Disputes in a Fragmenting World: Predictions 2026

Prediction

Macroeconomic and geopolitical factors are likely to drive volatility over the next 12 months, bringing with it pressures (and focus) on asset valuations.

Why

Factors that typically drive market volatility are all around us. These include geopolitical risks and conflicts, monetary policy and inflation, fears of recession, market concentration and cybersecurity threats. These factors are in many ways interlinked and have created a highly complex environment in which markets are susceptible to unexpected news and events.

At the time of writing, and despite some very recent wobbles, major stock markets around the world remain near all-time highs. However, the high concentration of market gains is based on a handful of mega-cap technology stocks, and particularly those associated with AI. Given the importance of these companies, it is likely that any disappointment in earnings or a shift in investor sentiment towards them could trigger a broad market correction.

Into these complex market conditions private market lending has continued to grow significantly. This has led to opportunities for alternative asset managers including hedge funds and private equity looking for higher returns. They are often willing to lend to companies with complex structures or those in distress. Sector specific demand includes areas such as emerging and digital infrastructure and energy transition which have high capital requirements. But there are problems. A lack of transparency and regulation can mask true asset values and leverage. The illiquid nature of private assets (including private credit) can make accurate, real-time valuation difficult. Critics say that in certain areas of the market a general relaxation of standards and covenant-lite lending has increased the risk of more sudden losses in a downturn.

The recent collapse of First Brands in the US has highlighted some of the potential vulnerabilities within parts of the private credit market. Its bankruptcy exposed hidden liabilities and potential fraud at the borrower level. Here in the UK, the FCA has confirmed that it is monitoring the First Brands situation and has recently announced a major review of private markets.

Implications

Market conditions and trends are combining to cause volatility and to make the accurate valuation of assets difficult to achieve. In the event of a downturn, we would expect valuation and liability risk to increase. Investors facing losses might seek recourse against those managing their assets. However, losses do not in or of themselves indicate that a breach has occurred; generally (although it will depend on the contractual position among other factors), the bar for establishing a breach in those circumstances is quite high and the law makes allowances for difficulties in circumstances in which judgments are made. That said, this would not stop disgruntled and motivated investors from bringing claims. Other claims that might arise as a result of market volatility and valuation pressures include claims against auditors and valuers and claims arising out of fraudulent conduct unearthed at portfolio level.

Prediction

We anticipate an increase in large consumer claims alleging damage caused by products, including increasing numbers of mass claims arising from healthcare and life sciences products, new technology and environmental risks.

Why

A number of significant products claims are making their way through the English courts and are likely to be the focus of press attention and court decisions in 2026. For example:

• Johnson & Johnson is facing a group action alleging that its talc-based products were contaminated with asbestos and caused cancer. A large number of similar claims in the US have resulted in significant awards and settlements.
• The liability trial in the “Dieselgate” emissions litigation – a substantial group claim alleging that car manufacturers used “cheat devices” in emissions tests for their vehicles - started in October 2025, with judgment expected in summer 2026.

The EU’s claimant-friendly strict product liability regime under the Product Liability Directive (PLD) will bring a greater risk of mass products claims (see our webinar series here), particularly in combination with the Representative Actions Directive. Non-EU based manufacturers are within the PLD’s scope, and the definition of “product” under the PLD is broad, including intangibles and AI. The PLD must be implemented by EU Member States by 09 December 2026, and a number of jurisdictions have started the process. We are watching closely the UK Law Commission’s current review of product liability law; the extent to which it will diverge from the EU approach remains to be seen.

We also expect to see claims in the English courts relating to PFAS and microplastics pollution next year, alongside legislative or regulatory measures to restrict their use in products. US and EU courts have seen significant claims, and as environmental reporting obligations in the UK and EU increase, so will the claims risk. Claims are likely in relation to remediation liabilities - the Fire Protection Association has projected that PFAS clean-up costs in the UK alone could amount to almost £10bn - as well as to personal injury and pollution claims arising from the impact of PFAS on people and the environment. The UK’s regulators are looking closely at PFAS; the Environment Agency and the Drinking Water Inspectorate are concerned with PFAs levels in drinking water and groundwater, and the HSE’s consultation on restricting PFAS in fire-fighting foams closes in February 2026.

As illustrated by the TCC’s decision in Municipio de Mariana v BHP Group (UK) Limited – by which an English parent company has been held liable for losses suffered by communities and others as the result of a dam collapse in Brazil - the English courts are prepared to grapple with jurisdictional, logistical and other complexities where English businesses might be liable for pollution events arising from their operations overseas.

In addition, while manufacturers of construction products face a number of contribution claims arising from fire safety and cladding liabilities post-Grenfell, the Building Safety Act ushered in liabilities beyond cladding products. Construction product manufacturers may face claims where any of their products causes a dwelling to be unfit for habitation, with a prospective limitation period of 15 years (for works completed after June 28, 2022).

Implications

Product manufacturers in all sectors are facing greater regulatory scrutiny and claims risk. Environmental concerns, consumer-friendly legislation and activity by claimant firms all lead to an increased likelihood of group claims.

Defending a group action can be extremely costly, both in defence and investigation costs and in reputational damage. Whether or not Johnson & Johnson’s talc products were safe – as its parent company insists (pointing to the role of the jury system in the US as a distinguishing factor in the defendant liability landscape) – product manufacturers need to be aware of their environmental and product safety obligations across all jurisdictions in which their products are sold, and to act promptly should any concerns or issues come to light.

Prediction

We anticipate increased claims against auditors and directors against a backdrop of economic uncertainty and insolvencies in 2026.

Why

Company insolvencies are expected to remain high during 2026, as the economic headwinds that have caused difficulties for businesses in 2025 continue to do so.

Although the nature of claims against auditors (for professional negligence and breach of statutory duties), and directors (for breach of statutory or fiduciary duties) may differ, both are made more likely by the scrutiny of a company’s affairs that follows an insolvency event. Insolvency can lead to increased claims risk for a company’s auditors or directors, as latent issues are uncovered and the insolvency practitioner seeks to recoup any losses that may be attributable to the action or inaction of a third party.

While obviously the reasons for a company’s financial difficulties and factual basis of these claims also varies, claims against auditors are likely to have at their core alleged failures to spot or uncover financial difficulties or irregularities, and breaches of requirements to conduct audits in accordance with relevant accounting standards. The International Standards on Auditing (UK and Ireland) (ISAs) include requirements for an auditor, for example, to obtain reasonable reassurance that the financial statements are free from material misstatement.

We can already see this in the English courts. The trial of a £2.7bn negligence claim against Ernst & Young LLP for their alleged failure to spot fraudulent activity during their audit work for NMC Health plc was heard in autumn 2025, with judgment expected early 2026. Claims currently making their way through the English courts allege failures in the audit of insolvent entities in multiple sectors, including a regulated peer-to-peer firm (with the claim having been assigned to specialist insolvency litigation funders), a large construction company and an insurance company.

Equally, the actions of an insolvent company’s directors or former directors in managing the company’s affairs will be scrutinised following an insolvency event; depending on the issues uncovered this may give rise to a range of claims, such as for misfeasance, or breach of statutory or fiduciary duties. Core duties under the Companies Act include obligations to promote the company’s best interests, to avoid conflicts of interest and to act with reasonable care and skill. During the period immediately preceding an insolvency, the directors’ fiduciary duties to the company’s creditors will overtake those to the shareholders. This is a period of high risk; directors who continue to trade once there is no reasonable prospect of the company avoiding insolvency may be liable for wrongful trading, and any active attempt to deprive creditors may give rise to a fraudulent trading claim. The collapse of the US company First Brands Group, which filed for Chapter 11 bankruptcy in September 2025 with total liabilities of over $11bn, has given rise to extensive regulatory scrutiny and claims by a number of lender creditors in the US. Further claims may well follow, as these investigations and claims probe alleged financial irregularities.

It is worth noting that insolvency practitioners themselves are not immune to professional negligence claims, and an increase in insolvency events obviously increases this risk. Recent decisions of the English courts have noted the tension between the personal nature of the individual insolvency practitioner’s duties under the Insolvency Act, and the contractual relationship often in place between the insolvent entity and the practitioner’s employer firm. Two decisions in 2025 have made clear that liquidators are unable to limit their personal liability (whereas their firms are able to do so).

Implications

Once a company is in administration or liquidation the die may largely be cast so far as directors’ and auditors’ claims risk is concerned, but it is worth emphasising that those involved in running a company need to be acutely aware of their duties both to the company and to its creditors at all times. Directors should seek professional advice as soon as any financial difficulties start to emerge. Similarly, auditors need to be aware of their duties, in particular the requirement that they apply professional scepticism and challenge in conducting their audits.

Prediction

Fraud will continue to be a major focus for many businesses in 2026. We expect to see an announcement of the first investigation into a Failure to Prevent Fraud offence, though associated prosecutions will take longer. The increasing availability of powerful AI tools that can mimic individuals and create false but convincing voice and even moving footage of people will lead to new forms of fraud. There will also be an increasing regulatory focus on financial crime controls, including those to combat money-laundering.

Why

While the new offence of Failure to Prevent Fraud came into force on 01 September 2025, some businesses have not yet completed their initial work. For those that have carried out a risk assessment and updated existing measures to protect against the risk of employees and agents acting fraudulently to benefit the organisation, there will be ongoing monitoring and updating. The government guidance makes clear that anti-fraud procedures need to be living systems and the defence of having reasonable procedures will only be available to those who can show active review and improvement. For more on the guidance, see here.

The nature of fraud risk by those acting against financial institutions and their customers will continue to shift as criminals adapt new technologies, requiring constant vigilance. The PSR reported in October 2025 that the first year of the APP Fraud mandatory reimbursement scheme had seen a fall of 15% in the number of claims, suggesting payment processors were becoming better at detecting and preventing fraud. However, new forms of fraud will continue to emerge from economic turbulence and increasingly convincing AI technology.

The FCA’s Strategy for 2025 to 2030 identifies the fight against financial crime as one of its 4 priorities and its activities over the last year have demonstrated a clear intention to follow through on this. Over the summer it issued three significant final notices dealing with financial crime systems and controls failures. The results of 2 very recent FCA surveys found that two-thirds of UK corporate finance firms which help businesses raise money by connecting them with investors or lenders are at risk of failing to satisfy anti-money laundering rules by not conducting assessments of the risks they face. They also found that firms involved in a multi firm review were not paying enough attention to their financial-crime risks. The FCA specifically called for firms to understand the risks they faced and to put in place “robust” financial-crime controls to mitigate those risks. Recent speeches by senior regulators in the UK and across Europe have been used to reinforce the message. The FCA plans to use a synthetic data project, in which "realistic, privacy-safe" data will be used to help firms build and test AML systems.

Implications

Monitoring developments in fraudulent activity will be vital for businesses across all sectors. As the introduction of the Failure to Prevent Fraud offence fades into the past, compliance and risk functions will have to work hard to keep the monitoring and review of measures taken high on the agenda. Early enforcement action may assist with that.

The FCA will remain focussed on financial crime in the year ahead. It is investing heavily in its data-related technology and will no doubt make use of that. Its sector-focussed approach is continuing as it now moves to look at how asset managers and alternatives firms are dealing with the issue. It will shortly assume AML supervisory oversight of legal, accountancy, and trust and company service providers. Firms need to gather sufficient information to understand money laundering risks posed by specific clients at the outset of a relationship and carry out proper ongoing monitoring. Other issues identified by the FCA include a lack of a documented business wide risk assessment, missing evidence of customer due diligence and gaps in risk assessments for appointed representatives. The FCA has stated that it expects firms to "address any gaps in their financial crime control frameworks" and firms would be wise to pay heed.

The UK government has credited the use of AI and advanced data tools with enabling a record £480 million in fraud to be recovered or prevented in the FY running up to April 2025. Significant savings were achieved in relation to fraudulent Covid-era loan schemes (£186 million) and wrongful public-sector pension payments (£68 million). These measures are part of a broader government crackdown on public sector fraud using technology.

Prediction

Parties to certain commercial disputes in England and Wales will need to adjust to a new regime under which the press and public will be able to access more documents from the litigation.

Why

From 1 January 2026, parties to cases in the Commercial Court and Financial List will need to file key documents relied upon in proceedings so that they can be accessed by the public.

A new pilot scheme, set out in Practice Direction 51ZH and to run initially for two years, introduces rules to enable the public to access "Public Domain Documents"; those documents necessary to understand cases that go to a hearing. The new obligations apply to all represented parties.

"Public Domain Documents" include:

• Skeleton arguments and any written submissions;
• Witness statements and affidavits, but not their exhibits;
• Expert reports, including appendices;
• Any documents critical to the understanding of the hearing ordered by the judge at the hearing to be Public Domain documents.

This last category could include contracts which are the subject of the dispute, plus any key correspondence to which the parties frequently refer.

The parties can apply to the court for a "Filing Modification Order" waiving or restricting the duty to file a document, limiting public access to it or requiring it to be filed only after redactions have been made. However, orders restricting access are not expected to be easily obtained.

Implications

Parties need to be aware of these changes and consider their impact. While the pilot scheme starts out in the Commercial Court and Financial List, it is likely to be rolled out across the Business and Property Courts before long.

Witnesses and experts need to be made aware that their statements and reports will be in the public domain. There may be cases where this impacts upon their willingness to participate, or may influence what they will say. Those contemplating litigation will also need to consider what documents may enter the public domain as a result and become available to the press or rivals. This will inevitably feed into considerations of settlement prior to a hearing. Those with an interest in a dispute between others will now be able to gain deeper insight into the issues and underlying facts.

A more detailed version of this is available here.

Prediction

The FCA’s enforcement work will focus on a number of key themes in 2026 including, in particular, financial crime systems and controls, the consumer duty, non-financial misconduct and market abuse. They will publish more final notices but these will result from fewer but faster investigations.

Why

The fight against financial crime is one of the FCA’s 4 key priorities and its activities over the last few months have demonstrated a clear intention to follow through. Over the summer it issued three significant final notices dealing with financial crime systems and controls failures. The results of 2 very recent FCA surveys found that firms were not paying enough attention to their financial-crime risks. The FCA specifically called for firms to understand the risks they faced and to put in place “robust” controls to mitigate those risks. Recent speeches by senior regulators have been used to reinforce the message.

In terms of the Consumer Duty we anticipate that enforcement will be directed towards improving customer outcomes, in particular enforcing the notion of fair value. There is likely to be a continued focus on individual accountability for non-financial misconduct as the FCA expands the scope of COCON to non-banks with effect from September 2026.

The insurance industry will likely come under the regulatory spotlight next year; the FCA’s focus on fair value includes market studies into pure protection insurance and premium finance. The FCA has also received a “super-complaint” from Which? relating to what it calls poor practice in the insurance industry. We note that the two s.166 skilled person reviews commissioned during 2025 were both of insurance entities.

Lastly, we believe that the regulator will continue to focus on market abuse in 2026. It is a key component of their 2025-2030 strategy to fight financial crime. The FCA plans to use advanced technology like AI to detect misconduct and will focus enforcement on cases that provide the most significant deterrent effect.

Implications

In her speech at the recent FCA summit in London, Therese Chambers suggested that there may be more Final Notices each year (up from around 25 to 30 per year), but these will result from far fewer investigations. We take this to mean that the FCA will be picking its areas of focus very carefully but that once chosen, its investigations will be pursued rigorously. There is little doubt that the FCA’s aim to be a data led regulator, including through the use of AI to augment its enforcement teams, should assist it in this regard. Chamber’s speech also contained a warning dressed up as a promise - to pursue investigations when it’s the right thing to do and that when they dig in, they will stay dug in until the bitter end.

Prediction

One or more new consumer claims groups will be established to challenge and seek to recover remuneration paid to intermediaries.

Why

The issue of intermediary remuneration and secret commissions came into sharp focus in the summer of 2025 with the Supreme Court’s judgment in three combined cases, all relating to alleged duties owed to customers by car dealers acting as credit intermediaries and the liability of lenders which provided the credit. The Court allowed the lenders’ appeals in part holding that the dealers were not fiduciaries but upheld a claim by one of the claimants under section 140A of the Consumer Credit Act 1974 (CCA) that the relationship in his case was unfair and that he should be entitled to recover commission paid plus interest from the lender.

The FCA is now consulting on an industry-wide scheme to compensate those who were treated unfairly in relation to motor finance agreements entered into between 2007 and 2024. Designing a scheme which satisfies all stakeholders and avoids the risk of a legal challenge may prove difficult. Working out which agreements from sometimes very significant historic books of business fall within the scheme and were ultimately unfair is likely to prove every bit as challenging. The FCA expects to publish the scheme rules in February or March 2026.

The case marked a key point for the motor finance industry but also raised the wider issue of undisclosed commissions across other sectors. The position currently is that both discretionary commission arrangements (DCAs), where dealers were paid a higher commission by the lender where they arranged a loan with a higher interest rate, and certain kinds of non-DCA motor finance commissions may give rise to liability under s.140A of the CCA. However, the Supreme Court’s decision was ultimately narrow in scope because of the finding that no fiduciary duty was owed by the dealers, limiting the decision to regulated consumer credit agreements under the CCA. The Court left open the possibility that a fiduciary duty might be owed in slightly different circumstances. In the motor finance context, the broker is not paid by the consumer but the Court noted that if the broker was paid by the consumer, that would probably be sufficient to establish a fiduciary duty. Other scenarios may, likewise, give rise to duties.

Implications

The task for businesses will be to identify situations in which liability could arise following the Supreme Court’s judgment. The risk of liability most obviously arises under s.140A of the CCA for consumer credit businesses which use intermediaries and pay them commissions. Other businesses which use intermediaries will need to be alive to the risk that those intermediaries do assume (or undertake) a responsibility to act with loyalty to the consumer because the nature of their relationship differs from that of the car dealers. This might arise, for example, where the intermediary is not involved in the sale of the goods being financed (as the car dealers were) but has a contractual relationship with the consumer to act as their intermediary. For example, an intermediary which is engaged directly by the consumer to arrange finance (or another product) and is remunerated by the consumer for these services could be at risk of owing and breaching a fiduciary duty if they accepted an undisclosed commission from the finance/product provider.

Firms which use intermediaries and commissions should now be assessing their back books of business for risk of liability and updating their practices going forward to ensure that any new risk is mitigated. The underlying facts in each case will need to be analysed and tested. Consideration should be given to segmenting books for the purpose of this analysis, given the likely differential status of different customer segments based on evolving businesses practices and regulation over time. This will enable firms to quantify their potential exposure and determine their strategy for managing redress and claims.

Prediction

As the impact of AI spreads, we expect to see it at the centre of various disputes across the globe. The courts will also take action to control the use of AI in proceedings. We also foresee changes in customer behaviour that will force businesses and institutions to adapt.

Why

The November 2025 decision in Getty Images v Stability AI ultimately proved not to be the watershed moment on the issue of AI data scraping, leaving much to be decided. Other issues surrounding the use of AI are likely to come before the courts in 2026, including claims relating to inbuilt bias, data privacy infringement and liability for AI driven errors. Insurers in the US are facing AI bias lawsuits in relation to the use of algorithms in claims and underwriting processes; we expect to see similar disputes in this jurisdiction. The rush by businesses to show they are embracing AI is also likely to see scrutiny of some claims and group actions by investors for “AI-washing” where public statements on AI capability are found to be inaccurate.

In August 2026 we were due to see the entry into force of certain elements of the EU AI Act, though there is now discussion of delaying this as part of the EU’s Digital Omnibus package. The EU AI Act applies to deployers of AI systems used in the EU or whose output is used in the EU. We have produced a resource to guide businesses through it. The UK is also likely to introduce legislation governing AI in 2026. We expect to see regulators and enforcement agencies adopting AI systems to enhance their oversight and investigatory powers. The Competition and Markets Authority has indicated in its Action Plan for 2025/2026 that the development of AI tools to identify illegal collusion is one of its key focus areas.

The English courts’ attitude to AI is developing fast. Emphasising their capacity to adapt to new developments, the judicial leadership have made a point of embracing AI in numerous speeches. However, more recently we have seen a growing concern over pleadings and submissions relying upon authorities which either don’t exist (the hallucinations of Large Language Models (LLMs)), or are irrelevant to the specific legal context. A number of barristers and solicitors have been referred to their regulators for unintentionally misleading the court with AI-generated submissions. Busy District Judges do not have time to go behind every statement of the law put before them and there is real concern that this could lead to incorrect decisions in the County Courts. We expect to see a consultation in 2026 on new court rules governing the use of AI in proceedings.

For in-house legal teams, AI presents opportunities and risks. The benefits of technological support for internal investigations will continue to grow, as new AI-powered software will speed up the identification of key material. Retrieval-Augmented Generation (RAG) systems are already transforming legal research, grounding responses to questions by searching only verified legal databases. Lawyers need to learn how to craft the most effective prompts for such systems, while being aware of their limitations so that they can properly scrutinise the outputs. To date there has been no specific guidance from the SRA in relation to the use of AI, despite several calls from the Law Society for the SRA to provide guidance as a matter of urgency.

One result of the ready availability of LLMs, such as ChatGPT, is the ability of those without legal knowledge or experience to put together plausible sounding claim documents. The volume of threatened legal proceedings that can be quickly dismissed as disclosing no cause of action or no causation of the loss claimed is likely to shrink, as disgruntled customers engage LLMs to do their drafting for them. In the past the availability of pro-forma letters before action and claim forms has tipped the balance in favour of those with complaints in common with many others. LLMs allow those with unique complaints to create authoritative looking letters and legal submissions replete with legal terms. Of course, many of these will not stand up to close analysis, but some will, which will mean more time is needed to weed out claims. This is likely to lead to a technological arms race where defendants and courts must deploy their own AI-powered triage tools to deal with the increasing volume.

Implications

All businesses using AI will need to stay abreast of the fast-changing AI regulatory landscape across multiple jurisdictions. Close scrutiny should be paid to public statements about AI capabilities to protect against claims of AI-washing, while, internally, proper consideration needs to be given to appropriate use cases and guardrails. In-house lawyers are likely to find aspects of their work made more efficient, but at the same time find unrepresented opponents increasingly able to appear legally literate. This is likely to require changes in approach to certain kinds of claims.

Prediction

The increasingly integrated and inter-dependent digital systems that businesses rely upon will lead to larger and more disruptive outages, with legal and regulatory fall-out.

Why

2025 saw the most high-profile cyber-attacks in the UK to date, with several retailers affected and Jaguar Land Rover having to suspend production completely. The easy availability of ransomware, which can be hired from criminal groups, and the increasing sophistication of attacks, including by state actors, means all forms of business are at risk.

The Information Commissioner’s Office will investigate such incidents and assess compliance with data protection regulations. Legal actions are also likely to follow such incidents, particularly concerning the protection of customer data and the adequacy of security measures in place at the time of the attacks. Parties whose customers have had their personal data compromised can expect group actions against them. There may also be underlying contractual claims available to those businesses affected against their third-party vendors where the vulnerabilities arose from weaknesses in supply chains.

But cyber-crime is not the only cause of data outages. Software problems, sometimes caused by errors in the remote roll out of updates, have had impacts on a wide range of businesses that are similarly stark, if more short-lived. The recent Cloudflare outage, that affected the largest social media platforms, is only the latest example in a growing list. The consolidation of internet infrastructure providers has brought increased speed and connectivity to digital services, but the series of outages in 2025 have shown that it has also meant a larger impact when something goes wrong.

The huge amount of data processed daily by large companies makes the potential impact of any disruption to data centres another risk area. The ten-hour blackout in parts of Spain and Portugal and the loss of power to Heathrow airport from the Hayes substation fire showed the potential for widespread business disruption. For businesses, an outage can mean lost data, halted transactions, and complete shutdown.

Implications

The events of 2025 highlight the importance of complying with data protection standards and the potential consequences of lapses in cybersecurity. We expect to see tighter enforcement expectations, with both public and private actors demanding more transparency, risk-sharing, and resilience in handling sensitive customer data.

Companies need strong recovery plans and clear procedures to restore services quickly should the temporary or permanent loss of a data centre occur. The risk of data outages needs to be considered in contractual relationships as well. Many data breaches originate through third-party systems, which have led to reviews of service contracts, liability caps, and breach response terms. When contractual obligations cannot be performed due to data loss or system outages, parties will inevitably look to see whether force majeure or similar provisions can be used to deflect claims, as well as caps on liability. Cyber-insurance and business interruption cover are increasingly important considerations for businesses of all kinds, and it will pay to examine the scope of cover carefully, as well as ensure compliance with policy terms.

Prediction

In 2026, the digital assets sector in the UK and EU will be shaped by the introduction and enforcement of comprehensive regulatory frameworks, alongside legal reforms designed to address the unique features of this asset class. Firms should expect increased regulatory scrutiny and must ensure that their systems and controls are robust and compliant.

Why

Digital assets include a wide range of electronically stored items of value, such as cryptocurrencies (e.g., Bitcoin), tokenised assets (like securities and funds), stablecoins and NFTs. These assets are typically based on decentralised technologies, such as blockchain, which enable trading outside traditional financial systems and benefits such as increased efficiency. The rapid pace of innovation in digital assets presents significant challenges for both regulators and the law. Regulatory frameworks are evolving to keep up with these developments, and firms must be prepared to adapt quickly.

2026 will see greater institutional adoption of digital assets, supported by regulatory progress and the expansion of real-world applications, particularly through stablecoins and asset tokenisation. Regulatory priorities will focus on providing clarity and enhancing investor protection as the sector matures. In the UK, the Financial Conduct Authority is expected to finalise and implement a comprehensive regulatory regime for digital assets. Firms involved in activities such as stablecoin issuance, custody, and trading platforms will require FCA authorisation. New prudential sourcebooks—COREPRU and CRYPTOPRU—will introduce capital, liquidity, and risk management requirements tailored to cryptoasset firms. The new CASS 17 regime will require the segregation of client assets under a statutory trust. A dedicated Market Abuse Regime for Cryptoassets (MARC) will also be introduced, prohibiting insider dealing and market manipulation, and requiring trading platforms to monitor and report suspicious activity. In the EU, the Markets in Crypto-Assets (MiCA) regulation will continue to bed-in and market practice is expected to develop.

Legal changes are also underway to support regulatory objectives. The Proceeds of Crime Act 2002 has been amended to provide specific civil recovery powers for digital assets. The Law Commission’s proposal to create a third category of personal property for digital assets has progressed through Parliament as the Property (Digital Assets etc) Bill which received Royal Assent on 2 December 2025. The Law Commission is also examining private international law issues relating to governing law and jurisdiction for digital assets.

Enforcement activity in the UK is already increasing. The Serious Fraud Office has launched its first major cryptocurrency investigation into suspected fraud. A recent high-profile case saw a Chinese national, known as the “Crypto Queen”, sentenced to 12 years’ imprisonment for laundering the proceeds of a Bitcoin fraud. In DPP v O’Connor, the High Court granted a civil recovery order in respect of cryptocurrency worth approximately £4.1 million.

Implications

Given the rapidly evolving regulatory environment and changes in the law, financial services firms must closely monitor legal and regulatory developments and ensure that their systems and controls are fit for purpose. It is essential to maintain thorough documentation of decision-making processes to demonstrate compliance if required. Firms should be proactive in reviewing and updating their risk management and governance frameworks to align with emerging requirements and best practices in the digital assets space.

Prediction

We anticipate an increase in disputes arising out of energy and other large infrastructure projects, including data centres.

Why

Investment both in renewable energy projects and in the construction of data centres is significant and continues to rise, driven in turn by net zero and climate targets and technological developments. Energy and infrastructure disputes are expected to increase, arising from the design, construction and the operation of these facilities.

While energy and data centre projects are quite different, both are critical to ensure a stable energy supply and resilient digital services. Ambitious renewable energy targets are driving the development of large-scale projects such as solar parks in India, wind farms in Morocco, and hydropower schemes in Ethiopia. Nuclear energy is recognised as a low-carbon power source, albeit with significant risks, including regulatory uncertainty, complex permitting processes, and concerns around safety, waste management, and public acceptance. Similarly, data centres are being constructed all over the world to meet the increased demand for digital infrastructure, particularly to support AI developments (we consider a number of issues relating to data centres in our podcast series here). Battery storage disputes are on the rise, as well as issues and challenges relating to off- and on-shore grid connectivity.

International contractors with relevant expertise and investment are increasingly entering jurisdictions for the first time. The unfamiliar legal and regulatory landscape in these jurisdictions means that construction companies must seek comprehensive local law advice to effectively manage risk.

Large construction projects will also usually involve multiple parties, global supply chains and third-party investors. In a climate of increasing materials costs and geopolitical tensions, supply chain risks are high, and difficulties and project delays (therefore project disputes) are commonplace. Inflationary pressures may lead parties to seek to renegotiate or vary contracts later in a lengthy project.

We anticipate a rise in construction disputes regarding design or workmanship issues on renewable projects and data centres, given the involvement of complex and relatively new technology. The energy transition increases risk, as designers, builders and investors explore new design techniques, materials and technologies. Data centres are energy- and water-intensive, but many technology companies and data centre operators have ambitious net zero or renewable energy targets which will need to be considered. The design and build processes also need to take into account the vulnerability of energy and IT infrastructure to physical and connectivity disruption, and the need to build in resilience.

Disputes will often be resolved through arbitration rather than through the courts, particularly on international projects. Maintaining control of the dispute resolution process and avoiding local courts, together with the ability to choose arbitrators with relevant technical experience, are key drivers.

In addition, while many government-led net zero and climate ambitions are spurring investment in renewable energy and sustainability initiatives, other jurisdictions (such as the US) are scaling back their commitments. This divergence creates additional complexity and uncertainty, particularly where an infrastructure project may take many years (and electoral cycles) to complete. Investors who have been attracted by a particular State’s incentive scheme to invest in a renewable energy project, where that scheme has subsequently been withdrawn, may seek to enforce their rights directly against the host State through an international arbitration. The recent decision in OperaFund Eco-Invest SICAV PLC & Anor v Kingdom of Spain relates to enforcement of an award following an investor-state arbitration relating to changing renewable energy regulations in Spain.

Implications

Parties to an infrastructure project should assess and address risks up front, including risks in the supply chain, ESG considerations, and local law and regulatory constraints. These risks can then be mitigated practically and clearly allocated in the contract.

Investors in renewable energy projects need to be equally aware of the risk of changes, delays and disputes in relation to the project, and mindful of their potential right to recourse through an investor-State arbitration.

Prediction

OFSI enforcement levels are unlikely to increase significantly in the short term but important reforms expected next year could have a material impact beyond that. We do expect to see an increase in the FCA’s enforcement of sanctions systems and controls breaches next year.

Why

Increased civil enforcement by OFSI has been long predicted including in public statements by the agency itself but enforcement levels remain low, with the agency continuing to prioritise cases concerned with simpler, lower-value breaches. However, there are now a range of proposals for change on the table, following a broad ranging consultation on enforcement reform which closed recently. The two proposals likely to garner the most support and which are therefore most likely to be implemented are: first, the streamlining of the enforcement of low value information, reporting and licensing breaches; and secondly, a settlement scheme to support quicker resolution of cases. The scheme will include an invitation to enter discussions at the conclusion of an investigation, the sharing of the decision, a negotiation period and up to 20% penalty discount (added to any voluntary disclosure and co-operation discount) for accepting liability and waiving the right to ministerial review. Other proposals such as the early account scheme and a doubling of the statutory maximum penalty will not in our view make a material difference to enforcement levels in the near term, if adopted.

The FCA has responded to the unprecedented expansion in the complexity and volume of sanctions measures with an increased focus on sanctions controls and risk management. This is demonstrated in the £29m fine for Starling Bank in 2024 (the first case containing stand alone and detailed findings regarding a bank’s financial sanctions controls); sanctions focused thematic reviews; an increase in sanctions related assessments as reported in the FCA’s Annual Report for 2024 – 2025; and extensive enhancements to the sanctions controls related parts of the FCA’s Financial Crime Guide in 2024.

Key messages from UK and European regulators emphasise the need for effective internal controls and regular audits of sanctions compliance frameworks. They expect proactive compliance, timely reporting, and the use of technology, with a strong emphasis on governance, due diligence, and the ability for firms to respond quickly to new sanctions developments.

Implications

We anticipate that, if implemented, the reforms proposed by its recent consultation will result in a significant uptick in enforcement activity by OFSI and more higher value cases involving more ‘sophisticated’ breaches but the impact is unlikely to be immediate.

We expect to see the FCA continuing to scrutinise firms’ sanctions controls as part of its supervisory and enforcement remit. Whilst a lot of this engagement is happening in direct consultation with firms through supervision, more serious cases will continue to be addressed through enforcement action. Firms should be mindful of available and new guidance on the FCA’s expectations in this area, and make recommended adjustments to their controls frameworks.