We have gone through turbulent times. To say that the world has changed in the past year and a half would be an understatement. Revered institutions have fallen like houses of cards and once untouchable reputations have been severely damaged by economic upheaval. Although there are some indications that life as we knew it has resumed, the way that lawyers do business has changed. This article discusses some of the changes that have occurred, and the lessons that lawyers can and should take away from the recession. Continue reading “Lessons of the economic crisis”

When we think of reputation, particularly corporate reputation, we are really thinking about trust in an organisation. A successful company must gain the trust of its employees, suppliers, shareholders and customers to help win a commercial advantage over its competitors and protect the value of its business. Losing stakeholder trust can result in the failure of a business, as recently demonstrated by a host of high-profile corporate scandals. Enron, Xerox and Barings Bank are all examples of brands that failed their stakeholders and lost the trust of consumers. Good governance should be at the heart of any business and not just a reaction to a reputational or media crisis. It is vital to the long-term prosperity of a business and there have been several recent changes in the law aimed at improving corporate governance.

Research shows that trust is at the centre of a successful business. The Edelman Trust Barometer 2009 shows that customers are more likely to buy the products and shares of a company that they trust. Asked about a company that they distrusted, 77% of respondents to the study refused to purchase its products or services, 72% criticised it to a friend or colleague, 34% criticised it online and 17% sold their shares in the business. However, for a trusted company, 91% of those surveyed chose to buy its product or services, 76% recommended them to a friend or colleague, 55% payed a premium for its products or services, 42% complimented it online and 26% bought shares in the firm. Enthusiasm for good governance among companies has also increased following the recent changes to s172(1)(d) of the Companies Act (CA) 2006, which came into force on 1 October 2007. CA 2006 states that a director of a company must:

‘Act in a way that he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.’

Under the Bribery Bill, companies must put in place adequate procedures preventing their staff from engaging in acts of bribery and may be prosecuted for a failure to do so (see the box on p57 for a summary of the Bribery Bill). Stakeholder trust and legal compliance can only be achieved through a well-planned and robust corporate governance policy. A positive corporate reputation is achieved by making sure that an organisation:

1. has a constructive commitment to corporate social responsibility;
2. manages publicly available information (including the internet) and takes steps to deal with damaging information;
3. manages the media and makes sure that action is taken to correct inaccurate stories in the press, including preventing the publication of damaging reports; and
4. assists chief executives and other senior staff in maintaining a strong public image.

Businesses that think ahead and carefully plan how to deal with reputational risk will be best placed for avoiding meltdown. When a company does face a reputational crisis, it is essential that it conducts a governance review, including a full audit of any risks, especially those applicable to its human resources, information technology, legal and communications departments. Lawyers are increasingly being asked to provide services that minimise the chances of a reputation crisis, including audits of organisations with which clients are doing business.

BAE Systems

Five years ago, BAE Systems, the world’s second largest defence contractor, was caught in a media storm resulting from allegations of bribery involving business in Saudi Arabia. Following investigations by the Serious Fraud Office and the Ministry of Justice, BAE commissioned an independent review of its ethical conduct that sought to determine any changes needed in the company to achieve global leadership in ethical standards and help improve stakeholder trust in the organisation. Roger Wiltshire, BAE’s chief counsel UK, has shared his experiences of the committee’s report and how the business is committed to a policy of superior corporate governance relating to its business conduct and reputation. The scale of the project is extraordinary and a full case study is included in the box on p58.

Comment

Companies that have built a high level of trust are far more likely to bounce back from a reputational crisis. Investing in sound corporate governance and ethical behaviour creates a reserve of trust that makes stakeholders far more likely to forgive future mistakes.

In-house legal advisors play an important role in establishing trust in the company for which they work. A counsel working in co-ordination with communications, public relations, human resources and IT teams, as well as a board of compliance and regulation, will be well placed to identify the warning signs of a reputation crisis while there is still time to act. Such an advisor will be a valuable asset to their company and success in this role depends on combining a commercial mindset with legal prudence. For further reading please visit www.justice.gov.uk/publications/docs/draft-bribery-bill-tagged.pdf and www.justice.gov.uk/publications/draft-bribery-bill.htm.

By Jo Paton, solicitor, Schillings.E-mail: jo.paton@schillings.co.uk.

Bribery Bill

A new and consolidated criminal law of bribery is currently passing through parliament as the draft Bribery Bill. The Ministry of Justice describes the draft bill as aiming to:

‘Reform the criminal law to provide a new, modern and comprehensive scheme of bribery offences that will enable courts and prosecutors to respond more effectively to bribery at home or abroad.’

‘Bribery’ is not clearly defined but ss1-3 of the draft bill set out two examples of offering a bribe and one of receiving a bribe.

Offence of corporate liability

Section 5 of the draft bill proposes that a ‘relevant commercial organisation’ will be guilty of a criminal offence where there is proven negligent failure by a responsible person (the person at the company or partnership responsible for preventing bribes, or a senior officer of the company or partnership) to prevent a bribe being paid on behalf of company or partnership, both in the UK and abroad. In such circumstances, the company or partnership, rather than the individual offender, would be held liable and there is no limit to the amount that a business may be fined as a result.

Defence

A company or partnership will have a strong defence to allegations of bribery only where it can prove that it had adequate anti-corruption procedures in place at the time of an offence.

Practical effect

The proposed new offence emphasises the need for companies and partnerships to ensure they have sound anti-corruption procedures and policies in place. In-house legal counsels will need to manage risk by ensuring that their employers create such measures.

Current UK law

There are currently three main corruption offences in the UK.

1) Common law offence of bribery

This offence is defined as a bribe given or offered to induce a public official to fail to act in accordance with their duty (R v Whitaker [1914] 3 KB 1283).

2) Public Bodies Corrupt Practices Act 1889 (the 1889 Act) (c69) (corruption in office)

The 1889 Act makes it an offence for any person to ‘corruptly’ solicit or receive any advantage as an inducement to any officer of a public body, doing or omitting to do any matter or transaction.

3) Prevention of Corruption Act 1906 (the 1906 Act) (c34) (bribes obtained by or given to agents)

Section 1 of the 1906 Act provides that it is an offence:

‘If any agent corruptly accepts or obtains, or agrees to accept or attempts to obtain, from any person, for himself or for any other person, any gift or consideration as an inducement or reward for doing or forbearing to do, or for having… done or forborne to do, any act in relation to his principal’s affairs or business, or for showing or forbearing to show favour or disfavour to his principal’s affairs or business.’

The Anti-Terrorism, Crime and Security Act (ATCSA) 2001 extended the 1906 Act to include bribery carried out overseas, but the new statute has rarely been used to prosecute since its enactment and the effect of ATCSA 2001 remains to be seen.

CASE STUDY: BAE SYSTEMS

Challenge

Amidst ongoing media allegations, investigations on both sides of the Atlantic and the controversial end to the Serious Fraud Office investigation covering its business practices in Saudi Arabia, BAE Systems’ board commissioned the Woolf Committee in June 2007. The committee was asked to provide an independent review of the ‘ethical’ state of the company and a ‘road map’ for it to become a global leader in ethical business conduct. The committee was authorised to go anywhere and speak to anyone. The board agreed to act on all of the committee’s findings before the publication of the Woolf Report. Published in May 2008, the report covers the ethical standards to which a global company should adhere, the extent to which BAE met those standards and action that the company needed to take to achieve such standards. The review made 23 recommendations for BAE to enact to become a global corporate leader in ethical business conduct, setting out how it should ‘establish a global reputation for ethical business conduct that matches its reputation for outstanding technical competence’. It also emphasised the importance for global businesses of managing reputational risk through the adoption of high ethical standards.

Responding to the Woolf Report

BAE set itself three years to implement the Woolf Committee’s findings. It created a dedicated team that was led by a full-time programme director and was overseen by Philip Bramwell, the group’s general counsel. A steering group of senior business leaders provided strategic oversight and monitored the team’s progress. The 23 recommendations were divided across six working groups and covered future contracting, anti-corruption and compliance, governance and operation of BAE’s board and management, leadership in business ethics, external engagement, and the creation of a code of conduct. It aimed to make the recommendations part of the company’s day-to-day practices and governance.

Global code of conduct

BAE also implemented a code of conduct across the business. Recognising the importance of clear and visible leadership, the code was ‘cascaded’ from the chairman through to the board and executive committee, so that every employee was briefed by their line manager, helping to make the code relevant to an individual’s role. Every employee undertook a training programme and signed a declaration confirming that they understood and would comply with the code. By the end of 2009, more than 90,000 employees had been briefed and trained. In addition, every executive and those employees dealing with people outside the company had to undergo integrity in business dealings training, covering anti-bribery and anti-corruption, gifts and hospitality, facilitation payments, conflicts of interest, fraud, money laundering, and behaviour in negotiations. BAE established a confidential ethics helpline to provide guidance to employees and a mechanism for ‘whistleblowing’.

Impact on business practice

The Woolf Committee states that individual directors had a clear responsibility for ensuring high standards of business conduct, and that ethical conduct and reputational risk should be standing items on board agendas. Part of the company’s senior executives’ bonuses are now aligned to business conduct. The committee also said that the board must deal with these issues itself, and ensure that values, principles and standards of business conduct are established corporately and applied globally. The company appointed a managing director for corporate responsibility.

Progress

The committee highlighted a change in the organisation from a UK-headquartered exporter to a global enterprise with strong operational footprints in six home markets and said that the wider business culture needed to follow suit. BAE revised 23 corporate governance policies and created three new ones, establishing three-yearly reviews to ensure they remain up to date. Responsible trading principles, together with a new code of conduct, now underpin the way that BAE intends to do business in the future, and applies to all employees of wholly owned and majority-owned businesses.

Compliance and regulation

To support its response to the Woolf Report, BAE has developed a principles-based compliance to assess non-financial risk in everything the business does, including decisions to sell products, use suppliers, purchase capital equipment, or sell or develop land. The public will not believe that a company is well run and responsible unless it can demonstrate that this is the case. BAE is externally audited twice a year and advisor appointments are overseen by a panel chaired by independent experts.

Developing corporate culture

Eighteen months into its response to the Woolf Report, BAE has made significant progress. There is still work to do, however, despite more robust governance and a global code of conduct now being embedded in the company’s practices. BAE developed its total performance cultural model, underpinned by the three values of trust, innovation and boldness. These are the characteristics that it wants people to attribute to BAE. Enshrined in its corporate governance, this marks a clear commitment to a different way of doing business, placing customer focus and responsible behaviour on an equal footing with financial performance and programme delivery. Together with its response to the Woolf Report, BAE’s global code of conduct and responsible trading principles, backed by a rigorous compliance programme, is developing a culture of total performance. This culture will not only support the delivery of BAE’s strategy and future prosperity, but will also ensure that it manages its reputation and turns it into something of significant value to the company.

Several high-profile data security breaches have made the headlines in recent times involving the loss of personal information relating to hundreds, if not thousands, of individuals. In many cases the information was stored on unencrypted laptops that were either lost or stolen.

Continue reading “Data security breaches: knowledge worth knowing”

The European system for granting patents has been a great success. A European patent, applied for via the European Patent Office (EPO), leads to a bundle of national patents that are identical in form but enforceable in each jurisdiction separately. However, while the process for granting patents has been successful, the need for separate enforcement has led to inconsistencies and expensive disputes in Europe. The EU is working to change this but is not there yet. One peculiar feature of the current system is that the validity of a patent can be challenged simultaneously before the EPO and each national court, inevitably leading to the risk of conflicting decisions. To complicate matters further, a decision by the EPO to invalidate a patent will bind all national courts, but the same is not true in reverse. A decision by a national court is not binding on the EPO or other national courts. This article discusses the unsatisfactory state of affairs, and the steps taken by the EPO and national courts to deal with it. Continue reading “Delays in European patent litigation: is the tide turning?”

For over 100 years property and liability insurance law has largely been governed by the Marine Insurance Act 1906, a product of careful thought and drafting that codified the previous 200 years of case law. Times have changed, however, particularly in the speed of communications, the availability of information and the development of the law. The asymmetry of the parties’ positions, whereby the insured knew everything about its affairs and the insurer knew nothing, is today very different. This has resulted in a great deal of activity in the review by trade bodies and the Law Commissions (of England and Scotland) of insurance law over the past ten years, culminating in two recent bills, the Third Parties (Rights against Insurers) Bill (the Third Parties Bill) and the Consumer Insurance (Disclosure and Representations) Bill (the Consumer Insurance Bill). Continue reading “Current insurance law reforms”

Logistics service providers need to have an effective contingency plan to deal with the prospect of their retailer customers experiencing severe financial distress, defaulting on payments, or going into administration or liquidation. Although good credit control is essential, especially given the recent disappearance of several household names in the retail sector, this article will focus on the need for the protection afforded by well-drafted contracts that give the service provider effective liens. Continue reading “The effective use of liens to protect against the collapse of corporate customers”

On 26 January, Ramsey J handed down a 468-page judgment in BSkyB Ltd & anor v HP Enterprise Services UK Ltd (formerly Electronic Data Systems (EDS) Ltd) & anor (Rev 1) [2010]. The decision, awaited since July 2008, saw Ramsey J uphold (in part) BSkyB’s claim that EDS had won the contract to supply BSkyB’s new customer relationship management (CRM) system by mis-selling its capabilities. HP, which took over EDS, has allegedly been ordered to pay £200m in interim damages, although the company is reported to be seeking leave to appeal. Continue reading “Death of the salesman? Implications of a landmark ruling”

Section 8 of the Indian Arbitration and Conciliation Act 1996 (the 1996 Act) empowers the court to refer matters brought before it to arbitration, in the event that the matter falls within the scope of an arbitration agreement between the parties (see the ‘Section 8’ box below).

The Supreme Court of India has categorically held, throughout a string of judgments, that this reference is mandatory and that the judicial authority has no discretion on the matter.¹ As such, s8 was seen to echo the objectives of the 1996 Act, in that it curtailed judicial interference, thereby ensuring a faster resolution of matters. Continue reading “Qualifying a reference to arbitrate”

The 14 jurisdictions of Central, eastern and south-eastern Europe (CEE and SEE), where Wolf Theiss concentrates its energies, are equally divided between seven members of the EU (Austria, Bulgaria, Czech Republic, Hungary, Romania, Slovakia and Slovenia), and seven members of the Energy Community, established by the Energy Community Treaty in October 2005 (Albania, Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Serbia and Ukraine). Despite the different memberships, there is a strong interplay between these two communities (the EU and the Energy Community) regarding energy issues, particularly renewable energy.

Renewable Energy in the EU

The EU has made the promotion of renewable energy sources (RES) and the production of electricity from these sources a high priority since 1997, with the publication of the European Commission’s White Paper on ‘Energy for the Future: Renewable Sources of Energy’. The Paper set out an EC strategy and an action plan to double the share of renewable energy from 6% to 12% in terms of gross inland production by 2010. In line with this strategy, the EU adopted:

• the RES-Electricity Directive 2001 (the 2001 Directive) on the promotion of electricity from RES in the internal electricity market;
• the Directive on Combined Heat and Power; and
• the Directive on Liquid Biofuels 2003/30/EC (the 2003 Directive).

The 2001 Directive required member states to take appropriate steps to encourage greater consumption of RES-electricity in conformity with the national indicative targets specified in the annex to the 2001 Directive, but did not put forward a harmonised EU-wide support system. The member states were called on to set national targets for the next ten years, taking into account the reference values in the annex of the 2001 Directive, which are set with a view to reaching a 21% indicative share of RES-electricity in all EU electricity consumption by 2010.

In addition to these national targets, the 2001 Directive called for:

• the establishment of mutually recognised guarantees of origin for RES-electricity;
• a reduction of the regulatory and non-regulatory barriers to the increase of RES-electricity production; and
• the guaranteed transmission and distribution of RES-electricity.

The key change and impetus came with the introduction of mandatory targets for each EU member state by the Renewable Energy Directive 2009/28/EU (the 2009 Directive) on the promotion of the use of RES. The mandatory national targets, which relate to the share of renewable energy (electricity, heating and cooling, and transport) in gross final consumption of energy, are consistent with a target of at least a 20% share of RES in the EU’s gross final consumption in 2020. The 2009 Directive further obliges member states to ensure that at least 10% of the final consumption of energy in transport is derived from RES by 2020.

As with the 2001 Directive, the 2009 Directive does not prescribe an EU-wide support system. Instead, it allows the member states to apply support schemes or measures of co-operation provided for in the 2009 Directive (eg arrangements for statistical transfers of specified amounts of renewable energy, joint projects between member states, joint projects between one or more member states and third countries, and joint support schemes).

National Renewable Energy Action Plans

By 30 June 2010, member states must adopt and notify the Commission of its National Renewable Energy Action Plan (NREAP). The Commission will then evaluate the NREAPs and assess the adequacy of the measures envisaged by the member states for the compliance with the indicative trajectory and the mandatory target for 2020.

Although the 30 June 2010 deadline is still just over two months away, the forecast documents recently submitted by the member states to the Commission provide some indication as to the strategies that they intend to adopt.

As the mandatory national targets are defined in terms of the percentage of renewable energy in gross final consumption of energy, many member states have indicated actions to increase efficiency in their strategy, which would reduce energy consumption.

In its forecast notification, Austria indicated that it can achieve its 2020 target (34% of renewable energy in gross final consumption of energy) through RES in the country itself and, therefore, did not expect to resort to the measures of co-operation provided for in the 2009 Directive.

The Czech Republic adopted the same approach in relation to its 2020 target of a 13% share of renewable energy in gross final consumption of energy. Slovenia expects to be able to achieve its 25% share of renewable energy in gross final consumption of energy by 2020 as compared to 16% in 2005, but has not yet detailed how.

Bulgaria, whose 2020 target is to achieve a 16% share for renewable energy in gross final consumption of energy as compared to 9.4% in 2005, expects to resort to the following renewable energy sources:

• hydro power (31%);
• biomass (36%); and
• a marginal role for wind power (7.5%), tidal energy and sea wave energy.

In its notification forecast, Bulgaria also mentions the potential to participate in joint projects with Romania to develop hydro power plants on the Danube (two plants of 800MW each are mentioned), as well as to explore and evaluate the potential of energy production in the Black Sea.

To achieve its 2020 target of a 13% share for renewable energy in gross final consumption of energy as compared to 4.3% in 2005, Hungary plans to:

‘Increase even more dynamically the use of biomass in the agricultural sector by developing and supporting intensively the production of energy crops.’

Romania is obliged to achieve a 2020 target of 24% share for renewable energy in gross final consumption of energy as compared to 17.8% in 2005. To reach this, it plans to make significant efforts to reach higher levels of efficiency in using biomass (including firewood) and also to develop other renewable sources (including wind power).

Slovakia, which has to increase the proportion of renewable energy in final energy consumption from 6.7% in 2005 to 14% in 2020, expects biomass (mainly), geothermal energy and solar energy to replace fossil fuels in the production of heat. It expects a smaller growth in the use of RES for electricity production.

Italy is one of the rare member states to expressly anticipate in its country forecast the need to import RES-electricity from neighbouring countries, such as Albania, Croatia and Serbia.

Renewable Energy in the Energy Community

One of the principal activities of the Energy Community is the implementation by the members of the acquis communautaire for renewables. This acquis communautaire must be adapted to both the institutional framework of the Energy Community and the specific situation of each member. To date, the acquis communautaire for renewables comprises only the 2001 Directive and the 2003 Directive on the promotion of the use of biofuels and other renewable fuels for transport.

As required pursuant to the Energy Community Treaty, each member state has provided the Commission with its plan to implement the acquis communautaire for renewables.

The 2009 Directive specifically envisages that the measures of co-operation provided between member states will become applicable to the contracting parties of the Energy Community if these countries, by virtue of a decision taken under the Energy Community Treaty, become bound by the 2009 Directive. To date, no such decision has been taken but the Energy Community has set up a Renewable Energy Task Force to define the steps for implementation of the 2009 Directive.

Regulatory Framework for RES-Electricity: the Labyrinth

Subject to these directives emanating from the EU and the Energy Community, each of the 14 countries covered by Wolf Theiss is relatively free as to how to implement them in its national law, which gives rise to a very wide variety of regulatory frameworks for RES-electricity in the region. In some cases, the regulatory hurdles and uncertainties deter investors and developers interested in exploring renewable energy opportunities in CEE and SEE.

In most jurisdictions where there is a promotion scheme for RES-electricity, this takes the form of a mandatory off-take of the electricity at incentivised feed-in tariffs. Some of the applicable feed-in tariffs compare favourably with the feed-in tariffs applicable in other parts of Europe.

For example, in the Czech Republic, RES-electricity producers from solar photovoltaic plants benefit from a tariff ranging between €465 per MWh (when the installed capacity is above 30kW) and €469 per MWh (when the installed capacity is below 30kW). According to the current interpretation of the Czech Energy Regulatory Office (the ERO), the producer is entitled to this tariff for 20 years from when the installation starts to operate, subject to annual indexation reflecting the price index of industrial products.

The promotion scheme in the Czech Republic is relatively unique as the feed-in tariffs, determined each year by the ERO, can only be decreased by a maximum of 5% year-on-year. However, a legislative bill is currently being discussed in the Czech Parliament that would remove this protection of RES-electricity installations where the return of the investment is achieved within less than 11 years. This amendment would make it possible for the ERO to decrease the feed-in tariffs for installations coming into operation in 2011 and beyond by more than 5% every year. The ERO estimates that for solar photovoltaic power plants the feed-in tariffs will drop by 30% in 2011.

In Slovakia, the same types of RES-electricity producers may enjoy a feed-in tariff of €425.12 per MWh for installations with more than 100kW capacity, or €430.72 per MWh for installations with less than 100kW capacity. This tariff is applicable, without revision or indexation, for 15 years from the year the installation was put into operation.

In Romania, there is a green certificate regime, including an obligation on electricity suppliers to purchase a certain number of green certificates, depending on the quantity of electricity supplied to final customers, sanctioned by a penalty of €70 for each green certificate in shortfall. The green certificates are traded on two markets:

1. a centralised market; and
2. a bilateral contracts market, where there is a floor of €27 and a cap of €55.

These amounts are subject to annual indexation in accordance with the consumer price index.

As a good reminder of the variety of regulatory frameworks applicable in CEE and SEE, in some jurisdictions there is simply no promotion scheme in place for RES-electricity, for example, Albania (except for small hydro power plants), and Bosnia and Herzegovina (except in Republika Srpska, one of the two entities within the state itself).

Permitting procedures: Applicants beware!

In terms of planning procedures, which relate to land use or physical planning, most of the jurisdictions start with an optional zoning process, but this is mandatory in Albania, Bulgaria and Croatia. The planning process then follows on with the issue of a building or construction and an operation or use permit.

The jurisdictions usually provide national significance thresholds above which an Environmental Impact Assessment (EIA) is mandatory. This tends to be true for significant wind power and hydro power installations. For smaller projects, the competent authority screens individual projects to determine whether an EIA is necessary and the scope of such an EIA.

Project developers should be particularly attentive to the level of authority that would be competent for issuing the relevant permit. For example, in Austria, which is a federal state, the local municipality issues the building permits, but it is up to the federal province to apply the laws regarding EIAs.

Regarding the permitting process under the special law applicable to energy or natural resources, some form of energy permit or licence issued by the energy or electricity regulator is generally sufficient. When required, a concession may relate either to the right to generate electricity (eg in Albania) or the right to exploit natural resources (eg in Bosnia and Herzegovina, Macedonia and Slovenia). A public tender process is usually relevant for the issue of concessions, but this can be applicable for even the granting of a licence, such as the tender process currently ongoing in Hungary for licences to construct wind farms, as well as the terms of the support scheme that the wind farms would be entitled to (including feed-in tariff, duration of support scheme and quantity of electricity subject to promotion schemes).

There is one unique feature applicable in Croatia for renewable energy generally and in Macedonia for wind power that is worth highlighting. In these jurisdictions even the exploration of RES-electricity opportunities is subject to a licence issued by the relevant ministry or the regulatory authority.

Grid connection

The treatment of the issues relating to connection of RES-electricity installations to the electricity transmission or distribution network varies from one jurisdiction to another. Most jurisdictions provide for RES-electricity to have priority access to the electricity grid, but there is no detailed provision regarding the right of this priority.

There is also a wide variety in terms of the rules governing liability and responsibility for grid connection and capacity upgrades, improvements or expansion of the grid, necessitated by the RES-electricity installation. The rules regarding the sharing of these costs are particularly unclear in some jurisdictions.

Very few jurisdictions make special allowances or tolerances in the application of balancing charges to intermittent forms of generation, such as wind power and solar power.

In Slovakia, there is a scheme for the assumption of deviations from schedules submitted for installations with less than 4MW instead of installed capacity. Similarly, Hungary has a relatively wide tolerance allowing deviations of +/- 50%.

Guide to Generating Electricity from RES in CEE and SEE

Equipped with the solid experience of working with project developers, investors, financiers, and, most importantly, national and local authorities to get projects completed in the region, the teams at Wolf Theiss’ offices and its associated law firms have joined forces to produce the Wolf Theiss Guide to Generating Electricity from Renewable Sources in Central, Eastern and South-eastern Europe.

This new book, which was launched in March 2010, is intended as a practical guide to the principal regulatory features of RES-electricity projects in 14 jurisdictions covered by Wolf Theiss. The first part of the Guide presents an executive summary of the regulatory framework applicable in each of the 14 jurisdictions. The second chapter contains an outline of the main forces driving the development of RES-electricity in CEE and SEE.

The regulatory framework applicable in each jurisdiction is described in more detail in the 14 country chapters. To facilitate the reference to the relevant sections, all the country chapters follow a uniform structure, and cover the permitting process (building permits, environmental permits, and concessions or energy permits), RES-electricity promotion schemes, financial incentives, grid connection issues and carbon credits.

As highlighted in this article, in some jurisdictions of the CEE and SEE regions the regulatory framework regarding these aspects of RES-electricity generation is either non-existent or lacks legal certainty, which may deter potential developers or investors. However, with many of the RES-electricity opportunities still untapped and sometimes even unexplored, major energy companies and other project developers continue to show interest in the region.

Over the past few months, the teams at Wolf Theiss have advised on numerous RES-electricity generation projects throughout the region, such as:

• wind farms in Austria, Hungary and Romania;
• solar photovoltaic projects in the Czech Republic and Bulgaria; and
• hydro power plants in the Balkans.

As for the future development of the regulatory framework, it is sometimes easy to forget that the countries covered either acceded to the EU only recently, or are now in the process of acceding or seeking accession. In these jurisdictions, Wolf Theiss is engaged in a constructive working relationship with the regional, national and local authorities, and is confident that the regulatory framework for RES-electricity projects will evolve in the right direction.

The Borders, Citizenship and Immigration Act (BCIA) 2009 received Royal Assent last year. BCIA 2009 makes changes to border functions and several miscellaneous immigration matters. However, the most significant change it introduces affects how foreign nationals may acquire British citizenship in the UK. This article seeks to highlight these changes in some detail.

Introduction

An article on the proposed changes to our current British citizenship and nationality laws would not be complete without considering the broader context in which BCIA 2009 was passed. In 2005 the government proposed sweeping changes to the UK’s immigration system. This began with the introduction of the Points-Based System (PBS) in 2008, radically changing the ways in which migrants are able to enter and work in the UK, the idea being that only those deemed fit to contribute to the UK should be allowed to enter.

Parallel to this new system for economic migration, the government made a myriad of other changes aimed at policing the new system and strengthening UK borders. Changes over the past two years include:

• bringing together the Border and Immigration Agency, UKvisas and HM Revenue & Customs in a unified UK Border Agency (UKBA), creating a single border force and police-like powers for frontline staff;
• introducing a biometric data requirement for those applying for a UK visa;
• counting foreign nationals in and out of the country;
• expanding the UK’s detention capacity, implementing powers to automatically deport serious offenders;
• introducing compulsory indentity cards for foreign nationals who wish to remain in the UK; and
• introducing large on-the-spot fines for employers who do not make the right checks.

As part of the government’s programme for reform, it came as no surprise that it would consider reforming the path to British citizenship.

Case for change

The government set out its proposals for change in the Green Paper ‘The Path to Citizenship: Next Steps in Reforming the Immigration System’. The Paper highlights the reasons for the changes and it is clear that there is an underlying agenda for social, as well as immigration, reform.

The central principle is that, alongside strengthening the rights of citizenship, citizenship must be earned. Anyone who wishes to remain in the UK in the long term must be willing to ‘speak our language, obey the law and contribute to the community’.

Current legislation

At present, migrants are entitled to apply for indefinite leave-to-remain (ILR) once they have completed a period of five years in the UK in a category leading to settlement (or two years if applying on the basis of a marriage or partnership to a British national, or someone with ILR).

To naturalise as a British citizen, migrants must have spent a minimum of five continuous years in the UK (three in the case of spouses or civil partners) and have held ILR for a minimum of one of those years. Migrants must also satisfy the current residency requirements, which require applicants to not have spent more than 450 days (270 days for spouses or civil partners) outside the UK in the five years preceding the application and not more than 90 days in the 12 months preceding the application.

New Regime

Qualifying and contributions

From July 2011, migrants will need to take the following steps to qualify for British citizenship:

• temporary residence for five years;
• probationary citizenship (for one to five years); and
• permanent residence or British citizenship.

Migrants will also need to demonstrate a far more significant contribution to the UK before being able to obtain British citizenship. The requirements for progression will include:

1. English language skills;
2. paying tax and becoming self-sufficient;
3. obeying the law; and
4. joining in with the British way of life by demonstrating active citizenship. (See the box below for the notion of active citizenship.)

Until secondary legislation is passed and the UKBA publishes further guidance, it is not clear how the government plans to implement the scheme. Accordingly, all migrants who become eligible to apply for British citizenship are advised to do so before the new regime is rolled out in July 2011.

Three routes

Under the new regime there will be three key routes to citizenship (although, in practice, several other immigration categories will also continue to qualify):

1. economic/work route – for highly skilled and skilled workers who are in the UK under Tiers 1 and 2 of the PBS;
2. family – for family members of existing British citizens and permanent residents; and
3. protection – for refugees and migrants who have been given humanitarian protection.

Regardless of which category a migrant falls into, they must pass through the same three stages to obtain British citizenship, specifically: temporary residence, probationary citizenship and, finally, British citizenship or permanent residence.

Other categories

While the government sets out the three key routes to citizenship, it is important to note that several other routes to citizenship will continue to exist. Those who are discharged from HM Forces with four years of completed service, victims of domestic violence who were admitted as a partner of a British citizen or permanent resident, and bereaved partners who were admitted as a partner of a British citizen or permanent resident and whose sponsor has died during the two-year probationary period will all be able to progress directly to permanent residence without passing through a stage of probationary citizenship. In addition, European Economic Area nationals with permanent residence, nationals with a qualifying Common Travel Area (CTA) entitlement, those with Commonwealth right of abode and those with UK ancestry will all be able to qualify for British citizenship.

Active citizenship

Migrants at the probationary citizenship stage will only be eligible to qualify for British citizenship after one year (and permanent residence after three years) if they demonstrate an active contribution to society. Those migrants who do not take part in active citizenship will be required to wait a further three years to qualify for British citizenship and a further five years for permanent residency.

The notion of active citizenship is yet to be clarified in any detail and further guidance is expected from the Home Office. It is anticipated that migrants will need to complete 50 hours of voluntary service, which may include initiatives such as volunteer work within a recognised charity or community body, along with activities that will:

• advance education or health;
• advance social and community welfare;
• advance heritage, arts, culture or sport;
• benefit the natural environment;
• benefit children, young people, elderly people, disabled people or other vulnerable groups; and/or
• involve mentoring or befriending.

Stage 1: temporary residence

Once a migrant has obtained valid leave to enter and remain in the UK in a category leading to settlement, they will automatically be deemed as temporary residents. For migrants to progress onto the second stage (probationary citizenship), they must demonstrate that they:

• obey the law;
• pass an English language skills test and knowledge of life in the UK assessment;
• meet the residency requirements (spend five years in the UK under the work or the protection route, two years under the family route), without more than 90 days a year absence in a single year (this differs from the current residency requirements for British citizenship applicants, since under current rules the 450 days absence can be spread across the five-year period randomly);
• contribute to the economy (ie through demonstrating that they have paid taxes); and
• meet the ongoing requirements, specific to their route.

With respect to the work route, migrants will have to show that they have been in ‘continuous employment’ since the grant of their previous leave. Under the family route migrants would have to show that they can support themselves or be supported by their sponsor and that their relationship with their sponsor is still subsisting.

Stage 2: Probationary Citizenship

Probationary citizenship is set to be the equivalent of the existing ILR route. A key difference, however, is that unlike ILR it will not entitle migrants to the same benefits that ILR currently offers (such as drawing on public funds and having access to benefits) until migrants become either British citizens or permanent residents.

To progress to the final stage, migrants will have to spend between one and five years as a probationary citizen. (After this point migrants would be expected to move to the third stage or leave the UK.) The length of time a migrant spends in this category will depend on whether they wish to:

1. apply for British citizenship or permanent residence; and
2. whether they wish to participate in active citizenship.

The government’s intentions where social cohesion and integration are concerned can be found at the crux of this new concept of active sponsorship, the idea being that those who actively contribute to society should be able to attain citizenship faster than those who do not. Thus, a person who completes the maximum required period of activities could potentially apply for citizenship after one year or wait three years should they not be inclined to do so.

Migrants who wish to become permanent residents, either by desire or because they are unable to become British citizens due to dual nationality restrictions, must spend a minimum of three years as a probationary citizen to qualify. Migrants who have obtained permanent residency may remain in the UK indefinitely and will be able to switch into the British citizenship category should they wish to do so.

Before progressing to the final stage, probationary citizens will also need to demonstrate that they have:

• obeyed the law during their probationary citizenship (migrants who receive custodial sentences will be stopped from progressing on the path to citizenship and those convicted of minor offences must wait until their conviction is spent);
• met the residency requirements;
• continued to be self-sufficient, with no access to benefits;
• continued to meet the additional requirements specific to their route; and
• satisfied the notion of active citizenship if this is claimed.

While the decision to create a probationary citizenship stage may be a good way to ensure integration in and contribution to the UK, it may also arguably be seen as discouraging, rather than encouraging, integration (the label ‘probationary citizen’ infers second-class citizenship).

Stage 3: British Citizenship or permanent residence

Migrants who become British citizens or permanent residents will have full entitlement to the rights and benefits currently enjoyed by individuals in these categories.

The government recognised that some migrants may be unable to apply for British citizenship due to restrictions on dual nationality. The permanent residence category has been created to give these nationals the freedom to retain another citizenship, and enjoy the benefits and rights that British citizenship offers (and which they will have earned) without relinquishing their original citizenship. However, to qualify for permanent residence, migrants will have to spend a longer period (minimum three years) at the probationary citizenship stage. The government’s view is that:

‘It is right that those who feel that they cannot become British but instead choose to become permanent residents should have to complete a longer period as a probationary citizen.’

Transitional Arrangements

There will be a transitional period for migrants who already have ILR when the new regime is introduced. Such individuals will automatically be permanent residents and they will not need to pay or apply for this to occur. Furthermore, they will be eligible to apply for British citizenship under the current rules during the first two years after earned citizenship is introduced (ie until July 2013). Similarly, any migrant whose application for ILR has been submitted to the UKBA before July 2011 and is subsequently given ILR will be eligible to apply for citizenship under the current rules until July 2013.

Comment

Until secondary legislation and corresponding guidance from the UKBA is issued, it is uncertain whether the government’s proposed path to citizenship will negatively affect migrants. The notion of active citizenship may not necessarily be welcome to all, and asking this of migrants who have already contributed to the UK socially and economically as a means to obtain citizenship at a faster rate may be difficult in practice. All migrants who become eligible to apply for British citizenship are therefore advised to do so before July 2011, to ensure that they will not be caught by the tough new rules.

Nathan Peacey (left) and Davina Watson (right) discuss Jackson LJ’s findings and his suggestions for reform to control costs, changing the civil litigation landscape to promote access to justice through new management procedures

IN 2008 AMID MOUNTING CONCERN among the judiciary at spiralling litigation costs, the Master of the Rolls commissioned Jackson LJ to undertake a root and branch review of the principles governing costs, as well as case management procedures.

On 14 January 2010 Jackson LJ published his report, ‘Civil Litigation Costs Review’ (the Review). It included some far-reaching and radical proposals that Jackson LJ claims will, if implemented, represent a ‘coherent package of interlocking reforms, designed to control costs and promote access to justice’.

The Review is notable for the range and scope of the enquiry, and also for the innovative solutions that are proposed. Access to justice comes at a price but the recommendations aim to impose a limit on that cost, and the limit will be proportionate and predictable. Judging by the reaction of some claimant personal injury lawyers, claims management companies and after the event (ATE) insurers, the changes could prove dramatic.

Our view is that the proposals will certainly control costs. However, they may or may not promote access to justice. More fundamentally, they have the potential to radically alter the approach that commerce takes to resolving disputes.

RECOMMENDATIONS

he proposals have three broad themes:

1. changes to the way civil litigation is funded;
2. adjustment of the rules on calculation and recovery of legal costs; and
3. procedural improvements designed to simplify the legal process.

The key elements and the impact of each theme are highlighted below.

FUNDING CLAIMS Success fees and ATE insurance premiums should not be recoverable if success fees in conditional fee agreements (CFAs) and ATE insurance premiums are no longer recoverable from the losing party, it would effectively end the culture of ‘no win, no fee, no costs’. The intention is to restore a claimant’s financial incentive to keep costs under control. The effect of this will be to significantly reduce costs for serial defendants and/or their insurers.

It remains to be seen whether this will result in lower insurance premiums. We suspect not, particularly in the fi eld of personal injury and clinical negligence claims, where insurers will point to the soft market, the proposed 10% increase in general damages and the impact of one-way costs shifting (OWCS) (see next column).

Contingency fees should be permitted

Under this type of agreement, the lawyer would only get paid if the claim is successful, normally receiving a percentage of the settlement sum or damages award. Claimants would still recover base costs from the losing opponent to offset against the contingency fee.

Third-party funding (TPF) should continue to be available as a funding option.

Legal expenses insurance should be more widely promoted This is the equivalent of health insurance for legal expenses. This funding option is currently under-utilised. The Review suggests that it could be of particular benefi t to small- and medium-sized enterprises (SMEs). Many, including some before the event (BTE) insurers, question whether the UK BTE insurance industry has the capacity to off er suitable cover at an aff ordable price. It almost certainly does not have the capacity for big businesses. If BTE cannot plug the ATE gap for SMEs either, this could be bad news for SMEs faced with fi nancial muscle-fl exing by big businesses in David versus Goliath disputes.

RECOVERY OF LEGAL COSTS

Costs shifting

In certain cases, such as in personal injury litigation, a qualified OWCS rule should be introduced to preserve access to justice. If the claimant is unsuccessful, they would not be made to pay the legal costs of the defendant (as long as they have behaved reasonably). However, if the claimant wins, the defendant will still have to pay the costs of the claimant. Jackson LJ wants this to be extended to judicial review and defamation proceedings, which is a suggestion that will be resisted by many.

Controlling Legal Costs

The Review comments that fees paid by lawyers to ‘claims management companies’, in return for being referred cases, have ‘grossly distorted the costs of personal injury litigation’. Few disagree although many question whether a ban on the fees could be enforced.

An unintended impact will be to further restrict the BTE market as most insurers currently rely heavily on referral fees to subsidise premiums.

Hourly charge rate under scrutiny The report concludes that the guideline hourly rates (GHR) are too high. A new costs council will attempt to restore the balance between lawyers and litigants. This is likely to result in lower GHR and probably diff erent rates for diff erent categories of claim. This will reduce inter partes costs awards. Solicitor and own client costs remain a matter for commercial negotiation.

Imposing proportionality on costs

Jackson LJ’s mantra could be said to be ‘proportionality, proportionality, proportionality’. He is particularly scathing of instances where, at the end of a case, the costs have exceeded the monetary value of the claim to the parties involved. Jackson LJ proposes repealing the ‘necessary’ test introduced by Home Office v Lownds [2002].

For example if it costs £500,000 in fees to resolve a £100,000 dispute, you are likely to be out of pocket even if you win, as you will not get all your costs back. This will encourage a more thoughtful approach to whether a claim should be brought, even a particularly meritorious one. It should lead to more alternative dispute resolution (ADR).

Fixed costs in fast-track litigation

A matrix of fi xed costs should be introduced right across the fast track (the track is currently restricted to claims under £25,000). In the short term, the introduction of fi xed costs would be confi ned to personal injury and housing claims. This will bring costs certainty and proportionality. Fixed costs may encourage some claimants, as exposure on costs is capped, but may deter others where costs recovery is capped at a level far below the costs likely to be incurred.

PROCEDURAL IMPROVEMENTS

There are several changes to procedure that are proposed, which if eff ectively implemented will make for a better litigation landscape. These include:

• the abolition of the general pre-action protocol;
• the introduction of costs management conferences;
• controlling costs through case management;
• restoring clarity to Part 36 off ers to settle (reversing the ruling in Carver v BAA plc [2008]);
• the endorsement of ADR; and
• Mercantile and Commercial Courts will introduce streamlined procedures for claims up to £100,000.

Will costs be reduced>

A new concept emerges from the Review that suggests that fair access to justice applies to defendants and claimants alike. A clear theme running through the Review is that defendants should not be unduly penalised for defending issues that they legitimately contest but happen to lose.

The Review concludes that the recovery of success fees and ATE premiums from losing opponents has imposed an excessive fi nancial burden on the government, the NHS, insurers that underwrite much of the UK’s tort law compensatory system and on defendants of libel actions. Costs will most certainly be reduced in personal injury litigation. The fact that losing defendants will not have to pay success fees on claimants’ costs or ATE insurance premiums will have a signifi cant impact. Similarly, the overall level of base costs will be reduced for the majority of personal injury claims that fall within the fast-track limit because of the implementation of a fi xed-fee regime. The likely reduction in GHR and the approach to proportionality also means that multi-track cases will cost less. The eff ect of this will be off set to a degree by the increase in general damages and the introduction of OWCS, which will mean that successful defendants will not recover their costs in successful cases.

Equally, a proposal that if a claimant’s Part 36 off er is bettered by the claimant at trial they will get a 10% uplift in damages will (in the minority of cases that go to trial) mean an increase in claims costs. Some insurers may prefer to ‘over settle’ to avoid this risk. In non-personal injury routine litigation the benefi ts are even greater for defendants because the increase in general damages will rarely have any signifi cant impact. Furthermore, in successful cases, the defendant will be able to recover fi xed costs from the unsuccessful claimant. In high-value disputes the removal of ATE and success fee recoverability will also have a signifi cant impact. The defendant in an important case faced with a £1.25m costs bill under the current system could fi nd that reduced to £500,000 when a £250,000 ATE premium is removed and a 100% success fee on £500,000 base costs is removed. Whether costs for in-house counsel will alter in relation to their own lawyers will of course continue to be a matter for commercial negotiation and further wrestling with the hourly rate conundrum. Jackson LJ’s suggestion of a menu of options for disclosure in larger commercial cases whereby there is greater focus on the issues, rather than a simple and standard blanket disclosure, does have the potential to reduce costs. However, it could also increase satellite costs around arguments over what should and should not be in a disclosure.

On balance there is clear scope both at the level of low-value routine litigation and in complex high-value cases for inter partes costs liabilities to be reduced.

Impact on funding

Commercial clients will still be able to instruct lawyers on a CFA basis. However, any agreed success fee will be payable by the client and will not be recoverable from the opponent. Similarly you can still cap liability for opponent’s costs by purchasing ATE cover. Again this will be irrecoverable. There will be a greater cost when bringing a claim that will need to be factored into the cost-benefit analysis.

Some commentators suggest ATE premiums will increase prohibitively as a result of the loss of turnover for insurers from premiums in routine personal injury cases. We are not convinced. Competition based on premium levels will increase as litigants now have a fi nancial interest in the level of the premium. Moreover, not all ATE providers currently rely on the personal injury market for turnover so their model will not be affected.

The irrecoverability of ATE premiums may impact on TPF. Will investors’ appetites be diminished given the proposal to make their liability for opponents’ costs unlimited? Some third-party funders argue it will, as investors seek less risky environments. Again, we are not convinced. For example, potential liability for third-party costs can still be hedged by purchase of ATE cover. The funded party will either pay the premium or, alternatively, the third-party funder will take the risk of an adverse costs order or pay the premium in return for a greater share of the damages recovered to refl ect the increased risk being taken. In other words it simply alters the cost-benefi t analysis and that will feed into the commercial negotiations between the claimant and the funder as to the return on investment. In marginal cases this shift in the risk equation may mean that cases are not pursued as they would have been in the past, but overall, the legitimacy given to this method of funding by Jackson LJ will outweigh that.

Will in-house counsel have the appetite for contingent fee funding? Will lawyers? Maybe the more imaginative ones will. The traditional arguments around conflicts of interest will deter some but this has, by and large, been managed in CFA-funded cases and can be controlled under contingency fees. Contingency fees do shift the point of perceived confl ict. The argument is that under a CFA the lawyer is best served by a case continuing for as long as possible to ensure that a success fee uplift is applied to as large a base costs bill as possible. Under a contingency fee arrangement the lawyer gets a greater return on their investment by resolving a dispute earlier. Concerns about under-settlement can be reduced, for example by the use of independent counsel for second opinions and by having stepped contingency fees (the higher the value of settlement, the greater the percentage take for the lawyer).

It will be worth watching to see how diff erent organisations wrestle with the confl icting concerns given that they present a gilt-edged opportunity to address the age-old hourly rate conundrum. It will also be interesting to see whether lawyers step in to fi ll a gap between traditional funding and the TPF market by using contingency fee arrangements. More radical fi rms may even consider seeking external fi nancing to compete with third-party funders.

Behavioural Change

Will we see an increase in disputes? There may actually be a slight decrease in personal injury cases. Some lawyers will continue to charge clients success fees that will come from damages. This may deter some claimants who have now taken ‘no win, no fee, no costs’ to be the norm. However, larger claimant firms will take cases on a straight ‘no win, no fee’ basis and will streamline their processes to make acceptable profits within the confines of the costs recovery that they will make under the fixed-costs regime. Freed of paying referral fees of up to £850 a case, this may be easier than it might first appear. OWCS may encourage ‘have-a-go’ litigants in person, which may offset any reduction in claims brought by lawyers.

If we are right that BTE will not fi ll a gap, as Jackson LJ hopes, then there may be a reduction in low-value commercial disputes. SMEs may be deterred by the exposure to adverse costs when bringing a fast-track dispute (absent from the protection of self-insured ATE premiums). There will, however, be some comfort as inter partes costs will be fi xed, bringing a degree of certainty to the cost-benefi t analysis. The challenge will be to extend this certainty to their own solicitor costs.

Commercial clients bringing high-value disputes will have a range of new options, to which we fi nd the response impossible to predict. This is largely because there is already a vastly diff ering appetite for getting involved in disputes and for how they are funded.

What is clear is that previously enlightened in-house counsel are considering the cultural shifts that the Review accelerates by seeking greater costs certainty and risk sharing with their lawyers. This involves discussions about fi xed fees, CFAs, contingency models, and hedging though ATE and TPF, all of which are now available in the right circumstances.

Significant increases in mediations and other forms of ADR are not expected in high-value disputes. Although mediation is given greater encouragement by Jackson LJ it is not made mandatory and his comments are aimed at the personal injury market, where it has traditionally been resisted, and at SMEs who are less aware of its advantages than sophisticated in-house counsel.

2) Responding to a claim

Will commerce and/or insurers fight more low-value cases, and be encouraged to flex financial muscle by the fact that the claimant can only recover fixed costs and there are no success fee, or ATEs to factor into the cost-benefit analysis?

This is doubtful. There will be little or no costs recovery so there would be few benefi ts, unless there is a signifi cant point principle, or it concerns brand protection or reputation. If a claimant is uninsured, what the value of the costs order in any event? However, in-house counsel or risk teams may fi nd it useful to revisit claims philosophies to test whether the approach to classes of personal injury claims or consumer claims are aff ected by the altered cost-benefi t analysis. For example there may be classes or values of claim that are not routinely fought because the additional liabilities make it prohibitive. There may now be an appetite to fi ght cases knowing that no additional liabilities are recoverable to test the opponent’s resolve or send a signal to the other claimants.

In terms of larger cases, the approach is not likely to be signifi cantly altered except in those cases where defendants have historically been pressurised into settlements they might not otherwise make by the prospect of large success fees and ATE liabilities altering the cost-benefi t analysis.

3) Lawyers

Fixed fees will drive efficiencies and these will eventually translate up to those conducting high-value cases.

Lawyers will need to face the cultural challenge of whether they feel comfortable off ering contingency fees, which will no doubt bring much wringing of hands and soul searching. We are looking forward to the creative arguments that will be put forward by lawyers seeking to preserve the status quo !

WINNERS AND LOSERS

Our initial analysis is that the winners will be:

• defendants generally;
• liability insurers;
• BTE insurers;
• the state, ie NHS and local authorities;
• mediators;
• large businesses; and
• the media.

The losers will be:

• ATE insurers;
• claimant personal injury lawyers;
• costs negotiators;
• claims managers;
• trade unions;
• the Bar; and
• SMEs as claimants.

IMPLEMENTATION

All very interesting, but is it going to happen?

Many changes will require primary legislation (for example reversing recoverability of additional liabilities and allowing contingency fees). Others can be implemented relatively quickly by amendments to the Civil Procedure Rules and pre-action protocols, for example the fi xed fee. The election will delay the detailed consideration required but may be a catalyst for manifesto promises (the Conservative Party will, for example, be encouraged by the political capital made from saving the NHS millions of pounds, while enjoying kicking the unions below the belt when they cut off their referral fee income). Someone may then mention the irrecoverable VAT and insurance premium tax paid by insurers on claimant’s costs and ATE premiums, which will force politicians into an uncomfortable cost-benefi t analysis of their own.

The current mood is that the proposals are sound and should be implemented in due course. For commercial enterprises, Jackson LJ’s pragmatic approach, one that increases the range of funding options and imposes controls on legal costs, is likely to bring about good results.

Cultural change will be required, whether that be in relation to how low-value disputes are approached or in relation to contingency fees. The time lag in implementing these reforms should be used to prepare for the changing landscape.

It is a well-established practice that companies carry out merger and acquisition (M&A) due diligence using a suite of questions and documentary information requests aimed at establishing legal, financial and reputational risks. However, as enforcement trends in corruption are a relatively recent phenomenon, proper and thorough anti-corruption due diligence is often overlooked. Continue reading “Look before you leap: anti-corruption due diligence in M&A”