger and clearer framework to weakened contestability of platform markets” . As proposed, it tackle non-ACM materials in the external walls of high-rise buildings . Nick Downing . provide national oversight of construction products, enforcement at applies to “gatekeepers” providing “core platform services” – it does local and national level, advice and support to the industry, and not apply to all digital services . Gatekeepers will be designated by Mortgage lenders who were concerned about the security offered technical advice to the Government . the Commission, and must comply with a list of “do’s” and “don’ts” . by high rise flats began requiring safety assurances as a condition of Gatekeepers must also inform the Commission of all intended approving mortgage applications and valuations . concentrations (within the meaning of the EU Merger Regulation 10 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 11

UK developments

4.3 Delay liquidated damages: Upcoming Supreme The FCA has made only one material change to the rules consulted use of corporate directors can provide a screen behind which to Key changes in the 2021 rules include provisions that awards can be Court judgment on the application of delay upon in March 2020 and has added some additional guidance . conduct illicit activity and weaken corporate governance by signed electronically and in counterparts, that Requests and liquidated damages where work incomplete Specifically, the Policy Statement contains a Guidance Note preventing individual accountability . The Government says it is also Responses must now be submitted in electronic form unless prior at termination clarifying environmental, social and governance disclosure minded to apply the ban to general partners and members of approval for alternative means has been granted and that all written obligations in the FCA’s existing rules . limited partnerships and limited liability partnerships . communications between the parties must be submitted via email In our July 2019 General Counsel Update, we discussed Triple Point or through a designated electronic filing system as the default . Technology Inc v PTT Public Co Ltd [2019] EWCA Civ 230 in which In addition, the FCA has also confirmed that it aims to consult on The Government says that it will confirm how it intends to proceed There is express provision for virtual hearings by conference call, the Court of Appeal departed from the “orthodox” view adopted in extending the application of TCFD disclosures to a wider scope of on these proposals later in 2021 and notes that primary legislation video conference or other technology and broader powers of previous authorities and found that a delay liquidated damages listed issuers, and possibly strengthening the compliance basis, in will be required to implement most of the proposed changes . consolidation for the tribunal and LCIA Court, including the tribunal (LDs) clause was not engaged in relation to parts of the work that early 2021 . having the power to consolidate one or more arbitrations into a the supplier had failed to complete in time before the employer For further information, please see our blog post on the topic single arbitration where they “arise out of the same transaction or terminated the contract . For further information, please see our client guide on or contact Sarah Hawes, Gareth Sykes or Julie Farley . series of related transactions” . mandatory climate-related financial disclosures, or contact In November 2020, the Supreme Court heard the appeal against Gareth Sykes, Sarah Hawes or Jannis Bille . You can read more about the changes in our blog post here . the Court of Appeal’s decision . There were three grounds for 6. Dispute resolution appeal, the first of which was whether or not the Court of Appeal 6.1 Arbitration 5.2 Corporate governance: Consultations on For further information, please contact Nick Oury or had erred in its construction of the contract in finding that the corporate transparency and Companies House 6 .1 .1 Supreme Court hands down decision in Halliburton Stuart Paterson . employer’s contractual entitlement to delay LDs only arose in respect of those works which the supplier had actually completed . The Department for Business, Energy & Industrial Strategy v Chubb 6 .1 .3 ICC Rules 2021 now in force with updated Note to The other two grounds concerned the interpretation of the wording published three consultation papers, which closed on 3 February In November 2020 the UK Supreme Court handed down its Parties and Arbitral Tribunals of a cap on liability for damages under the contract . 2021, setting out proposed reforms in relation to increasing the decision in Halliburton Company Ltd v Chubb Bermuda Insurance Ltd powers of Companies House, improving the financial information [2020] UKSC 48 on arbitrator conflicts of interest in English-seated The revised ICC 2021 Arbitration Rules have come into force, The Supreme Court’s judgment is due to be delivered in the coming which is filed with Companies House and implementing a ban on arbitrations . applying to cases commenced on or after 1 January 2021 . The Rules months . Whilst not a construction case, the decision will be of corporate directors . were accompanied by an updated Note to Parties and Arbitral particular interest to the construction industry as it is expected to The decision confirms that the test for bias is whether the “fair Tribunals on the Conduct of the Arbitration . clarify the legal principles to be applied when determining the These consultations follow the Government's consultation on minded and informed observer, having considered the facts, would treatment of delay LDs on termination . This clarification also has options to enhance the role of Companies House and increase the conclude there was a real possibility of bias” . The court also The ICC Rules 2021 do not differ substantially from the 2017 version significant practical implications in circumstances where – as is the transparency of UK corporate entities in 2019 and the response it confirmed that arbitrators have a duty to disclose facts or of the rules, but key changes concern the provisions on case under many construction contracts – an employer is entitled to published in September 2020 . circumstances which “would or might” reasonably give rise to an consolidation and joinder, provision for virtual hearings and a move and has been deducting delay LDs from interim payments, but the appearance of bias, including any overlapping appointments in away from paper filings . Other particularly noteworthy changes contract is then terminated before actual completion is achieved . Increasing the powers of Companies House accordance with the usual practice of the relevant type of include the power of the tribunal to limit changes to party The Government is proposing a number of reforms to the powers of arbitration . Departing from the Court of Appeal decision, the court representation where this causes difficulties as to conflicts of For further information, please contact James Doe or Companies House, which it says are designed to assist in its wider held that a breach of this duty of disclosure may, “without more”, interests, and the requirements to disclose certain third party Noe Minamikata . efforts to tackle economic crime and improve the integrity of give rise to an appearance of bias . Any failure to disclose funding arrangements . information held at Companies House . In particular, the proposals overlapping appointments will be one factor taken into account . The accompanying Note to Parties and Arbitral Tribunals has been 5. Corporate include a power to query information and company names, a power On the facts, the court held that the challenged arbitrator was revised significantly to reflect the updated Rules and provides A number of pieces of legislation and guidance have been published to remove information from the register, and for wider identity under a duty to disclose overlapping appointments in the context of noteworthy guidance in respect of the key changes highlighted above . in relation to UK corporate law as a result of the Covid-19 pandemic . verification requirements before a person can be validly appointed a Bermuda form arbitration, but that in the circumstances the These are summarised here . as a company director . failure to do so did not give rise to an appearance of bias . You can read more about these changes in our blog post here, or listen to our podcast ICC Rules 2021 – What You Need to Know on 5.1 Listing Regime: Final FCA rules on climate Financial information filed at Companies House You can read more about the decision in our blog post here . SoundCloud, Spotify and iTunes . change-related financial disclosures The Government is proposing a number of measures to improve the The Financial Conduct Authority (FCA) has published a quality and value of financial information which is filed at For further information, please contact Craig Tevendale, For further information, please contact Craig Tevendale, Policy Statement (PS20/17) and final rules and guidance in Companies House, including the timescale for filing accounts, Chris Parker, or Rebecca Warder . Laurence Franc-Menget or Thierry Tomasi . relation to climate-related financial disclosures for UK premium digital filing of accounts, tagging of financial information and listed companies . centralised filing with government . 6 .1 .2 2021 DIFC-LCIA Rules now in force 6.2 Banking litigation The 2021 DIFC-LCIA Rules came into force at the start of the year, 6 .2 .1 High Court confirms current scope of Quincecare Companies will be required, for accounting periods beginning on or Ban on corporate directors applying to DIFC-LCIA arbitrations commenced on or after 1 January duty is limited to protecting corporate customers and after 1 January 2021, to include a statement in their annual financial The Government is proposing to introduce a ban on corporate 2021 . Many of the innovations that were first seen in the LCIA Rules report which sets out whether the report contains disclosures does not extend to individuals directors . Currently only one director on a company’s board must 2020 feature in the new rules, which signal a shift away from paper consistent with the Task Force on Climate-related Financial The High Court granted reverse summary judgment in favour of a be a real or “natural” person . Any others may be corporate filings towards the primacy of electronic communications and Disclosures (TCFD) June 2017 recommendations, and to explain defendant bank on the basis that the so-called Quincecare duty of directors, ie other companies or legal entities . This is because the towards enhanced efficiency . why if it does not . care did not operate in the context of an authorised push payment 12 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 13

UK developments

(APP) fraud, where a third party fraudster tricked the bank’s basis that the claims were time-barred under the Limitation Act See our banking litigation blog post for more details . into force on 6 April and will apply to all trial witness statements customer willingly to instruct the bank to transfer large sums out of 1980 . It highlights the court’s approach to a limitation defence to signed on or after that date (subject to very limited exceptions) . her account, which were then misappropriated: Philipp v Barclays resist claims alleging breach of Quincecare duty and breach of For further information, please contact John Corrie, Bank UK plc [2021] EWHC 10 (Comm) . mandate claims . The decision confirms that the court will (in Harry Edwards, or Ceri Morgan . The reforms include some significant new provisions, including: a appropriate cases) take a robust approach in dismissing such claims requirement that (for important disputed matters of fact) the The judgment is the latest in a line of judgments concerning the which on the facts are clearly time-barred; this will especially be the 6.3 Litigation statement should, if practicable, state how well the witness recalls parameters of the Quincecare duty, which arises where a bank has case where the necessary facts required to plead a prima facie case the matter in question and whether (and if so how and when) that 6 .3 .1 Disputes following end of Brexit transition period received a payment mandate from an authorised signatory of its of breach were within the claimant’s knowledge at an earlier date recollection has been refreshed by considering documents; and a customer, and executed the order, in circumstances where than contended . It was hoped that if the UK and EU agreed a post-Brexit trade deal, requirement to list the documents, if any, that the witness has (allegedly) there were red flags to suggest that the order was an as they have now done in the form of the Trade and Cooperation referred to or been referred to for the purpose of providing the attempt to misappropriate the funds of the customer . This recent However, in doing so the court concluded that a prima facie case for Agreement, this would pave the way for a further agreement on the statement (though privileged documents can be identified by decision is important and helpful for financial institutions, because breach of the Quincecare duty could be pleaded by the claimants UK’s accession to the 2007 Lugano Convention . To date, however, general description, rather than individually) . There is also a it confirms that existing authorities limit the Quincecare duty to from inference, ie simply being inferred from the fact of payment . this remains unclear . If the UK does accede to Lugano, it will apply requirement for both the witness and the legal representative to protect corporate customers or unincorporated associations such While this was helpful in the context of the bank’s limitation defence, as between the UK and the EU, as well as EFTA countries Iceland, confirm compliance with the new rules . as partnerships (ie where the instruction to the bank has been given it is potentially less helpful to the extent that it suggests a low Norway and Switzerland, and there will be little change from the by a trusted agent of the customer) . The decision confirms that the threshold applies to the pleading requirements in Quincecare cases . pre-Brexit regime . For further information, please see our blog posts here and Quincecare duty does not currently extend to individual customers . here or contact Anna Pertoldi or Maura McIntosh . On the facts of the present case, the court was not persuaded to See our banking litigation blog post for more details . Otherwise, if there is an exclusive jurisdiction clause falling within extend the Quincecare duty to protect an individual customer in the the 2005 Hague Convention on Choice of Court Agreements, then 6 .3 .3 Damages-Based Agreement (DBA) regime clarified context of an APP fraud, saying to do so would be contrary to the For further information, please contact Harry Edwards, again relatively little will change . For contracts concluded since DBAs, otherwise known as contingency fees, are a form of retainer principles underpinning the duty . Chris Bushell or Ceri Morgan . 1 January 2021, parties can be confident that an exclusive English in which the legal representative charges a percentage share of jurisdiction clause will be respected by EU Member State courts recoveries if the claim succeeds . They were introduced as part of There has been an unfortunate proliferation of APP frauds over recent 6 .2 .3 High Court considers First Tower judgment in the and the resulting English judgment will be enforceable throughout the Jackson reforms in 2013 but have not been widely used, in large years which has seen a staggering increase in the accompanying sums context of no-advice clauses and confirms UCTA the EU under Hague (subject to certain exclusions, for example part due to a lack of clarity in the 2013 DBA Regulations which that individuals are therefore out of pocket . While this decision closes employment and consumer contracts) . does not apply govern the regime . one avenue by which banks were said to be liable for compensating The High Court dismissed the latest interest rate hedging product victims, it will only be of relevance when the circumstances of the In theory, Hague should apply to exclusive English jurisdiction (IRHP) mis-selling claim to reach trial in Fine Care Homes Limited v The Court of Appeal's decision in Zuberi v Lexlaw Ltd [2021] EWCA fraud cause it to fall outside of the voluntary Contingent clauses concluded since 1 October 2015, but there is some National Westminster Bank plc & Anor [2020] EWHC 3233 (Ch) . Civ 16 has resolved some of the difficulties, in particular confirming Reimbursement Model Code, which seeks to compensate victims of uncertainty as to whether EU Member State courts will treat that as that a DBA will not be invalidated by a clause which entitles the APP frauds and is funded by banks for this purpose . the relevant date . Accordingly, for agreements concluded before The aspect of the judgment likely to be of greatest and widest legal representative to payment on a time cost basis if the DBA is 1 January 2021, if parties want to ensure that they obtain the importance to the financial services sector, is the court’s analysis of terminated before the conclusion of the litigation . The decision also See our banking litigation blog post for more details . benefits of Hague, it may be worth entering into a new agreement how the doctrine of contractual estoppel should be applied in these confirms, by a majority, that there is no ban on so-called hybrid restating the exclusive jurisdiction clause (or moving to an exclusive types of mis-selling cases . The question in this case was whether DBAs which provide for a percentage share of recoveries on For further information, please contact Chris Bushell or jurisdiction clause), if the counterparty will agree . the bank was entitled to rely on its contractual terms as giving rise success (up to a maximum 50% including VAT) but some other Ceri Morgan . form of payment, eg reduced hourly rates, if the case loses . to a contractual estoppel, so that no duty of care to advise the If Hague does not apply, the position regarding enforcement of an 6 .2 .2 High Court provides further insights on the risks of customer as to the suitability of the IRHP arose . In good news for English judgment is likely to depend on national rules in each EU banks, the court determined that clauses stating that the bank was The Court of Appeal's decision means that the DBA regime offers Quincecare claims against banks Member State . Our understanding is that most (but not necessarily greater flexibility than previously thought for lawyers and providing general dealing services on an execution-only basis and all) EU countries will enforce foreign judgments even without a The High Court handed down another interesting decision on the sophisticated commercial clients to agree fee agreements which was not providing advice on the merits of a particular transaction specific reciprocal regime, although the type of judgment enforced Quincecare duty: Roberts v The Royal Bank of Scotland plc [2020] allow the lawyer to share in both the risk and reward of the (precisely the sort of clauses which are typically relied upon to may be more limited and the procedures may be more EWHC 3141 (Comm) . litigation . This increased flexibility, together with the new clarity on trigger a contractual estoppel), were not subject to the requirement cumbersome and more expensive . of reasonableness in the Unfair Contract Terms Act 1977 (UCTA) termination provisions, seems likely to lead to a broader take-up of The recent uptick in Quincecare duty claims against financial DBAs – regardless of the outcome of the ongoing review of the 2013 when relied upon in the context of a breach of advisory duty claim . For further information, please see our blog posts here and institutions is striking, perhaps a culmination of years of increased DBA Regulations by Prof Rachael Mulheron and Nicholas Bacon here or contact Anna Pertoldi or Maura McIntosh . regulation which has raised the expectation of firms to identify This may appear an unsurprising outcome, given the Court of QC . Their preliminary report in 2019 recommended that a form of potentially fraudulent activity . Accordingly, insights from the court hybrid DBA should be permitted, but their supplementary report is Appeal’s decision Springwell Navigation Corpn v JP Morgan Chase 6 .3 .2 Witness evidence reforms finalised on the risks associated with processing client payments will be Bank [2010] EWCA Civ 1221 . However, certain obiter comments by still awaited . welcomed by the sector . You can find our blog posts on previous Leggatt LJ in First Tower Trustees v CDS [2019] 1 WLR 637 could be Reforms to how witness statements are prepared for trials in the Quincecare decisions here . read as conflicting with Springwell in relation to the effect of Business and Property Courts have been finalised, in the form of a For further information, please see our blog post here or so-called no-advice clauses and the application of UCTA in relation new Practice Direction 57AC and Appendix . The new rules will come contact Anna Pertoldi or Maura McIntosh . Roberts involved a classic breach of Quincecare duty (and breach of to them . The decision in Fine Care Homes will therefore be mandate) claim, in respect of which the court granted the welcomed by financial institutions . defendant bank’s application for reverse summary judgment on the 14 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 15

UK developments

7. Employment and pensions should be held to be enforceable on the basis they are necessary to in the FTSE100 in the aftermath of the Brexit referendum (Mr T For further information, please contact Samantha Brown or protect confidential information or customer connections . In some (CAS-38354-V5L8)) . Rachel Pinto . 7.1 Employment cases (depending on the nature of the role and the business 7 .1 .1 Further extension of Coronavirus Job Retention interests being protected), it may be appropriate for employers to The Ombudsman subsequently held in Mr E (PO-26512), that SIPP 8. Finance: banking, insolvency and Scheme (CJRS) consider imposing less onerous or shorter covenants during an provider, Curtis Banks, would be required to make good investment restructuring initial period of employment . losses suffered by Mr E as a result of a delay in the transfer of his The CJRS has been extended for a further month until the end of SIPP, if Mr E could provide it with satisfactory evidence of his losses . 8.1 LIBOR transition April 2021 . The planned January review of the level of employer For further details, see our blog or contact Christine Young or contribution has been dropped and employers remain able to claim Work on RFR-based loans continues at a pace, across products and Peter Frost . Similarly, in Mr G (PO-21110), the Ombudsman directed Willis jurisdictions . For further details, please see our publications on a grant to cover 80% of employees' wages for hours not worked (up Towers Watson to pay Mr G £20,022 for investment losses after it to a maximum of £2,500 per month pro-rated) . HMRC has Leaving LIBOR: the ISDA 2020 IBOR Fallbacks Protocol and IBOR 7 1. .3 Collective redundancies: increased risk that failed to provide the receiving scheme with all the relevant Supplement and, on the loans side, Is LIBOR Really Entering the End published the names of employers claiming under the scheme, and consultation obligations will apply to batches information following Mr G’s transfer which meant his fund could will be publishing the value of claims (within a band) from February . Game, and our IBOR Transition Hub for the latest updates . of redundancies not be invested immediately . Under the third national lockdown from 5 January, everyone who In UQ v Marclean Technologies SLU (C-300-19) the European Court Please do contact one of the team to discuss any questions you may For further information, please contact Samantha Brown or have about the use of RFRs in the loans market, and its application can “reasonably” work from home must do so; clinically extremely of Justice has ruled that employers have to look both backwards Rachel Pinto . vulnerable individuals are advised to “shield” again and extra and forwards from an individual dismissal to determine whether the to your new and legacy transactions . caution has been advised for those in the third trimester of threshold number of redundancies to trigger information and 7 .2 .2 M&A, restructuring, re-financing and dividends For further information, please contact Nick May, Emily Barry, pregnancy . Updated guidance makes clear that furlough can be consultation obligations (20 or more) is met over a 90 day period . likely to be hit by new pensions offences and The ruling conflicts with the UK forward–looking approach which Simon Chadney, Will Nevin or Kristen Roberts . used for employees unable to work due to caring for children during regulatory sanctions school closures . focuses on the employer’s proposed dates and dismissals . The Pension Schemes Act 2021 finally received Royal Assent on 8.2 Environmental, social, and governance (ESG) Concerns over the emergence of new variants have led to the As the judgment was published before the end of the Brexit 11 February 2021 . The Act contains significant reforms including: Sustainability-linked loans and green loans have continued to gain suspension of travel corridors and quarantine exemptions for senior transition period, it remains binding on English tribunals which will •new criminal offences and regulatory sanctions (including fines traction in the market following the publication by the LMA, the executives from 18 January . From 15 February arrivals are required to be obliged to attempt to construe UK legislation consistently to the of up to £1 million) for pension failures – these sanctions could LSTA and the APLMA of the Green Loan Principles and the carry out additional Covid tests on days two and eight of quarantine extent possible . Only the Supreme Court and the Court of Appeal be imposed, broadly, where directors or other parties take action Sustainability-linked Loan Principles . To assist sustainable while UK nationals and residents arriving from “red list” countries will will be able to depart from the judgment where they consider it which is materially detrimental to a defined benefit (DB) scheme investment and deal with any remaining scepticism or concerns have to quarantine in selected hotels at their own expense (others right to do so . In the meantime, employers planning successive or which breaches key legislative requirements; about “green-washing”, governments are seeking to address two travelling from “red list” countries are banned from entry) . The small batches of redundancies who wish to avoid the risk of claims main issues with new legislation and policies: Government is also encouraging businesses with more than will need to take particular care to ensure they do not inadvertently •two new contribution notice triggers – these will apply •How can an investor determine if an economic activity is 50 employees to join the workplace rapid testing programme for cross the threshold number over a rolling 90 day period . where, broadly, a party engages in an act or course of conduct environmentally sustainable, in an objective way? asymptomatic individuals in sectors open during lockdown (see here) . which reduces the amount that may be available on the For further details, see our blog or contact Andrew Taggart or insolvency of a sponsor or which reduces the value of a sponsor •How can companies and financial institutions be held For further information see our blog or contact Tim Leaver, Anna Henderson . to a material extent; accountable in relation to their activities in this area? Jenny Andrews or Nick Wright . •new scheme funding requirements for DB schemes – including a 7.2 Pensions requirement to set a legally binding long-term objective, and For further analysis on this topic, please see our publications on The 7 1. .2 Restrictive covenants: possible reform and impact of 7 .2 1. Courts and Ombudsman open door for pension Rise and Rise of Sustainability-Linked Loans, and The Increasing probationary period •power to introduce new requirements relating to the Prominence of Sustainable Financing for Corporates and our latest scheme members to claim for investment losses management of climate-related risks . thinking on ESG, Sustainability and Responsible Business . The Government is considering legislation either to prohibit the Recent decisions of the High Court and the Pensions Ombudsman use of non-compete clauses or impose an obligation on an have highlighted the risk that pension schemes, providers and The new offences and regulatory powers are not expected to come For further information, please contact Will Breeze, employer to pay compensation to outgoing staff if it seeks to rely administrators could now be held liable for losses suffered as a into force until mid-2021 at the earliest to allow time for the Kristen Roberts, Elliot Beard or Emily Barry . on them . This is the second time in the last few years that the result of missed investment opportunities due to transfer delays . Pensions Regulator to issue guidance on how it intends to use them . Government has sought views on this topic; the previous This could add significantly to the cost of such claims . In the meantime, the Government has confirmed that they will not 8.3 Catalyst and strengthening the balance sheet consultation exercise did not result in any changes to the status be applied retrospectively . quo . However, with a more radical Government setting out its The Covid-19 global pandemic has resulted in economic production Prior to the decision of the High Court in Tenconi v James Hay intent on making Britain more innovative and entrepreneurial post and consumption contracting rapidly . While businesses have come Partnership, the Ombudsman had generally found that losses Despite this, directors, lenders and investors should have regard to Brexit, there is a greater chance that changes could be made this under pressure from all sides – with reduction in supply and arising from missed investment opportunities were too remote to these new powers immediately because the courts have previously time . The consultation ends on 26 February . demand and in output and capacity, supply chains failing and be recoverable . However, the High Court disagreed in the context held that the Regulator can take account of actions and decisions payments being deferred and delayed – attention is now being of Mr Tenconi’s complaint and, when the matter was remitted taken before new regulatory powers come into force when deciding The High Court judgment in Quilter Private Client Advisers Limited v turned to businesses’ longer term recovery and viability . back to the Ombudsman, he held that James Hay Partnership had whether it is reasonable to exercise them in the future . Falconer [2020] EWHC 3294 has highlighted the risk that a short to pay £43,700 to Mr Tenconi for investment losses suffered as a notice period, including during a probationary period, can In this guide we look at how businesses can rebuild their balance result of his delayed transfer, which prevented him from investing For more on these measures see our UK pensions blog . undermine an employer’s argument that restrictive covenants sheets and how their funding structures could adapt in order to ensure their long term ability to thrive . 16 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 17

For further information, please contact Simon Chadney, to be divergence in practice on the use of market conventions for collateral . The London Stock Exchange’s work-around to this has Will Breeze, Will Nevin or Kristen Roberts . calculating interest on SONIA floating rate notes (with both the been to automatically list applicable London listed debt securities “lag” and “observation shift” approach being used in the market) . It on the MTS BondVision Europe MTF, which is an “acceptable 8.4 Corporate Insolvency and Governance Act 2020 is possible that the publication of the SONIA Compounded Index by market” for ECB eligibility purposes . However, the loss of the UK’s the Bank of England could lead to standardisation in the market as deemed status as an “EEA country” post-1 January 2021 will have The Corporate Insolvency and Governance Act 2020 came into effect the SONIA Index is compatible with the “observation shift” two key consequences: (i) any debt securities issued by a UK on 26 June 2020 . The provisions of the Act are complex and could approach and, indeed, some issuers have used the SONIA incorporated issuer will require a supporting legal opinion have significant impact on companies in distress and their creditors, Compounded Index for issuances of floating rate notes from meeting the ECB’s requirements to be eligible collateral; and particularly landlords, suppliers, financial services providers and autumn last year . (ii) guarantees given by UK-incorporated guarantors are not pension schemes . Our UK restructuring team have produced a series expected to meet the eligibility requirements . of short, informative and user-friendly webcasts focussing on a Most bond documentation now includes fallbacks to cater for a •Issuers with FCA-approved programmes no longer have the number of the key aspects to help you better understand the permanent cessation of reference rates . There have been some ability to passport programmes into the EU . This will, of course, implications of the Act and how it may affect your business . discussions in DCM about how these fallback provisions would be more relevant for retail programmes (where an issuer may operate in practice: there have so far been no recommendations of For further information, please contact John Whiteoak or want to make an offer to the public in the EU) . Those issuers a successor rate for the purposes of the fallbacks and independent Kevin Pullen . wishing to continue to offer to the public in an EU Member State advisors may be reluctant to make a determination in the absence will require an EU competent authority approved programme . of an obvious alternative rate . With this in mind, the Sterling 8.5 Cross border insolvencies Working Group published a consultation paper in February 2021 in •DCM participants should be mindful of changes post-1 January The EU-UK Trade and Cooperation Agreement made no provision order to seek feedback on whether it would be helpful for the 2021 that will need to be made to documentation, including for continued recognition of, or co-operation in, insolvency and Working Group to make a recommendation on a successor rate to selling restrictions and MIFID and PRIIPs legends . In addition, the restructuring proceedings . This briefing considers the implications GBP LIBOR for bonds upon the occurrence of a permanent contractual recognition of EU and UK resolution stays should be of this and we examine how: cessation event or a pre-cessation . The consultation is expected to carefully considered by EU and UK financial institutions, with end in March 2021 . appropriate language included where the contract is a “liability” . •Insolvency practitioners, debtors and creditors in both the UK and the EU will need to modify their approach where a debtor and its •UK issuers using UK GAAP to list on an EEA regulated market or For further information, please contact Amy Geddes or insolvency proceedings have a cross-border element . offer to the public in the EU on a non-exempt basis will be third Minolee Shah . country issuers and therefore face more onerous disclosure •Recognition of English insolvency proceedings in the EU will now requirements as UK GAAP is not equivalent to IFRS . This means depend on the local law of each Member State . Only four 9.2 ESG Bonds: publication of the climate that issuers reporting UK GAAP would need to restate their Member States have adopted the UNCITRAL Model Law, transition handbook accounts to IFRS (for a retail prospectus) or prepare a narrative permitting cross-border insolvency recognition upon application On 9 December 2020, the International Capital Market Association statement of differences (for a wholesale prospectus) . to the Member State’s courts . Recognition is not automatic . published a Climate Transition Finance Handbook together with a •For insolvency proceedings originating in a Member State, set of Q&As . The Handbook is to be used when raising funds in the For further information, please contact Amy Geddes or recognition in England will be possible under the UNCITRAL debt markets for climate transition purposes, whether this be for Minolee Shah . Model Law . “use of proceeds" bonds or general corporate purpose bonds issued in line with the SLB Principles . The Handbook clarifies the 10. Financial services regulation •Schemes of arrangement were given effect in the EU via civil issuer-level disclosures which are recommended to credibly jurisdiction rules, not insolvency jurisdiction rules . These have 10.1 Update on Brexit and financial services position the issuance of “transition bonds”, with an emphasis on the now been lost, though schemes are likely to retain effectiveness Paris Agreement and science based targets . It is hoped that the The Trade and Cooperation Agreement (TCA) finalised on at least in relation to English law debts or debts arising under Handbook paves the way for high-emitting industries to engage in Christmas Eve, offers minimal commitments on financial services agreements containing a mutual, exclusive jurisdiction clause in the sustainable finance market in their efforts to achieve their and even excludes financial services from some general protections favour of England . emission reduction goals and climate transition strategy . that otherwise apply under the TCA . The obligations of the EU and •As to restructuring plans, this is a live issue before the English the UK under the WTO GATS agreement go further in some cases courts, but may also be impacted by local laws in the EU . For further information, please contact Amy Geddes or and so will remain relevant . The UK and EU have also agreed in a Minolee Shah . non-binding declaration to enter into a memorandum of For further information, please contact John Whiteoak or understanding on the establishment of a cooperation framework by Kevin Pullen . 9.3 Brexit March 2021 . This will involve discussions on how to “move forward There are several implications to consider in the wholesale DCM on both sides with equivalence determination” . 9. Finance: debt capital markets space following the end of the Transition Period . A few of the key Passporting ended on 31 December 2020 . Access to the EEA 9.1 LIBOR transition changes are highlighted below: markets now depends on individual national regimes (where The transition from IBORs to RFRs has continued to progress in •As the London Stock Exchange no longer qualifies as an EEA available) and the application of third country provisions in EU 2020 and 2021 with significant volumes of new SOFR and Regulated Market, there are additional considerations for issuers financial services legislation . Transitional arrangements are SONIA-linked floating rate notes being issued . There has continued and investors seeking eligibility of debt securities as ECB available to UK firms in some EU Member States . 18 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 19

UK developments

The UK Government has put in place transitional regimes for EEA 11. Insurance The FCA’s reforms include the following key changes: lack of clarity and certainty for some customers (particularly SMEs) firms including the temporary permissions regime to minimise making business interruption claims relating to Covid-19 profit 11.1 Brexit – implications for insurance sector •Firms will be prohibited from imposing a “loyalty penalty” on disruption . The UK regulators have also exercised their temporary losses, and the basis on which some insurers were making decisions customers at renewal of their policy . transitional powers in order to give firms a 15 month period, until The Trade and Cooperation Agreement (TCA) agreed between the in relation to claims . The proceedings were brought by the FCA, the 31 March 2022, of transitional relief to adjust to many (but not all) UK and the EU on 24 December 2020 makes little provision for •This prohibition will extend to products sold alongside regulator of the defendant insurers, as a test case . Herbert Smith of the changes made as a result of the onshoring of legislation . insurance . This comes as no surprise given the UK Government's insurance cover . Freehills acted for the FCA who advanced the claim for negotiating ambitions which left (re)insurers and (re)insurance policyholders . The purpose was to determine issues of principle on •Manufacturers and distributors will be required to consider There is no immediate change to the framework for overseas intermediaries with little choice but to plan for the loss of policy coverage and causation under sample insurance wordings . whether their products represent “fair value” for customers . access to UK markets . However, changes are likely in the future as passporting rights afforded to them under EU legislation . Many UK Insurers took part in the test case by agreement . After the High the UK Government considers the current UK framework for (re)insurers and intermediaries have decided, therefore, to transfer •Further measures will aim to stop practices that act as barriers Court handed down judgment in September 2020, a “leapfrog overseas access in a recent call for evidence and introduces their EEA business into an EU hub . Equally, EEA (re)insurers and to switching . appeal” to the Supreme Court was allowed on an expedited basis . measures to promote openness between the UK and overseas (re)insurance intermediaries have acted to preserve their ability to •New regular reporting requirements will be introduced to help the markets (see our blog post here) . The Supreme Court unanimously dismissed Insurers’ appeals and conduct business in the UK or, in some cases, withdrawn from the FCA’s ongoing supervision of home and motor insurance markets . UK market . allowed all four of the FCA’s appeals (in two cases on a qualified Our recent briefing provides a detailed update here . basis), bringing positive news to policyholders across the country New rules are planned to take effect later in 2021 . The FCA's work that have suffered business interruption losses as a result of the This position seems unlikely to change notwithstanding that the UK in this area reflects an ongoing concern to ensure that firms are For further information, please contact Clive Cunningham or Covid-19 pandemic . At first instance the FCA had been successful and EU have agreed to enter into a memorandum of understanding giving "value" to customers . Karen Anderson . by March 2021 on the establishment of a cooperation framework . on many of the issues, and the Supreme Court substantially Although discussions will aim to make some progress on A more detailed summary of the FCA's findings and proposals can allowed the FCA’s appeal on the issues it chose to appeal . The 10.2 Woolard Review on unsecured consumer credit equivalence, achieving this would have relatively little value to the be found here . practical effect is that all of the insuring clauses which were in market and regulation of BNPL insurance sector and certainly fall well short of mitigating the loss of issue on the appeal will provide cover for the business interruption The FCA has published the Woolard Review report on change and passporting rights . For further information, please contact Hywel Jenkins, caused by Covid-19 . innovation in the unsecured consumer credit market . The Review Alison Matthews or Emma Reid . You can find our in depth analysis of the judgment and its makes a number of recommendations on how regulation can better For UK insurers with policyholders in EEA States, the loss of implications here . support a healthy market for unsecured lending, taking into account passporting rights creates a particular concern that they will no 11.3 Supreme Court judgment in FCA’s Covid-19 the impact of Covid-19, changing business models and new longer be licensed to service those policies, including paying claims, business interruption insurance test case For further information, please contact Paul Lewis, developments in unregulated buy-now pay-later (BNPL) unsecured unless they have established an authorised branch in each country . On 15 January 2021, the Supreme Court handed down judgment in Sarah McNally or Greig Anderson . lending . The FCA has welcomed the Review, and will provide a Run-off regimes introduced by a number of EEA States to address the Covid-19 Business Interruption insurance test case of The detailed response to the recommendations in its 2021/22 Business this problem are helpful . Each state’s regime is different, though, Financial Conduct Authority v Arch and Others [2021] UKSC 1 . The Plan which is to be published in April . requiring local legal advice to be taken as to their effect . FCA’s action had been triggered by widespread concerns about the The Review recommends that three areas in particular are acted on Our insurance blog contains a number of articles on Brexit which as a matter of urgency: can be found by using the search term "Brexit" . •ensuring strong provision of debt advice and debt solutions; For further information, please contact Geoffrey Maddock, Barney Hinnigan or Alison Matthews . •providing a sustained response to Covid-19 including examining arrangements for reporting forbearance to credit reference agencies and the “masking” of credit file; and 11.2 FCA introduces remedies to address "price walking" in general insurance markets •bringing BNPL products within the scope of FCA regulation . The FCA’s Final Report on general insurance pricing practices On BNPL, the Review found that the BNPL market has more than concludes that retail home and motor insurance markets are not trebled in size in 2020 and that these products can pose significant working well for all consumers and confirms proposals to prohibit potential consumer harm . The regulatory treatment of partner “price walking” . Price-walking allows firms to offer policies at a retailers will need to be considered as they are likely to require discount to new policyholders but to recover any losses on renewal authorisation for credit broking . In response to the Review, the by increasing the price year on year . Firms that practice price Government has confirmed that it will legislate to bring unregulated walking will make an assessment of how likely a customer is to interest-free BNPL into FCA regulation as soon as parliamentary switch supplier when setting the premium they propose to charge time allows . for renewal of the policy . This can lead to some loyal customers paying very high prices as compared to others who, for example, For further information, please contact Clive Cunningham or regularly switch insurer or negotiate the cost of their cover . Karen Anderson . 20 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 21

UK developments

The call for evidence launched on 13 January 2021 and covers two 12. Intellectual property 12.3 The Unified Patent Court commencement For further information, please contact Matthew Bonye . process – a short delay while Germany broad themes: 12.1 The Trade and Cooperation Agreement and its considers further challenges impact on IP, pharma and medical devices 1 . The relationship between domestic courts and the European 14 1. .2 Restrictions on landlords with (let) commercial The Unified Patent Court (UPC) is closer to becoming a reality, after Court of Human Rights (ECtHR) in the context of section 2 of premises The final Brexit agreement, the Trade and Cooperation Agreement the German Parliament’s upper house, the Bundesrat, passed the the HRA . Pursuant to section 2, domestic courts and tribunals (the TCA) was agreed between the UK and the EU on 24 December 2020 saw unprecedented restrictions on both landlords' ability legislation to allow Germany to ratify the UPC Agreement . must “take into account” the ECtHR’s case law, albeit they are 2020 . Within this agreement are provisions that set out the to recover possession of premises, and the recovery of arrears Germany's ratification is required before the UPC commencement not bound by it under the usual rules of precedent . standards expected to be recognised (mutually) between the EU (but also breaches of other covenants), should a tenant fail to pay process can begin . The passing of this legislation by the upper and the UK in relation to intellectual property (including SPCs and 2 . The impact of the HRA on the relationship between the judiciary, rent . Some only apply to them as landlords, others restrict the house would normally have been followed by the signature of the trade secrets) . There are some provisions concerning the executive and the legislature . In particular, the way in which actions that all creditors (including landlords) may take against President and then publication in the legal gazette for the law to pharmaceutical regulation and product standards, but overall there the HRA balances those roles, including whether the current debtor companies . come into force, but there have been two new challenges filed is a lack of mutual recognition, with the consequence that, for both approach risks “over-judicialising” public administration and before the German Constitutional Court . As a result, according to pharmaceuticals and medical devices, there are now effectively two draws domestic courts unduly into questions of policy . Where rent is unpaid under a business lease, landlords are no information from the Federal President’s office, he has been asked separate regimes for the EU and the UK . Read the detail in our blog longer permitted to forfeit leases for non-payment of rent . to delay his signature, which is required in order for the legislation to post here . The call for evidence closes on 3 March 2021 and the Panel is Landlords will not regain this right until at least 1 April 2021; and so enter into force . This legislation includes the German consent to the expected to report in summer 2021, after which the Government forfeiture for non-payment of rent is effectively suspended . Protocol on Provisional Application (PPA), which requires German An updated Intellectual Property section of our Beyond Brexit Legal will respond . However, landlords can now progress and initiate claims using the ratification to enter into force . Therefore the Provisional Application Guide is now available, in which we look at the impact of the end of court process to forfeit leases for breach of other covenants . Period (PAP) (see our previous post here) cannot presently the Brexit transition period on IP rights . See also a link to all the For further information, see our blog post or contact commence, delaying the further preparation of the UPC . For more Brexit pharma regulatory relevant blog posts here . Andrew Lidbetter, Nusrat Zar or Jasveer Randhawa . The limitations on a landlord's ability to pursue remedies for the detail on these challenges, which include an application for an recovery of arrears, should a tenant fail to pay the rent due under its interim injunction preventing the deposit of the instrument of For further information, please contact Jonathan Turnbull or 14. Real estate and planning lease, include: ratification by Germany, see our blog post of 28 January here . Rachel Montagnon . 14.1 Real estate (i) to use the Commercial Rent Arrears Recovery scheme, an We expect that if the interim injunction applications are rejected, amount equal to either 189, 276 or 366 days' of principal rent, 12.2 Enforcement of IP rights across online 14 .1 .1 Leasehold reform – abolition of ground rents and the Germany will deposit the instruments of ratification (which are depending on when it fell or falls due, must now be owed; and platforms and against intermediaries rise of commonhold required to allow the UPC to progress towards its commencement) (ii) statutory demands issued between 1 March 2020 and Actions involving online intermediaries, in particular ISPs are key and not await the full decision . If so, the UPC could be a reality in Following the release of the Law Commission’s recommendations on 31 March 2021 cannot form the basis of a winding up petition areas for enforcement of IP currently when everything is now going 2022, along with the unitary patent right (a single right across all residential leasehold reform last July, the Government has now presented to the court after 27 April 2020 . Creditors on-line . The Herbert Smith Freehills London IP practice has had two participating EU Member States) which the UPC will have exclusive confirmed long-awaited proposals to effect some of them, including (including landlords) cannot present winding-up petitions practice notes on this area published on Practical Law recently jurisdiction over . banning leasehold ground rents in England, and encouraging a move between 27 April and 31 March 2021 based on a company's (both of which are available via the links below, without towards an increased use of the commonhold ownership system . inability to pay its debts unless the creditor has reasonable subscription): For more on the UPC and the unitary patent (UP), see our Hub grounds for believing that: (a) Covid-19 has not had a dedicated to the UPC and UP . Under these changes, leaseholders of houses and flats will be •Enforcement of intellectual property rights across online platforms: “financial effect” on the tenant company; or (b) the tenant permitted to extend their leases up to 990 years without needing injunctions A checklist on the circumstances in which a rights company would have been unable to pay its debts even if For further information, please contact Sebastian Moore or to pay a ground rent to their landlord . Before this announcement, holder may be able to obtain an injunction against online Covid-19 had not had a financial effect on the company . Ina vom Feld . leaseholders of houses could only extend their term once for intermediaries, in particular ISPs, in relation to online intellectual 50 years with a ground rent, whereas flat owners were entitled do property right infringement, and the practical points that need to The Government also expects landlords and tenants to operate 13. Public and administrative law so multiple times for 90 years with a nil (“peppercorn”) rent . No be considered . within the framework of a (voluntary) Code of Practice . detail has yet been released as to the basis on which the loss of the 13.1 Government launches independent review of •Protecting brands by enforcement against intermediaries A guide to value to the landlord of the ground rent income will be the Human Rights Act 1998 For more information, please see our blog post, or contact the options available to brand owners when seeking to enforce compensated, or how the existing valuation process that deals with Matthew Bonye . their rights against intermediaries, such as ISPs, including On 7 December 2020 the Government announced that a panel of “marriage value” (reflecting the increase in value of the property website-blocking injunctions, take-down notices and experts led by former Court of Appeal Judge, Sir Peter Gross, will following the lease extension) will be reformed . 14.2 Planning domain-name seizures . conduct an Independent Human Rights Act Review . The review will consider whether there is a need to reform the Human Rights Act Commonhold (a system by which flats within a scheme are each 14 .2 1. Consultation – Supporting housing delivery and For further information, please contact Victoria Horsey or 1998 (HRA), which incorporates the fundamental rights and held, as registered freeholder, by the respective flat/unit holder with public service infrastructure Joanna Silver . freedoms set out in the European Convention on Human Rights no landlord) has been around in the UK since 2002, but has been On 3 December 2020, the Ministry of Housing, Communities and ( ) into domestic British law, “to ensure that it continues to ECHR slow to take root, with developers almost always preferring the Local Government (MHCLG) published a consultation “Supporting meet the needs of the society it serves” . The review proceeds on traditional route of granting long leasehold interests subject to a housing delivery and public service infrastructure”, which closed on the basis that the UK remains a signatory to the ECHR . ground rent . Now that this structure is to be abolished the 28 January 2021, proposing: (i) a new permitted development (PD) Government is expected to set up a “Commonhold Council” right for change of use from the new Use Class E (commercial, comprising industry experts and affected groups in order to business and service use) to residential use; (ii) expanded PD rights undertake significant reform of the commonhold legislation . 22 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 23

UK developments

and a new planning application process for hospitals, schools and 15. Tax stringent than those of the EU in DAC 6, and are effectively 16. Technology, media and prisons; and (iii) proposals to simplify and consolidate existing PD reflected in the Category D hallmarks only . 15.1 Office of tax simplification: review of capital telecommunications, sourcing and data rights, including seeking views on changing the breadth of the new gains tax Use Class E . These changes are intended to take effect pending The Government’s intention is that DAC 6 will be repealed in its 16.1 International data transfers and Brexit: Deal fundamental reform of the planning system pursuant to the The first part of the Office of Tax Simplification’s wide-ranging entirety, likely in 2022, and replaced with a UK regime based on the grants an interim data transfer window and Planning for the Future White Paper . The proposals relate to review of capital gains tax (CGT) was published in November 2020 . MDR . It is expected that draft legislation will be published for European Commission launches process for England only . Of particular interest is the proposed new residential The report is aimed at identifying “opportunities relating to consultation later in 2021 . adopting adequacy decision PD right which is intended to come into effect from 1 August 2021, administrative and technical issues as well as areas where the The issue of international data transfers has long been the main to be available to a large percentage of properties in commercial, present rules can distort behaviour or do not meet their policy For UK intermediaries and taxpayers, this change will materially area of concern regarding Brexit; particularly whether or not the UK business and service use whether in town centres or otherwise, so intent”, and sets out a number of potentially significant reduce the DAC 6 compliance burden in the UK . Many businesses will be considered “adequate” for GDPR purposes . The EU-UK long as they were in Class E use as at 1 September 2020 . This recommendations and policy choices for government, including: have, however, already incurred significant time and expense in Trade and Cooperation Agreement (the Brexit Deal) provides a proposal has received much opposition . Also of interest is the preparing for reporting under the former, full regime . temporarily “lifeline”, pending conclusion of the European •closer alignment of CGT rates with income tax rates . The existing question whether uses that are currently able to change use within rate disparity is thought to distorts economic behaviour, creating an Commission’s (Commission) adequacy decision which was the new Class E should be able to change to any use within that For intermediaries and taxpayers with a presence in the EU, it artificial incentive for taxpayers to favour investments that generate recently published in draft form . class, whether this right should be restricted or whether the scope should be noted that DAC 6 will remain of significance as the full capital returns (over those that generate income returns); of some rights should be broadened . For further information on the regime, featuring all hallmarks A-E, continues to apply throughout Article FINPROV 10A. of the Brexit Deal grants an interim data transfer potential impact of these consultation measures, which could be •reducing the Annual Exempt Amount (AEA) to £2,000-£4,000 the EU . window of four months (which can be extended to six months) during significant, please see our blog post of 8 January 2021 . (from its current £12,300), in order that it fulfils a purpose as an which the UK will not be treated as a “third country” for GDPR administrative de minimis threshold (designed to reduce the For further information, please contact Isaac Zailer or purposes, allowing the free flow of data from the EU and EEA For further information, please contact Matthew White . number of individuals who have a CGT liability) . At its current Howard Murray . Member States to the UK (until 30 June 2021 at the latest) . level, the AEA is principally used by taxpayers as a form of relief 14 .2 .2 Consultation – National Planning Policy Framework and, as such, distorts economic behaviour, incentivising 15.3 Spring budget – 3 March 2021 However, the interim window will only remain open provided the and National Model Design Code individuals to limit their annual disposals to realise gains just Although it is clear that the tax landscape will need to adapt in UK: (i) does not change its data protection laws from those in place below the AEA threshold; on 31 December 2020 (ie the UK GDPR); and (ii) does not exercise On 30 January 2021, MHCLG published a consultation “National order to help rebalance public finances in the wake of the pandemic, any of its “designated powers” without agreement from Europe . Planning Policy Framework and National Model Design Code: •replacement of Business Asset Disposal Relief (BADR) (formerly it is less clear exactly what changes will be announced in the Spring The “designated powers” comprise a relatively long list of consultation proposals” . The consultation relates to England only Entrepreneurs Relief), which is not considered to be an effective Budget on 3 March . actions the UK is prohibited from taking with respect to and closes on 27 March 2021 . It seeks views on revisions to the means of stimulating investment, only being realised on disposal . international transfers . National Planning Policy Framework (NPPF) and on the content, Instead, BADR could successfully be refocused on providing relief Income tax, NICs and VAT together make up two thirds of the application and use of the new draft National Model Design Code to business owners on retirement, recognising the fact that they Government’s tax revenue but the Conservative manifesto’s “triple The implications of not obtaining an adequacy decision would have providing national guidance on the production of local design codes, have operated their business as an alternative to a pension . lock” has effectively ruled out their increase . There has been particularly concerning for organisations across the UK and guides and policies . nevertheless been speculation that national insurance for the the EU . However, in a move seen as a “huge relief” for these For further information, please contact Isaac Zailer or self-employed will be brought closer to the level of that imposed on organisations, on 19 February 2021, the Commission launched the The Government is proposing changes to the NPPF to reflect its Howard Murray . employed workers . process towards adopting two adequacy decisions for the transfers commitment to “making beauty and place making a strategic of personal data to the UK – one under the GDPR and the other theme” in national planning policy in line with the recommendations 15.2 DAC 6 – Disclosable cross-border tax The possibility of changes to the CGT rate and associated reliefs under the Law Enforcement Directive . After assessing the UK’s law of the Building Better Building Beautiful Commission “Living with arrangements and exemptions has also been raised (see above), along with a and practice on personal data protection, the Commission Beauty” report, the Government's response to which was also potential increase in the rate of corporation tax . Some have In an unexpected move, the majority of the DAC 6 reporting regime concluded that the UK ensures an essentially equivalent level of published on 30 January . Other proposed changes relate to: (i) the speculated that a rise from the current 19%, perhaps to as high as in the UK has been repealed, with effect from 31 December 2020 – protection to the one guaranteed under both the GDPR and the Law environment, particularly flood risk and climate change; (ii) the new 23%, is not out of the question, raising nearly £14 billion annually the day before the “reporting window” opened in the UK . Enforcement Directive . “retain and explain” policy regarding public statues; (iii) new policy for the Treasury . However, at a time when many businesses are on Article 4 Directions; and (iv) general updating . In relation to struggling, a further financial burden may not assist their recovery . The UK regime now only applies to hallmarks in Category D The Commission did, however, acknowledge it is essential that the Article 4 Directions, changes are proposed to restrict their (arrangements with the effect of undermining automatic adequacy findings are future proof now that the UK will no longer application to “the smallest geographical area possible”, and to Perhaps a tax measure that is targeted at those businesses that exchange of financial account information obligations or obscuring be bound by EU privacy rules . In addition, if adopted, the draft significantly restrict their use to circumstances where use is either have profited during the pandemic is more likely . The Government beneficial ownership) . decisions would be valid for a period of four years, after which the “essential” or “necessary” depending on the circumstances . This is reportedly considering an online sales tax and an excess profits adequacy finding could be renewed if the level of protection in the will limit the ability of local planning authorities to manage the mix tax, aimed at those businesses which it perceives are best placed to This change ensues from the end of the Brexit transition period, withstand an increased tax burden . It is thought, however, that if UK continues to be adequate . of uses in their areas through Article 4 Directions, which will have a when the DAC 6 European Directive ceased to apply in the UK . In significant impact in town centres, particularly if the proposed new these measures are brought forward, introduction in the Autumn, the Brexit Trade and Cooperation Agreement, the UK and the EU The European Data Protection Board must now provide its opinion PD right for change of use from Class E to residential proceeds rather than in the March Budget, is most likely . agreed to not weaken or reduce their rules on the exchange of on the findings, after which the Commission will request approval following the “Supporting housing delivery” consultation . information on potential cross-border tax planning arrangements For further information please contact Isaac Zailer or from Member States’ representatives in the “comitology” below the global minimum standard agreed at the OECD level . The procedure before adopting the final adequacy decision for the UK . For further information, please contact Matthew White . Howard Murray . OECD’s Mandatory Disclosure Rules (MDR) are significantly less The Information Commissioner described the draft decisions as an 24 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 25

UK developments International developments

“important milestone in securing the continued frictionless data •Traceability of illegal goods: Online platforms will be required to transfers from the EU to the UK” . However, given the level of vet the credentials of third party suppliers that conclude distance complexity and political legal uncertainty in this area, there is still contracts with consumers through their platform . the possibility of any approved UK adequacy decision being •Very large platforms: In addition to those set out above, the challenged in the future in a "Schrems-style” action . legislation includes enhanced controls and new responsibilities on “very large platforms”, defined as those with more than 45m See the press release here, the GDPR draft decision here, and the users . Law Enforcement Directive draft decision here . •Enforcement: The legislation introduces significant fines for Following the Brexit Deal, the European Data Protection Board non-compliance: up to 6% of the annual income or turnover of issued an updated “Statement on the end of the Brexit transition the provider or platform . period” (the Statement) . If the Commission does not determine a positive adequacy decision, the Statement re-emphasises that The European Parliament and European Council will debate, amend transfers from the EU or EEA Member States to the UK will require and ultimately must approve the Commission’s proposal . The DSA is adequate safeguards in place (eg standard contractual clauses, not expected to come into force until the end of 2022 at the earliest . binding corporate rules, intra-group agreements etc) . Our full blog post is available here . See also the competition, Our full blog posts are available here and here . regulation and trade section above .

For further information please contact Miriam Everett or For further information, please contact Hayley Brady, Duc Tran . Claire Wiseman or James Balfour .

16.2 European Digital Services Act and Digital Markets Act: A new era for online regulation in Europe On 15 December 2020, the European Commission released the draft text for the Digital Services Act legislative package which comprises two proposed regulations: (i) the Digital Services Act (DSA) which sets out a new framework of obligations for all digital services that connect consumers with goods, services or content; and (ii) the Digital Markets Act (DMA) which contains ex-ante rules that apply to so-called digital “gatekeeper” platforms to the single market .

Key points of the proposed legislation include:

•Scope: It is broad in scope and will apply to a range of key players across the digital ecosystem including intermediary services offering network infrastructure, hosting services such as cloud and webhosting services, and online platforms bringing together sellers and consumers . Given the global nature of digital services, as well as EU-based providers, these rules apply to providers established outside the EU that offer services inside the EU .

•Advertisement transparency: All online platforms displaying advertisements online will be required to ensure that individuals using their services can clearly identify information such as who the advertisement is displayed on behalf of and meaningful information about the main parameters used to determine the recipient to whom the advertisement is displayed .

•Illegal content: Online platforms that provide hosting services will be obligated to combat illegal content by putting in place user-friendly notice and action mechanisms, that will allow third parties to notify the platform of illegal content . 26 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS GENERAL COUNSEL UPDATE 27

International developments

17. Hong Kong which have each issued similar licensing frameworks in the past 20. UAE expectations for businesses to conduct such due diligence, even few years . when not legally mandatory . 17.1 SFC releases FAQs simplifying compliance with 20.1 Timely amendments to UAE Bankruptcy Law electronic data storage requirements Applications for digital banking licences are open to non-bank introduced to cover emergency situations See our Sanctions Note for more details . On 10 December 2020, the Securities and Futures Commission players . Licensed banks may apply for a digital bank licence On 24 October 2020, the UAE Cabinet announced its decision to (SFC) released its long awaited FAQs regarding its 31 October 2019 separate from their current licensed entity should they wish to carry amend Federal Law No . 9 of 2016 (the Bankruptcy Law) by adding For further information, please contact Benjamin Guthrie, circular on the use of external electronic data storage providers on digital banking business in a joint venture with other parties . certain provisions to allow for business continuity during Antony Crockett or Oliver Elgie . (EDSPs) . While there are some aspects of the FAQs which we However, this does not preclude licensed banks from digitalising emergency situations, including pandemics and natural disasters . anticipate will create practical challenges and will require some their current business operations, as this remains within the scope This is a timely amendment to the Bankruptcy Law and has been 21.2 US agencies clarify due diligence expectations careful analysis to implement, we generally consider the FAQs to be of their existing banking licence . introduced in response to the Covid-19 global pandemic . for charities and non-profit bank customers a significant step forward and to provide much needed flexibility for The Board of Governors of the Federal Reserve System, the Federal According to BNM, the primary aim of the licensing of digital banks the industry . The Bankruptcy Law is amended by a Federal Decree Law (the Deposit Insurance Corporation, the Financial Crimes Enforcement in Malaysia is to provide access to financial solutions for the Amending Law) . The overarching aim of the Amending Law is to Network, the National Credit Union Administration, and the Office underserved and unserved market segments . Applicants who can We have been leading the AIMA Working Group in relation to the provide assistance to debtors, both companies and individuals, of the Comptroller of the Currency have issued a joint fact sheet demonstrate a business model with strong financial inclusion 2019 circular and have been heavily involved in the industry facing financial distress to enable them to continue operating in clarifying for banks how to apply a risk-based approach to charities objectives will be favoured . engagement with the SFC, including in relation to the development emergency situations . and other non-profit organisations . of documentation in relation to the new requirements . Further details on this development and the policy document are Please see our full briefing here . The US Government does not view the charitable sector as set out in our bulletin of 7 January 2021 . In summary, the FAQs: presenting a uniform or unacceptably high risk of being used or For further information, please contact Debbie Standring, •provide licensed corporations with alternatives for compliance exploited for money laundering, terrorist financing, or sanctions For further information, please contact Natalie Curtis, Glynn Stuart Paterson or Emma Tormey . with the 2019 circular in addition to the requirement on EDSPs to violations; however, the guidance notes that US charities that Cooper, Mark Robinson or John Ling . provide an undertaking or countersigned notice to the SFC; operate abroad, provide funding to, or have affiliated organisations 21. United States in conflict regions, can present potentially higher risks . •clarify the SFC’s position in relation to the use of intra-group 19. Singapore 21.1 US State Department provides guidance on affiliates, both within Hong Kong and offshore, for the storage of 19.1 MAS issues revised guidelines on technology human rights due diligence regarding Although not altering existing Bank Secrecy Act and anti-money electronic regulatory records; and risk management surveillance-capable products/services laundering requirements nor establishing new supervisory •provide welcome flexibility to licensed corporations in relation to expectations, the guidance emphasises that banks must adopt On 18 January 2021, the Monetary Authority of Singapore (MAS) The US Department of State has issued new guidance on human the appointment of their EDSP managers-in-charge . appropriate risk-based procedures when developing the risk issued its revised Technology Risk Management Guidelines . rights due diligence for US businesses involved in the sale of profiles, and conducting ongoing monitoring, of charities and other products or services with surveillance capabilities that could be Further details in relation to the FAQs are set out in our bulletin non-profit customers . Although not required, the guidance The revised guidelines focus on addressing technology and cyber used by foreign governments . published in December 2020 . Our commentary on the 2019 circular recommends in developing such risk profile collecting information risks in an environment of growing use by financial institutions when it was first published and on the subsequent extension of the regarding, among other things, the customer organisation's purpose (FIs) of cloud technologies, application programming interfaces, The scope includes transactions involving not only products/services implementation deadline in light of the Covid-19 pandemic can be and nature, including mission(s), stated objectives, programmes, and rapid software development . The guidelines reinforce the intended for surveillance, but also those with “unintended found in our bulletins of November 2019 and April 2020 . activities, and services; location in higher-risk areas where terrorist importance of incorporating security controls as part of FIs’ surveillance capabilities” – a broad range of offerings that can be used groups are most active; organisational structure and internal technology development and delivery lifecycle, as well as in the to collect or analyse sensitive data, such as but not limited to For further information, please contact Hannah Cassidy or controls; donor base, funding sources, and fundraising methods; deployment of emerging technologies . biometric identification software, location tracking technology, Mark Robinson . beneficiaries and criteria for disbursement of funds, including recording devices, sensors, and data analytics software or services . guidelines/standards for qualifying beneficiaries and any The revised guidelines set out the following enhanced risk 18. Malaysia intermediaries that may be involved; and affiliation with other mitigation strategies for FIs: Although the guidance is voluntary and does not impose legal non-profit organisations, governments, or groups . 18.1 BNM opens applications for up to five digital obligations under US law, the Department "encourage[s]" businesses •to establish a robust process for the timely analysis and sharing of take steps to assess and minimise the risk that their product/service bank licences cyber threat intelligence within the financial ecosystem; and See our Sanctions Note for more details . will be used to violate human rights . These include, among others, Following a six-month consultation period, Bank Negara Malaysia •to conduct cyber exercises to allow FIs to stress test their cyber reviewing the capabilities of the product/service for such potential (BNM) issued the Policy Document on Licensing Framework for For further information, please contact Jonathan Cross, defences by simulating the attack tactics, techniques, and use (or misuse), and the human rights record and laws and policies of Digital Banks on 31 December 2020 . Christopher Boyd, Brittany Crosby-Banyai or procedures used by real-world attackers . the foreign government end-user; identifying entities that could gain Christopher Milazzo . access to the product or service, whether authorised or not; and Together with the issuance of the policy document, BNM announced The revised guidelines also provide additional guidance on the roles establishing both pre-and post-sale contractual and procedural that applications to conduct digital banking business or Islamic and responsibilities of the board of directors and senior management safeguards, and strong grievance mechanisms . digital banking business are now open until 30 June 2021, with up to in the oversight of technology and cyber risks . five digital banking licences to be issued by the first quarter of 2022 . The guidance suggests an increasing acceptance of human rights For further information, please contact Natalie Curtis or due diligence as an appropriate means to avoid human rights BNM’s move to promote the development of digital banks is in line Kenneth Lo . impacts associated with business activity, which will only increase with the direction taken by regulators in Singapore and Hong Kong, 28 GENERAL COUNSEL UPDATE HERBERT SMITH FREEHILLS

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