"Mishcon predicts" – What our experts say about 2020

With a clear Conservative majority, it now looks likely that the UK will leave the EU at the end of January ('exit day') on the terms of the Withdrawal Agreement agreed at political level with the EU in October 2019. This will place us in a 'transitional period' until at least the end of 2020. These predictions reveal some of what that may mean:

"During the transition period we will no longer have representatives at EU institutions except on invitation as an observer. However, most EU law – including our participation in the single market and the customs union, the application of the four freedoms (including freedom of movement), delegated legislation and decisions of the EU Court of Justice and changes after exit day - will continue to apply in the UK as if we were still a member." – Competition Partner Rob Murray

"We could well see a continuation of the transactional "bounce", as the perceived certainty of the path being travelled following the election result will encourage parties to proceed with transactions on which they had been holding off. We may also see an increased interest in investing in the UK in light of the growing uncertainty in other financial hubs and the current trading of the pound on international currency markets." – Corporate Partner Nick Davis

"With the Federation for Small Businesses reporting in September 2019 that only one in five small businesses had begun preparing for a 'no deal Brexit', it seems likely that many businesses - in particular those engaged in trade into or out of the UK, or who employ EU nationals on a full time or temporary basis – will need to undertake significant work to prepare for a 'no (or very limited) trade-deal Brexit' at the end of the transition period." – Competition Partner Neil Baylis

"To avoid business disruption and potential fines for employing illegal workers once the transitional period comes to an end, employers should conduct a full audit of their workforce from now until the end of the transitional period to identify workers who will need to obtain 'settled' or 'pre-settled' status under the EU Settlement Scheme. They should verify and (pending Home Office guidance) screenshot their workers' pre-settled or settled status online." – Immigration Associate Natalie Loader

"Discussions will proceed in earnest as to the extent to which the UK should develop its own competition and state aid regime following the transition period. The UK will have to decide how to protect UK industry from state-backed foreign competitors. However, it will also have to balance a desire to protect or support UK industry against the risk of provoking other states – both in and outside the EU - into imposing sanctions on UK exports in response." – Competition Partner Rob Murray

"As we prepare to transition out of the EU's 'one stop shop' system for reviewing large-scale European mergers, the UK's Competition and Markets Authority could see a dramatic surge in merger notifications and assessments, with up to 30 to 50 more merger assessments per year anticipated to come under the CMA's jurisdiction once we fully leave the EU." – Competition Partner Neil Baylis

"For IP rights, the status quo will continue until the end of the transitional period and rights holders will not need to take any steps yet in relation to their EU trade marks and designs. Member States are due to implement new copyright laws by July 2021 and some, such as France, are already taking steps to do so. Watch this space as to how the UK approaches regulatory alignment on these issues in due course." – IP/Data Protection Legal Director Nina O'Sullivan

"The project to revolutionise EU patent litigation – the Unified Patent Court and Unitary Patent - has been on hold pending a constitutional challenge in Germany. If that challenge is, as many expect, rejected in 2020, Germany should proceed to ratify the new regime. But it's still uncertain whether the UK can participate, post-Brexit." – IP Partner David Rose

"Will the new Government do away with the GDPR once the UK is (finally) out of the EU?  Discussions over regulatory alignment will be key. The previous Government had taken steps to ensure that 'UK GDPR' would be in place post-Brexit and it seems likely that this will remain the approach, not least in an attempt to ensure continued data flows post-Brexit, but these are unpredictable times!" – Head of Data Protection, Partner Adam Rose

 

Recent high profile statements and reports (e.g. from the American Business Roundtable and the British Academy) have highlighted calls for redefining the "purpose" of business – the concept that business should not only return profit to shareholders, but in doing so solve the problems of people and planet - and not profit from harm. As the predictions below reveal, there appears to be a real momentum for change, driven by a number of factors which include, but are not limited to, more reporting and regulation. 

ESG and Purpose – general  

"With the growing trend for investors, consumers and employees to buy into companies that deliver positive social change alongside financial returns, the trend for business to adopt impactful social missions and have a clearly defined purpose looks set to continue - see Profit with a purpose – the new norm." – Corporate Partner Nadim Meer

"In the latter half of the year, companies' annual reports will start to reveal how they have embraced new corporate governance reporting requirements including: their mechanisms for engaging with employees and other stakeholders; and how they have taken into account factors including reputation and the environment in delivering corporate success – see our Corporate governance reporting checker.

From January, the FCA's revised UK Stewardship Code will place environmental, social and governance (ESG) factors and climate change at the heart of effective stewardship, increasing the likelihood of asset owner and manager engagement with companies and their reporting on these issues." – Corporate Legal Director Kate Higgins

Environmental and Green Finance

"With the UN Climate Change Summit, COP26, due to be held in Glasgow in November, the Government's Environment Bill will enshrine in law environmental principles and targets, including meeting net-zero carbon by 2050 and on biodiversity, air quality, water, resource and waste efficiency.  It will establish a new environment regulator, the Office of Environmental Protection." – Mishcon Private Managing Associate Alex Rhodes

"Businesses will need to navigate carefully consumers' - and regulators' - rising expectations for sustainably and ethically produced goods and services without alienating consumers over price. The ASA will more actively regulate 'green' adverts and we expect more Government initiatives to encourage 'green' behaviour." – Commercial/Data Protection Associate Emily Dorotheou

"Following the Government's 2019 Green Finance Strategy, with the collaboration and contribution of key regulators and industry bodies, the public and private sectors will increasingly drive integration of climate and environmental factors into the UK's financial system and accelerate the flow of finance into green and low carbon technologies, services and infrastructure.  We also expect more so-called 'green' financial products (or 'money with purpose') such as 'green' loans and other products linked to sustainability goals (sometimes at a lower rate of interest if criteria are met)." – Real Estate Finance Legal Director Sarah Spurling

"The practical application of the Green Loan Principles and the Sustainability Linked Loan Principles - each jointly developed by the LMA, APLMA and LSTA - will rapidly evolve. The challenge will be to develop more subjective criteria for those areas which are not readily verified or assessed by an independent third party in order to create meaningful benchmarks and avoid any challenge of 'greenwashing'." – Real Estate Finance Partner Omega Poole

"Expect measures to increase the minimum energy rating for commercial buildings from grade E to grade B by 2030 (see further here).  Although seemingly a long-term target, it is pretty punchy and likely to need improvements to be planned sooner rather than later. We also anticipate a new focus on how buildings are used in practice, not just how they are designed in theory." – Planning and Environment Legal Director Daniel Farrand

"Climate litigation will become a dominant theme as all sorts of stakeholders, from consumers to businesses in the supply chain, seek redress for damages seen to be caused by climate change, be that claims against "polluting" companies or governments. This ties in to a growth generally in collective redress claims, across environmental, data, mis-selling and healthcare, with issues such as opioid abuse claims likely to rise to the fore." – Dispute Resolution Partner Richard Leedham

Social and Employment

"Gender pay gap reporting is in its third reporting cycle and, although mandatory reporting of other types of diversity data - including the much talked about proposals for ethnicity pay gap reporting - may be some way off, more employers will start to analyse and track their diversity data and take steps to address any disparity." – Employment Partner Jennifer Millins

"Issues around #MeToo and sexual harassment in the workplace are unlikely to abate and the rise in workplace investigations, coupled with the holding to account of those responsible for harassment, is set to continue." – Employment Legal Director Asa Waring

"It would be surprising if the new Government did not take up the Select Committee's proposals to increase employers' obligations to protect workers from harassment. We anticipate that new limits on the use of NDAs in employment, announced in the last Parliament, will be introduced (see here)." – Employment Associate Matt Robinson

"Although the Government's pledge in the Queen’s Speech to increase protection of workers’ rights consists mainly of proposals that were already in the pipeline, employers will need to be alert to potential developments in 2020, including around flexible working and maternity and redundancy rights." – Employment Legal Director Asa Waring

"The Government's forthcoming response to its recent Modern Slavery Act and supply chains consultation will likely require businesses to investigate the risk of modern slavery within their supply chains more rigorously and to comply with increased reporting requirements, with tougher penalties if they fail to comply." – Commercial Associate Fran Denny

"Following inquiries into corporate collapses, the Government plans to strengthen the powers of the Small Business Commissioner to support small businesses that are exploited by their larger partners through late payment practices." – Corporate Legal Director Kate Higgins

 

In May 2020, the EU's GDPR will have been in force for two years, with other jurisdictions keeping a close eye on how it develops as they consider their own data laws and regulation. Regulators and the Courts are continuing to feel their way with the legislation and how to respond to rapidly developing technologies with significant potential to impact on individuals' rights. They and the legislature will continue to need to balance competing interests including: those promoting transparency of information to tackle issues such as terrorism and corruption on the one hand; and data laws and actions aimed at protecting personal data on the other. 

Data protection

"Whilst at the end of 2019 the UK ICO had only issued three notices of intent to serve fines and just one fine relating to data breaches under GDPR, the spectre of significant fines will continue to focus the mind, both on a day to day basis, and when conducting due diligence in corporate transactions." – Data Protection Advisor Jon Baines

"The prospect of class actions being brought by data subjects after adverse regulatory decisions (e.g. by the ICO) looks more likely following the successful 2019 iPhone users' representative action ruling in Lloyd v Google - all eyes will be on a potential appeal to the Supreme Court this year." – Dispute Resolution Partner James Oldnall

"Thousands of Morrison's staff could be set for a payout depending upon the outcome of the Supreme Court's decision on their data breach class action. The decision could have significant implications for employers' vicarious liability: an employer could be vulnerable to a compensation claim even where it takes all reasonable steps to secure personal data and comply with its obligations."  – IP/Data Protection Legal Director Nina O'Sullivan

"Anyone running a website or app needs to understand their obligations in relation to cookies and similar technology. The rules are honoured more in the breach than in the observance, but we can expect regulators to get tougher on this in 2020." – Head of Data Protection, Partner Adam Rose

"Privacy Notices: most people ignore them or click past them, but they are fundamental to 'fair processing' in compliance with GDPR, and there are strong indications that regulators and courts across Europe (including in the UK) are focussing their attention on the extent to which they meet the legal requirements." – Data Protection Advisor Jon Baines

"Like other regulators, the UK ICO is taking a hard look at certain practices and technologies – expect more focus and regulation on the use of AdTech (also under consideration by the CMA), facial recognition software and other privacy-related issues, particularly where vulnerable people are involved, such as children." – Commercial/Data Protection Associate Emily Dorotheou

"Competition Authorities, both at national and EU level, have realised they have failed to properly scrutinise the many mergers in the tech sector over the past decades, and now are very focused on mergers with a data or tech angle. Expect to see intense scrutiny of such transactions, as evidenced by the response to Google's proposed purchases of Looker and Fitbit."  – Competition Partner Rob Murray

"The mechanisms by which personal data are routinely transferred from the EU to the US – standard contractual clauses (SCCs) – are at risk of being found invalid by the European Court of Justice in the Schrems case referred by the Irish court (although just before Christmas the Advocate General suggested the CJEU should find them valid). Many businesses rely upon SCCs, and they will have particular relevance for UK companies in a Brexit scenario where the UK is not yet recognised as providing an adequate level of protection. There are no easy alternatives to SCCs at the moment." – Head of Data Protection, Partner Adam Rose

Transparency

"Regulated businesses will have a short window to get to grips with anti-money laundering (AML) changes under the Fifth Money Laundering Directive required to be implemented by 10 January 2020. For the first time, cryptoasset exchanges, custodian wallet providers and high-value residential property letting agents will also be subject to AML requirements." – Corporate Managing Associate Nicholas McVeigh

"Privately-controlled overseas companies and other entities owning UK property will soon be required to disclose the names of their ultimate beneficial owners (see here). This change is not likely to take effect until 2021, but clients whose response is to sell up should reach that decision during 2020." – Real Estate Consultant Philip Freedman QC (Hon)

"What started off as a fight against tax evasion by individuals - highlighted in the Panama Papers of 2015 and the adoption of the Common Reporting Standard shortly after that - has turned in to a fight against abusive tax avoidance by companies all under the banner of transparency. The main difference is that the use of aggressive practices by huge corporations has already resulted in vacillation (a number of EU countries have decided not to publish their tax revenues paid by big multinationals) whereas individuals have started fighting using data privacy regulations." – Mishcon Private Partner Filippo Noseda

 

We expect continued focus on regulation to embrace the fast pace of technological innovation both to accommodate advances which act as a force for good, such as climate change reporting standards and in medical science; and protect against the very real risk of harm to consumers and society of technology which helps conceal wrongdoers or aid the monetisation of personal data. 

Tech innovation

"2019 saw multiple influential bodies publish suggestions for regulating and auditing artificial intelligence (including how to achieve "Trustworthy AI"). As AI continues to be widely used, and in increasingly complex ways, regulators will issue more guidance on how liability for AI systems should be dealt with and any mandatory requirements to protect consumers."  – Commercial/Data Protection Associate Emily Dorotheou

"We will see a proliferation of projects involving cryptoassets and smart contracts supercharged by the clarity afforded by recent guidance on the legal status of cryptoassets and smart contracts published by the UK Jurisdiction Taskforce." – Corporate Associate & Co-blockchain lead Tom Grogan

"Expect pressure to bring forward laws allowing all commercial real estate documents to be signed using a mobile phone app. We have the tools to do this, but the law is still not clear.  It's time statute caught up with technological change."  – Real Estate Managing Associate Nicholas Kirby

Consumer harm

"The latest EU legislation focussed on consumer protection, the recently approved "Omnibus Directive", follows the earlier Digital Content Directive and Sale of Goods Directive. The Omnibus Directive will require a raft of changes to current consumer legislation in response to increasing use of e-commerce, bolstering consumer rights, in particular, in relation to digital markets and placing power and protection more firmly in the hands of consumers. Whilst Brexit means it's not clear whether these updated rules will apply in the UK, businesses trading in the EU will need to ensure they are ready to comply with the new rules in all of these Directives once implemented by EU Member States." –Commercial Associate Fran Denny

"Despite criticism from those concerned about the impact on freedom of speech, the Government will press ahead with the plans set out in its Online Harms White Paper for much tougher internet regulation. Proposals include a new, statutory duty of care for tech companies – 'companies that allow users to share or discover user-generated content or interact with each other online' – and an independent regulator with a 'suite' of powers, including to issue 'substantial' fines and impose liability on individual members of senior management. " – Commercial Associate Anne Rose

"Expect to see the Competition and Markets Authority increasingly focusing on matters with a consumer protection element, and prioritising the protection of consumers over the preservation or encouragement of competition". – Competition Partner Sarah Houghton

"As the Law Commission continues its review of hate crime legislation in England and Wales, with an extensive public consultation beginning this year, we expect more debate on the adequacy of the current regime, including in particular how best to tackle online hate speech. Mishcon de Reya, which partnered with Cardiff University to launch a report titled Hatred Behind the Screens, will continue to be part of that conversation." – Reputation Protection Associate Isabella Piasecka

"We expect to see a move towards online platforms and market places, app stores, social media platforms and search engines changing their practices and user interfaces to be more transparent.

The revised Audiovisual Media Services Directive must be implemented by 20 September 2020, with an extended scope covering video sharing platforms. Given that the role of online platforms in online harm is very much a talking point at the moment, there is a likely to be a flurry of activity on this in 2020." – Commercial Associate Anne Rose

 

With the first post-election (and likely post-Brexit) Budget pencilled in for early February 2020 it will be interesting to see if, to pay for all the infrastructure promised, there will be changes to business taxation. Our experts give their views.

"The Government has stated that it is 'committed to conducting a fundamental review of business rates'. Will this ultimately result in a genuine reform, helping the beleaguered retail sector?  At least it is acknowledged that business rates form a key source of income for local authorities, so any reform resulting in a fall in revenues would have to be paid for by someone." – Real Estate Tax Partner Jonathan Legg

"It remains to be seen whether the proposed review of IR35, promised by the Conservatives in the run up to the election, will take place or whether the proposals - which impact businesses with contractors - will just come into effect as planned on 6 April.  The prudent money is on the changes coming into force without significant amendment as the new rules are aimed at stopping tax avoidance, a perennially popular topic with the press and public.  Affected businesses should review their arrangements early in the New Year to ensure there is time to negotiate new arrangements with their contingent workforce, if necessary – see here."  – Corporate Tax Associate Sarah Hein

"The increase in the National Living Wage might indicate a direction of travel to being less supportive of high turnover, low profit (or loss making) businesses reliant on working tax credits to top up their workforces' income and at the same time reduce social security outlays.

With the scheduled reduction in corporation tax (from 19% to 17%) looking as though it will be reversed, could there even be an increase to 20% to pay for the increased tax reliefs for R&D, 'sold' to the corporate sector as likely to boost demand in the long run?  

At an international level, the discussions involving OECD members and other countries on how to collect more tax from tech companies in the countries where their markets or users are based will need to work towards a conclusion, but obtaining consensus will be challenging. Failure raises the very real possibility of countries unilaterally introducing their own digital services tax or other similar measures, not least to have as a bargaining chip to surrender in treaty or tariff negotiations." – Corporate Tax Partner Gary Richards