Predictions 2023: Changes in the law

We predict that in 2023 the current wave of anti-trust class actions will continue to pick up pace, with more opt out collective actions being certified in every sector.

Why?

• The Supreme Court decision in Merricks v Mastercard [2020] UKSC 51 (at the end of 2021) paved the way for opt-out collective actions. Since then, the number and breadth of claims issued has been beyond projections and continues to increase.
• 24 opt-out collective actions had been issued toward the end of 2022, spanning all sectors including telecommunications, the banking sector, ferry and rail operators, insurance and (in particular) technology.
• The approach to certification from the Competition Appeal Tribunal and the Court of Appeal has narrowed the areas in which defendants can challenge certification, though watch for a possible further decision from the Supreme Court in Merricks v Mastercard. For now, the certification process is becoming quicker all the time.
• The collective value of these proceedings runs into the tens of billions and the claims will be some of highest value seen in the UK.
• Backed by litigation funding through necessity, the high value of these claims means funders continue to be interested. Claimants and funders will look for competition elements of their grievances to allow opt-out actions to be brought.

Prediction author: Eleanore Di Claudio

We predict that 2023 will see the introduction of a new offence of 'failure to prevent fraud'.

Why?

• Calls to reform the criminal liability regime for corporates have been growing stronger in recent years (due to high profile acquittals, amongst other factors).
• A wide range of stakeholders, including both major political parties, have signalled that economic crime reform is a legislative priority.
• In June 2022, the Law Commission published a report setting out several options for reform, which is awaiting a response from the government.
• We predict the government will consider it necessary to produce some form of meaningful legislative response, and that it will view a ‘failure to prevent fraud’ offence as the most appropriate option.
• Any such reform would have far-reaching consequences and require to be carefully drafted and accompanied by robust guidance and communication.

Prediction authors: Nick Benwell, Camilla de Silva, Emily Agnoli, Jon Malik

We predict that in 2023 the UK will increase the pace of review and reform of its product liability regime.

Why?

• September 2022 saw the publication of a proposed Product Liability Directive by the European Commission, anticipated to come into force in 2024.
• Even if the UK lags behind in proposing reform, it is wise for UK businesses who manufacture or sell products to consumers in EU Member States to start preparing for the new EU regime now. The life sciences and TMT sectors are likely to be the greatest affected.
• The European Commission’s proposed Directive is fully formed and, although it requires approval, the European Commission considers the content to be reflective of the majority view of stakeholders from the consultation process, and an implementation of key case law from the last two decades.
• The UK’s Law Commission intends to review the UK’s product liability regime, and previous signals (such as a response to a call for evidence on product safety, from the Office for Product Safety and Standards) indicate similar areas of focus. These include expanding the regime to include intangible products (eg software, AI, 3D printer designs), imposing liability on online platforms and fulfilment service providers, and promoting sustainability and repairability of products.
• The proposed Directive expressly focuses on assisting claimants where complex products and/or claims arise - with particular reference to pharmaceuticals, smart products, and AI-enabled products. The proposed Directive even includes a presumption of defect and/or causation if a claimant 'faces excessive difficulties, due to technical or scientific complexity'.
• The proposed Directive was accompanied by a lengthy impact assessment report, in which an increase in successful claims is expected to lead to a rise in insurance premiums. Prudent product liability insurers are likely to perceive increased risk.
• The European Commission predicts an increase in product liability insurance premiums, since a number of proposed changes facilitate the bringing of claims, and help make them more likely to succeed.

Prediction author: David Kidman

We predict that in 2023 the Law Commission will recommend a number of amendments to the Arbitration Act to ensure England remains an attractive and competitive seat for international arbitration.

Why?

• It is over 25 years since the Arbitration Act was last overhauled. Over the years, a number of commentators have called for changes. In September 2022, the Law Commission published a consultation on amendments to the Act. We predict that a number of those proposed amendments will make their way onto the statute book.
• The Law Commission’s goal is to ensure the Arbitration Act remains 'state of the art', in order to protect England & Wales’s reputation and role in international arbitration. The Law Commission’s proposals aim for evolution rather than revolution. They have avoided proposing a wholesale redrafting of the Act in favour of clarifications of areas of difficulty.
• A welcome clarification would be to amend s.44 so that it is clear that agreeing to emergency arbitrator provisions should not preclude a party from accessing the English courts for emergency interim relief (a position which has been uncertain since the decision in Gerald Metals S.A. v Timis & Ors [2016] EWHC 2327 (Ch)).
• The Law Society has also proposed clarifying that arbitrators have the power to dispose of claims summarily. Given one of the criticisms of arbitration is that arbitrators can be too reticent to dispose of unmeritorious claims or defences on a summary basis, this amendment has its attractions. However, one reason for hesitation is that Article V(1)(b) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards states that enforcement may be refused if a party was 'unable to present [its] case'. Even if the Act is amended to include an express power to dispose of claims and issues summarily, it remains to be seen how and to what extent it may be used in practice.
• There is also a suggestion that the process for challenging jurisdiction be amended to remove the court’s powers to re-hear the issue de novo (ie from scratch). Instead, if a tribunal has already made a determination on jurisdiction, the court may be required to apply the same standard used in a domestic appeal (ie not reopening questions of fact, but examining only whether the tribunal applied the law correctly). There are difficulties with an appeal standard of review in circumstances where one party has not participated in an arbitration at all, and we predict that any amendment to the Act may take this into account.
• There are a series of other 'minor' amendments designed to ensure the efficiency and continuing attraction of England & Wales for international arbitration.

Prediction authors: Stuart Dutson, Basil Woodd-Walker

We predict that in 2023 it will become more difficult to establish the ultimate beneficial owners of EU companies for the purposes of identifying an individual’s assets, whereas the public registers in the UK will become an increasingly useful tool for identifying assets held through overseas holding companies.

Why?

• In late November 2022, the Court of Justice of the European Union (CJEU) decided that open public access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and family life, and to the protection of personal data, as set out in Articles 7 and 8 of the Charter of Fundamental Rights of the European Union. Shortly after the ruling, a number of EU members (including Austria, Belgium and Luxembourg) removed public access to their beneficial ownership registers. It is entirely possible that other EU countries will follow.
• The Courts in the UK are no longer obliged to follow the CJEU’s post-Brexit case law meaning that a similar step to remove public access to beneficial ownership registers in the UK is presently unlikely. The CJEU’s decision may, however, have interpretative value and therefore prompt litigants to challenge the existing beneficial ownership register regime in the UK.
• The Economic Crime (Transparency and Enforcement) Act 2022 has introduced a requirement for overseas entities that own UK properties to disclose information about their beneficial owners on a register kept by Companies House (the 'Register'). From the end of the transitional period on 31 January 2023, the Register should contain details about the beneficial owners of the vast majority of overseas entities that own UK property. Further information regarding the Register can be found in our practical guide, which is available here.

Prediction authors: Alexander Thavenot and Shaun Clay

We predict that in 2023 the revised Energy Charter Treaty will come into force, but only as a much diminished resource for resolving energy investment disputes.

Why?

• Despite a revised text adopted in November 2022, that should enter into force in 2023, the Energy Charter Treaty looks destined to become peripheral. With intra-EU arbitrations under it already prohibited by a decision of the Court of Justice of the EU in September 2021, a full European withdrawal looks likely, meaning investors from outside the EU will also be prevented from using it in any disputes relating to future investments.
• Germany, Italy, Spain, France, Slovenia and the Netherlands have announced their withdrawal from the Treaty, with Poland and others looking likely to follow suit, unwilling to offer binding investment protections that may hamper their energy transition plans. Many of these countries have faced claims by investors in fossil fuel projects (eg claims by RWE and Uniper against the Netherlands for its phase-out of coal).
• After 14 years, this long-standing framework for energy investment disputes looks to be reaching the end of the road. However, its protections remain in place for 20 years for investments made before a country’s withdrawal, meaning it will be relevant for a long while yet.

Prediction authors: Jonathan Schuman, Will Dunning, David Bridge