No-Fault Divorce -
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No-fault divorce becomes legislation on Wednesday 6 April 2022

Despite the long awaited Act for “no-fault” divorce being passed in June 2020, it is finally becoming legislation on Wednesday 6 April 2022. It has taken years of discussion to reach this point, providing significant changes to the way couples apply for a legal separation.

This landmark legislation, formally called the Divorce, Dissolution and Separation Act 2020 will allow married couples to divorce without assigning blame. Up until this point, couples had to have been separated for at least two years, or have to blame the other spouse for the breakdown of the marriage, which increases the animosity.

England and Wales have been a step behind many other countries when it comes to divorce with many opting for a more progressive approach. At present, one spouse must issue divorce proceedings against the other, potentially creating unnecessary animosity which can often lead to the divorce being contested by the other spouse.

Under the no-fault divorce system, couples will also be able to apply for divorce jointly which will hopefully lessen the chance of blame creeping into the equation. It will not be possible to contest a divorce, putting an end to traumatic situations such as the Owens v Owens case.

Cases such as Owens v Owens are rare. Removing the option to contest a divorce is a vital step forward, stopping people from being trapped in a marriage that they no longer want to be part of.

A statutory timeframe has been included in the new legislation, meaning that a divorce cannot be finalised in less than 20 weeks. Under current law, it is possible to conclude a divorce in a shorter time frame than this, however, it's rare for this to happen in less than four months.

It is important to remember though that complexities can arise that can add significant time to the process, such as financial claims that require negotiation, or concerns around child custody.

What terminology has changed as part of no-fault divorce?

Divorce terminology is also changing too, bringing the process into the 21st century. Making each element of divorce as clear as possible will reduce confusion and help people to understand the process they’re embarking on a little easier.

Previous terminology New terminology Description
Petition Application
Petitioner Applicant
Decree Nisi Conditional Order The order by a court of law stating the date on which the marriage will end
Decree Absolute Final Order The legal document that ends a marriage
(Judicial) Separation Decree (Judicial) Separation Order An order which confirms the parties to a marriage or civil partnership are separated
Decree of Nullity Nullity of marriage order A declaration of the court that the marriage is null and void

How will no-fault divorce work?

The announcement means that couples will no longer have to agree to be separated for two years, or have proof of their partner being at fault, in order to file for divorce. Only one person needs to desire the divorce, and their spouse will not be able to refuse the application.

Being able to apply for a no-fault divorce will spare couples the emotional stress and strain of finding blame for an unreasonable behaviour petition or when they can’t, or don’t want to, wait two years to divorce on the grounds of separation or five years if they do not have the consent of the other spouse.

It should be noted that under the new law, the statutory timeframe means that a divorce cannot be concluded in less than 26 weeks. Although it is possible for this to be shorter under the current law, it is still unusual for it to be less than four months, not including the time taken to resolve financial claims. As a result, the overall timeframe of the new system will be largely in line with the existing one. Plus, a fixed timeframe allows parties to reflect on whether the decision to end the marriage is the right one.

What caused the delay?

Following the tireless campaigning of family lawyers, the government has spent a significant amount of time over the past few years trying to make the divorce process simpler.

The Divorce, Dissolution and Separation Act receiving Royal Assent was a real breakthrough moment, with many hoping no-fault divorce would come into play by early 2021 at the latest. However, following delays, the act has now come into force on 6 April 2022. This was to allow time to become familiar with the new process, and for any necessary, IT changes to be made to HMCTS’s online divorce systems so that new process works as intended and is fit for purpose.

No-fault divorces will take a huge amount of anxiety away from the process, benefitting a significant number of people.

How we guide you through the divorce process

The introduction of no-fault divorce is one of the most significant changes in family law in the last 50 years. Ending a marriage is a monumental decision, and that won’t change. It’s important to remember that the actions you take in the early stages can set the tone for everything that follows.

If you’re about to start divorce proceedings, or currently going through the separation process, then speak to one of our divorce lawyers. We’re here to guide you through the maze of emotions and legal responsibilities, every step of the way.

You can also read our step by step guide on how to get a divorce. Find out more here >>.

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Helen works with clients to ensure that they are sensitively guided through the complex area of family and relationship breakdown.

Our family team is ranked as a Top Tier Firm in the Legal 500 2021 edition.

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Has the Supreme Court slammed the brakes on data protection claims?

New Legislation

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Supreme Court and data protection

Over the last couple of years, we’ve seen a marked increase in the number of claims relating to data protection breaches.  

It’s easy to see why. When the GDPR was introduced a couple of years ago, people became more aware of their data rights than ever. It also used to be the case that a claimant could only seek damages for distress if the data breach also caused them a financial loss. But the court (and, latterly, Parliament) accepted this was prohibitive and introduced a free-standing right to claim for distress, widening the door for possible claimants to pursue damages.  

Lloyd v Google – opening the floodgates

And then came the seminal case of Lloyd v Google, where the Court of Appeal appeared to give the green light to claimants who had suffered neither financial loss nor distress as a result of a data breach. The case was brought by an individual, acting as a “representative” of all individual iPhone users who were affected by a Safari Workaround that was installed by Google on Apple iPhones in 2011-2012. The Workaround allowed Google to essentially profit from tracking the iPhone users’ internet habits and advertising targeted at users based on those habits. Around four million users were affected and the damages bill for Google could have run into the billions.  

At the High Court, Mr Lloyd was refused permission to serve his claim on Google (who are based outside of the jurisdiction). This decision was subsequently overturned by the Court of Appeal, which decided that a “loss of control” over an individual’s data could, of itself, give that individual a right to claim for damages, even if the data breach caused the victim no financial loss or distress. 

Some of the claims we’ve seen since the Court of Appeal decision have, it must be said, been speculative at best. Minor breaches where trivial data has been inadvertently disclosed suddenly attracted claims on the basis that “if there’s been a breach, I have lost control over my data so you’re liable, no matter what”. Inevitably, the Court of Appeal’s decision in Lloyd has been quoted at length to support this type of argument. 

Applying the Brakes

It was therefore with some trepidation that data controllers waited for the Supreme Court’s decision in Lloyd v Google, to see whether it would endorse the Court of Appeal’s view and open the floodgates even further. After around six months of waiting, the judgment was finally delivered w/c 8 November 2021. 

It will give data controllers some relief to hear that the Supreme Court has retreated from the view given by the Court of Appeal. It has expressly stated that section 13 of the Data Protection Act 1998 “cannot reasonably be interpreted as giving an individual a right to compensation without material damage or distress whenever a data controller commits a non-trivial breach of any requirement of the Act in relation to any personal data of which that individual is the subject”. So the Supreme Court has clarified the position: under the DPA 1998, a claimant must be able to show that they suffered financial loss and/or distress as a result of a data breach. The simple loss of control of data is not enough on its own.  

Although the decision was made in relation to the DPA 1998, the wording of the DPA 2018 is not significantly different, so it’s likely that the current legislation would be interpreted in the same way. While claimants are not prevented from seeking “loss of control” damages in a tortious claim of Misuse of Private Information (“MPI”), these claims are harder to establish and are unlikely to succeed where the data disclosed is trivial in nature. 

As for the way the claim was brought, the Supreme Court found that an individualised assessment of damages could not be conducted in a representative action. It was up to Mr Lloyd to seek a declaration that Google had breached the DPA 1998 with damages left to be assessed by individualised assessment. He chose not to adopt that two-stage approach. As such, the conditions for bringing a representative action have not been established and Mr Lloyd has been denied permission to serve his claim on Google. As a result, the claim is now over.  

Is this a victory for data controllers?

Overall, the outcome is undoubtedly a victory for data controllers who could potentially face huge representative actions. The brakes on those types of cases have – for now - been applied.  

As for the lower value, “any breach leads to a claim” type of cases that we’ve seen a lot of recently, the Supreme Court decision will now require a claimant to show they have suffered financial loss and/or distress (by which we mean, some sort of mental distress caused by the disclosure of their data). This ought to make it easier for trivial claims to be rejected. It’s unlikely that the threat will evaporate all together, however, with claimants still able to rely on “distress” to claim damages and alternative claims for MPI still being available.  

With further, high profile, data protection cases waiting to be heard, it remains to be seen whether and how claimants will seek alternative ways to pursue data protection and privacy claims and how Lloyd will limit representative claims in the future. Practitioners will be keenly watching this space to see what the long term consequences of the Lloyd v Google decision may be.  

If you have any queries regarding your role as a controller or processor of data or have any concerns about data security and breaches contact Catherine Savage or another member of the litigation team.

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Catherine specialises in academic litigation. She has extensive experience of representing education clients in discrimination claims and judicial review applications.

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OfS Consultation: Regulating quality and standards – how far is too far?

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OfS consultation

The current OfS consultation on quality and standards ends on 27 September 2021 and is a good example of how, irrespective of any bureaucracy-busting regulatory bonfires that may be going on in other sectors, higher education is seeing regulation expand further and farther into its core activities than it has ever done.  

In fairness to the OfS, the consultation contains reassuring statements about its intention to regulate in a risk-based way, but if recent history has taught anything it is that once a regulatory framework is established, it can influence and intervene in circumstances and ways that could not necessarily be predicted.  

Few would seek to argue (and this blog most certainly does not) that demonstrably high quality and standards in higher education are unimportant, or that regulatory oversight does not have a vital role in ensuring there is public confidence in this area.

Much of the substance of the new conditions of registration is uncontentious: of course programmes of study should be robust and challenging, rigorously assessed, well-resourced and of value.  There are, however, three areas that cause concern: 

  • Who makes the judgments? 
  • What might be the impact be on innovation? 
  • Are there other potential unintended consequences? 

Who makes the judgments?

The new conditions include matters of expert academic judgment. For example, the accompanying guidance indicates that one of the circumstances in which the OfS might intervene is where “The subject matter of a course is not representative of current thinking and practices. For example, course content, including topics and reading lists, that is not informed by research and scholarship, or does not reflect professional developments, such as the adoption of the latest professional or industry standards, would be likely to be of concern.” 

In reaching its decisions on matters such as this, the OfS says that it expects to “draw on expert academic judgment”. Elsewhere it says that it “may” ask the designated quality body or another appropriate body to investigate concerns or may do so itself. These are hardly robust guarantees. “Drawing on” expertise does not mean following it.

Additionally, experts don’t always agree especially in academic matters: this is in part why the courts have always declined to adjudicate matters of pure academic judgment. And (except in relation to standards, where it is statutorily obliged to do so)  the OfS does not commit to utilising existing, well-established expertise and processes in assessing quality in higher education through the designated quality body, but only that it ‘might’.  So, overall, there is a lack of clarity both as to who makes the judgments and how those judgments are arrived at. 

It is no answer to this to say that the OfS will only act in clear cut cases, as the current quality and standards conditions would surely equally enable it to act in such cases (if not, it calls into question how it has decided to accept or reject applications for registration to date.).

The new conditions therefore inevitably broaden and deepen the potential for regulatory intervention in questions that have until now been the preserve of academic debate and deliberation. 

What might be the impact on innovation?

One of the driving forces behind the Higher Education and Research Act was the belief that the regulation of higher education should not make it unnecessarily difficult for new and innovative providers and provision to enter the market. The new quality conditions will apply to all higher education, including new providers, new provision, micro-credentials and partnership delivery, whether in the UK or transnational. 

It will be important that the requirements are applied proportionately, to prevent a situation where providers are deterred from innovation because of concern that all of the requirements cannot immediately be met. An example might be a course that is taught with extensive practitioner input to align with the needs of a particular industry. Could this be said to have an over-reliance on visiting staff, which is given as an example of non-compliance? If the OfS was willing to engage with providers to discuss whether such new delivery was likely to comply, that would be one thing. But it is very fond of the mantra that it is for providers to decide how to comply with the regulatory framework, not for it to tell them how to. This may lead some providers to decide that innovation is simply too risky. 

A possible solution is for the OfS to consider the “sandbox” approach adopted by other regulators to support innovation. This includes temporarily offering bespoke support and advice, comfort around regulatory enforcement and relaxation of certain regulatory requirements to allow new products and services to be trialled. 

Are there other unintended consequences of the new approach?

As stated above, the new conditions involve matters of academic judgment, and may in due course involve matters of contested academic judgment. Say an institution disagrees with the OfS about whether a course, for example, provides sufficient educational challenge or is assessed “reliably”.  Will the courts relent in their long-standing unwillingness to adjudicate on pure academic judgment and make a ruling? If so, will that open up challenges to academic judgment in other areas, such claims and complaints by students to their marks and degree classifications? 

Given that the culture wars show no sign of ending, it is worth remembering this section of the then Education Secretary’s statement of priorities to the OfS in February 2021: “All students deserve the opportunity to receive a rigourous and high-quality education. While providers are rightly free to determine the content of their courses, university administrators and heads of faculty should not, whether for ideological reasons or to conform to the perceived desires of students, pressure or force teaching staff to drop authors or text that add rigour and stretch to a course. The OfS should robustly challenge providers that have implemented such policies and clearly support individual academics whose academic freedom has been diminished.” 

It does not take psychic abilities to foresee articles bemoaning that “woke” students and academics have forced institutions to  adopt more authors of colour on  reading lists, or to revisit the prevailing analysis of Empire, and presenting the changes as reducing rigour and stretch. Is there therefore a risk that the quality and standards conditions become yet another proxy war for a wider ideological struggle? 

Finally, some of the proposed amendments to the Higher Education (Freedom of Speech) Bill propose extending the definition of academic freedom to include the freedom to decide what to teach and how, without institutional interference.  If adopted, it is difficult to see how the OfS could reconcile its new proposed approach to quality and standards with the proposed new duty to protect the academic freedom of staff.  

In conclusion

The quality and standards of UK higher education clearly matter and are regarded as amongst the best in the world. Any further regulation in this area needs to ensure that institutions remain free to drive high quality and innovation, through the expertise of their talented staff and the longstanding processes for internal and external quality assurance that underpin the UK’s global reputation in this area. The new conditions need to be implemented in a way that avoids the risk of throwing the baby out with the bathwater and creating a host of unintended consequences.  

For further information please contact Smita Jamdar, head of education.  

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Smita leads the team that works to shape the universities and colleges of the future by providing strategic advice and sector specific insight across all their legal needs.

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Government Announces Adult Social Care Reforms

New Legislation

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Social Care Reforms

The Government announced last week that, from October 2023, there will be changes made to the Social Care system. These changes will affect how much you will need to pay towards your care in the future. These changes are currently proceeding through Parliament.

The current average cost in England of a stay in a residential home is £600 per week, with nursing care costing on average £800 per week.

What is the current system?

Currently, if the value of your capital assets is above £23,250 then your care fees will need to be fully self-funded, and you will not receive any financial support from the Local Authority, subject to certain limited disregarded items in certain circumstances.

If the value of your capital assets are between, £14,250 and £23,250, then you will get some financial help from the Local Authority.

If your assets are less than £14,250, then you must continue paying from your income, subject to a ‘protected’ lower amount, but you will not need to contribute from your capital. The Local Authority will pay the remainder.

Your Local Authority will do a ‘means test’ to work out how much you will need to contribute from your capital towards the cost of your care.

What are the new changes?

MPs voted this week by a sizeable majority to approve the following changes to the Social Care system.

  • If the value of your capital assets is above £100,000 then you will need to fully self-fund your care.
  • If the value of your capital assets is between £20,000 and £100,000, then you will need to contribute to a percentage of the fees, based on your income and savings, but you can request financial support from the Local Authority on a means-tested basis.
  • If the value of your capital assets is below £20,000 then you will not have to use your capital to pay for your care, although you will still need to contribute from your income, subject to a ‘protected’ lower amount.

The Government also announced that people will not be made to pay more than £86,000 (a lifetime cumulative amount) in care costs. Whilst, on the face of it, this change may be welcomed by many who worry about spending their life savings on care fees, and needing to sell their homes to fund their care costs, this cap does not include the costs of accommodation and food – only personal care. However, care costs paid whilst at home will count towards this total lifetime amount.

This change will only benefit those starting care from October 2023. If you are already paying for your care, then you will not benefit from the new changes.

Can I protect my savings for my family?

There is no definitive answer to this question. It is important to consider your aims and objectives, and your personal and family circumstances. We can advise and support you about the payment of care fees and the relevant disregards. Learn more about this and the matters mentioned above, or to review any existing steps or structures you may have taken or tried to put in place in this area, by getting in touch with our private client team.

These changes will not affect the Deprivation of Capital Rules or the Continuing Healthcare Funding entitlement to Nursing Care (not residential costs or food) for those who are assessed as needing nursing care which is a NHS responsibility.

 

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Lauren helps individuals put plans in place for the future by means of Wills, Powers of Attorney, and other estate Planning.

With our adaptable and creative approach, we ensure your family’s interests are always protected in troubled times. We know that no two families are the same and we take the time to understand the intricacies and sensitivities of the situations that you face.

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Certain key insolvency measures to be phased out

New Legislation

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Key insolvency measures

Creditors will be able to issue Winding up Petitions against individual corporate debtors owing more than £10,000 from next month, even where debt may be “Covid related”. Commercial rent arrears are still excluded.

The Government has announced that measures put in place to protect business from insolvency during lockdown and the pandemic are to be phased out from 1 October 2021.

The Corporate Insolvency Governance Act 2020 was brought into force in June 2020 to prevent creditors from issuing winding up petitions and enforce insolvency.

Updated legislation will:

  1. See the debt threshold for a winding up petition be raised to £10,000 or more
  2. Require creditors to seek proposals for payments from a debtor business and allow 21 days for a response before proceeding with a winding up petition.

These measures will be in force until 31 March 2022, when it is expected that legislation will return to pre-pandemic measures.

What this means for businesses

Those will smaller debts will have more time to rebuild balance sheets and reserves ahead of the March 2022 deadline.

Those with larger debts, should be aware that the threat of the business being wound up (which has been very much in the background for many months) will now be an important consideration in the viability of the business going forward.

Directors should be looking at all options including; restructuring, refinancing and negotiations with creditors to avoid facing winding up petitions next month.

What this means for creditors

Creditors should consider the options available to them, where they have corporate debtors owing £10,000.00 or more. Where the debt cannot said to be legitimately disputed, businesses can again look to the demand and petition route as a means of enforcement.

We are expecting to see many of our creditor clients use this procedure straightaway, particularly against those debtors who are considered to be zombie companies or those who have not engaged or co-operated with them over the last year.

For debts less than the £10,000 threshold, creditors should continue negations with debtors and recover what they can through the courts or mediation.

What this means for landlords

For landlords there is no change to the legislation and tenants maintain protection from eviction until 31 March 2022.

Businesses should pay contractual rents where they are able to do so. However, the existing restrictions will remain on commercial landlords from presenting winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic.

Full details of when and how the Government’s rent arbitration scheme will come into force are still to be confirmed.

For support with matters relating to restructuring, contact Andrew.Taylor@shma.co.uk

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Andrew works with companies, insolvency practitioners and lenders on restructuring and turnaround options.

He also advises on formal insolvency issues including the sales of assets and undertakings, validity of security/appointment, asset realisations, director’s conduct and antecedent transactions.

In any situation when things take a turn for the worse, our corporate restructuring and insolvency team work closely and quickly with clients to assess options deliver the best possible commercial outcomes where possible.

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REMIT and 6th Edition ACER Guidance

New Legislation

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ACER guidance

The Agency for the Cooperation of Energy Regulators (ACER) released the 6th edition of its REMIT Guidance on 22 July 2021, covering the application in the EU of EU Regulation No 1227/2011 on wholesale market integrity and transparency (REMIT). 

By virtue of the European Union (Withdrawal Agreement) Act 2020, the provisions of REMIT (and its accompanying implementing regulation) became part of EU retained law at the end of the Brexit implementation period, with a few amendments to ensure its operability in GB and with the suspension of trade and fundamental data reporting obligations pending establishment by Ofgem of a GB reporting system. 

This latest guidance update from ACER is important however to those actively involved in the GB wholesale energy markets, because the key definitions in REMIT – “inside information”, “market manipulation” and “attempt to manipulate the market” - remain the same in both the GB and EU REMIT regimes, and Ofgem has stated that in carrying out its GB monitoring and enforcement responsibilities it intends to continue to interpret REMIT having regard to ACER’s guidance.

Who is affected by this latest ACER Guidance?

It follows that this latest guidance from ACER will be of interest to any company trading in wholesale energy products, whether for delivery in the EU or in the UK, including electricity generators, trading companies, gas shippers, transmission system operators, and operators of gas storage and LNG import terminals. But the REMIT prohibitions and obligations extend beyond those termed “market participants”, and can apply to any person coming into possession of inside information, or engaging in market manipulation (which can include disseminating false or misleading information). 

What are the changes in the 6th edition?

This latest 6th edition of the guidance differs from the previous updates, in that it incorporates a restructuring of the guidance document, with the aim of making the guidance more intuitive. 

As such, there are sections which are moved around but have not changed in substance, notably the sections dealing with registration (Article 9 REMIT), the obligation to disclose inside information (Article 4 REMIT) and PPATs (persons professionally arranging transactions) (Article 15 REMIT). 

In other areas, ACER has taken the opportunity to add new content, to take account of expected market developments resulting from implementation of the European Green Deal as well as the experience gained to date, including feedback from national regulators and market participants and other stakeholders. 

The key areas which have changed are outlined below. 

Scope of REMIT 

There is a new chapter entitled “Scope of REMIT”, which is a merger of the previous chapters two and three.   

Now included is more detail on the scope of wholesale energy products, including clarification that biogas will be treated as natural gas and hence contracts for supply/transportation of biogas, if the biogas can technically and safely be injected into, and transported through, the natural gas transportation system.  And it is made explicit that redispatching and countertrading mechanisms, and local flexibility markets, will be treated as wholesale energy markets insofar as wholesale energy products are traded there.   

There is also text describing the geographical scope of REMIT, which obviously has some relevance to GB market participants, who whilst governed by the GB REMIT regime will also be caught by the EU regime insofar as involved in wholesale energy products which are produced, traded, delivered, consumed or related to transportation in the EU. 

Also new is clearer analysis of the interaction between REMIT and the financial services legislation. 

Prohibition on insider trading 

This is a new section, dealing with the key market abuse prohibitions in Article 3 REMIT – using inside information to trade, disclosing inside information, and recommending/inducing a third party to trade based on inside information.  Whilst some content is taken from the previous guidance, there is a lot of new content including examples, and some useful explanation of several of the underlying concepts.  For example, in relation to the inside information disclosure prohibition, ACER makes clear that the carve out for disclosure made “in the normal course of the exercise of employment relationship, profession or duties” should be interpreted strictly, with a suggestion that national regulators should look for disclosures which follow a pre-defined workflow based on the “need to know” principles, or disclosures which are included in the contract governing the person’s duties. 

There is also detailed analysis of the categories of natural and legal persons possessing inside information who will be treated as “insiders” for REMIT purposes, which provides some insight on how, for example, “members of the administrative, management or supervisory bodies of an undertaking” will be construed.    

Prohibition on market manipulation  

Similarly, there is a new section of the market manipulation prohibition in Article 5 REMIT, which builds on and replaces content from the previous guidance.  As with the section on insider trading, the notion of “on-market” and “off-market” activities is introduced, and there is substantial new content, including useful examples, covering the key underlying concepts of giving false/misleading signals, securing an artificial price, using fictitious devices/deception/contrivance and disseminating false or misleading information.  

Again, there is also analysis of the scope of the market manipulation prohibition, which like the insider trading prohibition is not limited to market participants, and this is particularly relevant to the “off-market” activity of disseminating false or misleading information which can apply to a wide range of persons operating through media and internet channels for example. 

In conclusion

This latest 6th edition is certainly an improvement on previous editions, and the new examples and case studies in particular are welcome.  Companies affected by REMIT should review their compliance policies and training materials in light of this new guidance. 

It is worth noting the guidance does not touch on enforcement since that is a matter which REMIT devolves to member states and national regulators.  In Great Britain, REMIT enforcement is the responsibility of Ofgem, which derives its enforcement powers from the Electricity and Gas (Market Integrity and Transparency) (Enforcement etc) Regulations 2013, and pursuant to which it publishes REMIT Procedural Guidelines and the REMIT Penalties Statement. 

Ofgem is currently consulting on changes to those documents, which is summarised here.

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Andrew is a specialist energy regulatory and contracts lawyer, who works with a range of utility and developer clients and funders to help them manage regulatory and legal risk in a fast-moving and complex environment.

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REMIT Ofgem consultation

New Legislation

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Ofgem REMIT guidance

In June 2021 energy regulator Ofgem consulted on changes to its principal documents underpinning the enforcement framework, these being the Enforcement Guidelines and Sectoral Statement of Policy with respect to Financial Penalties and Consumer Redress. That consultation closed on 4 August 2021. Ofgem carried out the consultation in order to update these documents in response to changes in the energy market and the enforcement landscape.  

On 17 August 2021 Ofgem published a separate consultation on its two REMIT enforcement documents namely REMIT Procedural Guidelines and the REMIT Penalties Statement which are not part of the general enforcement framework described above. Ofgem’s three objectives for undertaking this consultation are to maintain alignment with its proposed updated general enforcement framework, to reflect the fact that the United Kingdom has left the European Union and to make REMIT processes clearer and more efficient. 

The two documents updated for the proposed changes have been provided in Annex One and Annex Two to the main consultation document. This latest consultation closes on 28 September 2021.  

Background to REMIT

REMIT is the energy sector market abuse regime.  REMIT in fact derives from EU law - EU Regulation No 1227/2011 on wholesale market integrity and transparency – which by virtue of the European Union (Withdrawal Agreement) Act 2020 is now (alongside its accompanying implementing regulation) a part of EU retained law in Great Britain.    

Ofgem is tasked with enforcing REMIT, and its REMIT enforcement powers derive from the Electricity and Gas (Market Integrity and Transparency) (Enforcement etc.) Regulations 2013 (2013 Regulations). The Procedural Guidelines set out how Ofgem will use these powers, whilst the Penalties Statement discharges Ofgem’s obligation in the 2013 Regulations to publish a statement of its policy on imposing penalties and determining their amount. 

REMIT Procedural Guidelines Changes

Recent enforcement case

This REMIT consultation is timely as Ofgem announced on 24 August 2021 that it had taken an action against ESB Independent Generation Trading Limited (IGT) and Carrington Power Limited (Carrington) for breaching REMITBetween March 2019 and September 2020, IGT and Carrington submitted misleading data to National Grid Electricity System Operator (NGESO) about the minimum amount of energy the Carrington gas power plant could supply. This caused NGESO to purchase more energy from the plant than needed when the plant was called on to generate in the Balancing Mechanism. 

As result, Ofgem found IGT and Carrington to be in breach of Article 5 of REMIT which prohibits market participants from engaging in or attempting to engage in market manipulationIGT and Carrington have agreed to make a collective payment of £6m to Ofgem’s voluntary redress fund. 

The proposed changes are: 

  • consistent with the wider enforcement regime changes, to reduce the three settlement windows to one, giving a 30% discount; 
  • consistent with the wider enforcement regime changes, power for the settlement decision to be made by Ofgem’s Director of Enforcement rather than a full settlement committee, in “appropriate” cases, which Ofgem says will be “less complex and serious” cases; and 
  • structural and clarificatory changes to the document, for example making the settlement process more efficient by giving flexibility for Ofgem to seek an indication in writing from the person under investigation that they are interested in settlement before Ofgem goes down that route.  Also, incorporation of reference to “alternative action”, which has been used but not currently mentioned. 

REMIT Penalties Statement Changes

The proposed changes are: 

  • consistent with the wider enforcement regime changes, a significant reduction in the number of the stated factors that Ofgem may consider when determining the seriousness of a breach (and clarification that this is a non-exhaustive list); 
  • consistent with the wider enforcement regime changes, Ofgem will calculate detriment and gain only where proportionate, reasonable and practicable to do so, so that it does not need to engage in resource intensive analysis where, for example, a breach was only attempted or financial impact was not material;
  • and changes in approach to calculating financial gain. 
Conclusion

These proposed changes to the REMIT enforcement regime will bring it into alignment with Ofgem’s broader regulatory enforcement framework. 

As for REMIT compliance more generally, we can expect to see Ofgem maintain its focus on monitoring and enforcement. Those caught by the REMIT prohibitions and obligations should ensure they are familiar with the most recent guidance published by the Agency for the Cooperation of Energy Regulators (ACER) in July, which is summarised here. (link) 

Notwithstanding Brexit, ACER guidance remains useful and relevant compliance material for those involved in the Great Britain whole energy markets.  The key definitions in REMIT – “inside information”, “market manipulation” and “attempt to manipulate the market” - are the same in both Great Britain and EU REMIT regimes, and Ofgem has stated that in carrying out its monitoring and enforcement responsibilities it intends to continue to interpret REMIT having regard to ACER’s guidance. 

For further information on changes to Ofgem’s enforcement framework, contact Andrew Whitehead or another member of the energy team. 

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Andrew is a specialist energy regulatory and contracts lawyer, who works with a range of utility and developer clients and funders to help them manage regulatory and legal risk in a fast moving and complex environment.

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Further changes to tenant notice periods for possession proceedings

New Legislation

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Key changes for tenant notice periods – rent arrears

 

As of 1 August 2021, the notice period to be given for a Section 8 Notice for rent arrears has reduced from six months down to two months, where a tenant is in arrears of less than four months’ rent. This is applicable when relying on grounds 8, 10 and 11.

My previous article, Key changes for possession proceedings sets out the in detail the notice periods for other grounds which a landlord may seek to rely on, including Section 21 notices.

At present, no further changes have been made to the notice period for a Section 21, which currently still stands at four months’ notice for any Section 21 notice served after 1 June 2021.

The amended notice periods will stay in force until the end of September 2021, where they will revert back to the way there were pre-pandemic. Unless, of course further amendments are announced by government.

It is important for landlords to be aware of the change to notice periods for a Section 8 Notice, to ensure that the correct notice period is given to a tenant.

 

Get your How To Rent Guide

 

On 21 July 2021, the government published an easy read of the How to rent guide for tenants.

As many private landlords will be aware, when granting an assured shorthold tenancy, one of the requirements is that the government’s How to rent guide must also be issued upon commencement of the tenancy agreement.

When granting an assured shorthold tenancy, landlords can also now issue the easy read version alongside the full guidance of the How to rent guide. The new easy read guide has been designed to provide tenants with key information in short statements which is further assisted with use of pictures.

 

For information contact Habib Khan in our housing management team, who can guide, help support and you and your teams to deal with any housing management and litigation issues you face during these evolving times.

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Habib is part of the social housing litigation team. He engages with all stakeholders to ensure landlords and property managers achieve their goals for their housing stock.

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Personal data can now flow freely from the EU to the UK

New Data Legislation

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How the change in personal data flow impacts education institutions

In June of this year, the EU adopted two adequacy decisions confirming that personal data can now flow freely from the EU to the UK.

These decisions are hugely important for education institutions and will no doubt come as a relief to many who will have been taking measures such as putting in place standard contractual clauses as the end of the post-Brexit extension loomed.

 

What were the adequacy decisions?

The adequacy decisions from the European Commission, which have been a long time coming, confirm that the UK is considered to have laws equivalent to those that safeguard personal data inside the European Union as well as those countries in the European Economic Area.

Since Brexit there has been a bridging mechanism that gave the European Commission another six months (until 30 June 2021) to put in place a decision, so it really did come at the eleventh hour!

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This stimulating and highly practical discussion will look at what institutions need to consider when managing change in an Education sector environment.

How will they affect education institutions?

These decisions will help education institutions that have campuses which span the UK and the EU, particularly if this is achieved by collaborations with other institutions. There will be less GDPR paperwork to fill in, as student data (and other personal data) will be able to pass freely, as it did when the UK was a member of the EU.

In a note of caution however, the European Parliament, the Member States and the European Data Protection Board expressed concerns about the possibility of future divergence from EU standards in the UK's privacy framework. In order to provide strong safeguards against dilution of privacy rights, which are considered fundamental to EU citizens, these adequacy decisions contain a 'sunset' clause. For the first time this limits the duration of adequacy to four years (previous decisions have been perpetual).

As such, and while we can all breathe a sigh of relief for a moment, education institutions will need to be mindful of the sunset clause and the potential for the UK to be without any adequacy decision in four years' time.

Consideration should be given to relationships and contracts that will go beyond this period. This is imperative to ensure that continued compliance with relevant data protection legislation and contractual provisions is possible at that time if no subsequent adequacy decision is granted.

For expert advice and support on GDPR and other commercial law, please contact our commercial team.

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Joanna works exclusively for higher and further education clients and has over 20 years’ experience of advising on a wide variety of student-related issues including policies and procedures, discipline, complaints and appeals, equality and immigration.

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Government’s ‘Innovation strategy’ aims to attract top talent to the UK

New Legislation

UK Innovation Strategy aims to attract international talent

 

On the 22 July 2021, the Department for Business, Energy and Industrial Strategy published a policy paper which sets out the UK Government’s ambitious plans to “make the UK a world-leader in science, research and innovation”.

The Innovation Strategy sets out their vision to make the UK a global hub for innovation by 2035 with the intention to make the UK the easiest country in the world for top innovative talent to enter

What does the Innovation Strategy say?

As part of the growth plan, the UK government intends to introduce two key immigration routes and revitalise the innovator visa to open the UK to top talented highly skilled migrants.

These new reforms are expected in a Statement of Changes to the Immigration Rules later this year.

Immigration routes:

  • The High Potential Individual route

    Open to those who have graduated from a top global university. Unlike other immigration routes, this route is unsponsored so UK employers will not need a sponsor licence and individuals will not require a job offer.

    This route will give eligible foreign nationals flexibility to work, and switch to jobs or employers, settle in the UK and make contributions to the UK economy.

  • The Scale-Up Visa

    Open to skilled migrant workers who have a job offer from a qualifying ‘Scale Up’ business at the required salary level to enter the UK.

    Scale-Ups can through a fast-track verification process and must demonstrate an annual average revenue or employment growth rate over a three-year period greater than 20% in addition to a minimum of ten employees at the start of the three-year period. This route will give greater flexibility to work in the UK and to move between different employers, extend visas and settled in the UK, subject to meeting specific requirements.

  • A revitalised Innovator route

    An existing immigration route for talented innovators and entrepreneurs from overseas to start and operate a business in the UK that is venture-backed or harnesses innovative technologies, creating jobs for the UK workers and boosting growth.

    Changes will mean applicants will no longer be required to have at least £50,000 in investment funds to apply. Applicants will need to show that their business has a high potential to grow and add value to the UK, and that it is innovative, instead of having to prove growth in international markets, as is the case currently. The revamp of this route intends to make the route more accessible and desirable.

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Whether the policy paper will confront bureaucracy and give control back to entrepreneurs remains to be seen but these reforms are a certainly step in the right direction. They will sit alongside the Global Entrepreneur Programme (GEP) that has a track record of success in attracting high skilled migrant tech founders with IP-rich businesses to the UK.

If you require any assistance with doing business in the UK or require information on the latest immigration development, contact our business immigration team

Business Immigration

Against an ever-changing global and political backdrop, we know it’s harder than ever to plan for the future. Whilst it seems that more borders are being built than broken down, the movement of people will remain integral to the continued success of international business and investment.

Speak to us about your business immigration needs today.

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Blog

Are the lights on for UK-registered designs?

Registered designs are not expensive or difficult to obtain for businesses and can provide strong protection over and above unregistered design protection in the UK.

That said, registered designs have had somewhat of a difficult recent history in the courts of England and Wales.  A selection of recent decisions has perhaps given the impression that registered designs can be difficult to enforce against infringers and led to some uncertainty around filing practices.

However, a recent decision in the Intellectual Property Enterprise Court (IPEC) suggests that the tide could be about to change in favour of registered design owners.

We take a look in more detail at the case.

The Case

In the relatively short judgment of Lutec (UK) Limited & Ors v Cascade Holdings Limited & Or [2021] EWHC 1936 (IPEC), the court found that the claimant’s registered designs were infringed by the defendants’ outdoor light fittings.

The judge determined that the defendants’ “Helios” fittings (pictured right) did not create a different overall impression on the informed user than that of the registered designs (pictured left), which is a part of the test for infringement:

You can find the full decision and the source of the above images at bailii.org.

Interestingly, there was no challenge to the validity of the registered designs based on the existence of earlier designs in the marketplace, which is a common method of trying to avoid a finding of infringement.

If the registration is invalidated, there can be no infringement, so an early search by defendants for pre-existing designs is an important exercise.  Whilst it appears that there was a late attempt by the defendants to put in evidence of earlier designs (which was denied), ultimately they were left exposed with just the question of whether their products infringed.

Whether or not you agree with the outcome, there are a number of important take-home points from this decision which will be of interest to owners and would-be owners of UK registered designs.

Further thoughts

The decision of IPEC Deputy Judge Stone reads very much like a statement of intent for UK registered design infringement cases.

Where the parties and their legal advisers take a sensible approach to the proceedings, registered design proceedings can be streamlined to be dealt with quickly and at a proportionately lower cost.

Since the proper interpretation of the registered designs is a matter for the court, there is no need for expert evidence to address the point, so the added complexity of expert evidence will rarely be required in registered design cases.

This particular claim was issued in August 2020 with the liability hearing in June 2021, and the trial took place by a remote hearing using MS Teams in just over one hour.

Whilst a fully argued validity challenge would have increased the duration of the trial, the point stands that the courts, and in particular the IPEC with its more focused procedural rules, can dispose of registered design cases relatively quickly.

This case should be of interest to a wide range of businesses, including owners of Community (EU) registered designs who will now own equivalent UK “re-registered” designs protecting their UK interests.

If the UK had been previously overlooked in terms of any perceived difficulties with enforcement, it may be time to re-evaluate your design protection strategies in the UK.

Get in touch

At Shakespeare Martineau we have experience of guiding clients through registered design cases in the Intellectual Property Enterprise Court.  If this case is relevant to your business and you require assistance protecting your business’ own interests please do get in touch with Daniel Goodall or a member of our Intellectual Property Team.

 

We have updated our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of restrictions and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

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We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

 

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New legislation

Skills and Post-16 Education Bill introduced to Parliament

The long awaited Skills and Post-16 Education Bill was introduced to Parliament on 18 May, putting in legislative form the proposals brought forward by the government in the skills for jobs white paper published in January of this year.

The Bill includes a number of important changes to the further education (FE) sector, and will involve greater powers being allocated to the Secretary of State for Education.

What are the key changes?

In the government’s own words, the key changes are:

  • Embedding employers in the heart of the skills system, by making it a legal requirement that employers and colleges collaborate to develop skills plans so that the training on offer meets the need of local areas, and so people no longer have to leave their home-towns to find great jobs;
  • Supporting the transformation of the current student loans system which will give every adult access to a flexible loan for higher-level education and training at university or college, useable at any point in their lives; and
  • Introducing new powers to intervene when colleges are failing to deliver good outcomes for the communities they serve, and to direct structural change where needed to ensure colleges improve.
How the Bill seeks to achieve the key changes

The Bill, if enacted, will require the development of local skills improvement plans and places an obligation on college governing bodies to regularly review provision in relation to local skills need.

At this stage there is a lack of information in the Bill about how the “lifelong loan entitlement”, trumpeted in the white paper, and intended to make student loan finance available for an equivalent of four years’ study throughout life across post-compulsory further and higher education, will work. The government has promised more information on this as the Bill progresses through Parliament.

The structural changes referred to will potentially include forced mergers, which if actually used, will demonstrate a far greater willingness on the part of the government to intervene in the sector.

A number of sector leaders have cautiously welcomed the plans, albeit with some degree of alarm raised by what many see as a centralisation of powers in the hands of the Department for Education and with the Secretary of State.

Renewed importance of the further education sector

At the very least, the plans and the surrounding messaging from the government, are a further illustration of the renewed importance being placed on the FE sector post Brexit.

This is surely a welcome sign, and the Chief Executive of the Association of Colleges, David Hughes, has said that: “[The] legislation is confirmation that colleges will be central to the country’s economic recovery. For too long the snobbery towards further education has meant it’s been neglected and the Skills and Post 16 Education Bill is a chance to put that right.”

The changes also represent a pivot away from a focus on the higher education (HE) sector, with the government being at pains to emphasise the importance of FE in helping the country to recover from the economic impact of Covid-19, as well as speaking to the government’s much talked about “levelling up” agenda.

We’re here to help

We will continue to analyse the Bill, and monitor for details yet to emerge, as it progresses through Parliament.

If you would like further information or advice please contact Tom Long, head of further education, or another member of our specialist education team.

Our education team is ranked as a Top Tier Firm in the Legal 500 2021 edition. 

Our updated guide to recovery and resilience covers everything you need to navigate your way out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.   

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News

Case Law Update – There’s Movement in the Commercial Lease Market

There has been a flurry of recent cases looking at the impact of the COVID-19 pandemic on disputes that have arisen between landlords and tenants of commercial leases over the past 12 months.

The recent case of WH Smith Retail Holdings Limited –v- Commerz Real Investmentgesellshaft MBH resulted in the court supporting the tenant’s claim for the insertion of a pandemic rent suspension clause. However, the cases of Bank of New York Mellon (International) Ltd & Ors v Cine-UK Ltd & Ors and Commerz Real Investmentgesellschaft mbh v TFS Stores Ltd saw the court grant judgment in favour of landlords and requiring tenants to pay all rent owing under their leases which they had failed to pay during various periods of the pandemic.  At the time of writing, it may be that these decisions are the subject of appeal by the tenants.

Nevertheless, this raft of cases demonstrates there is a lot more activity between landlords and tenants in the commercial lease market and subject to change.

Main Takeaways

 

  • Reduction in rent - The valuers acting for the landlord and tenant in WHS had already agreed that there should be a 20% reduction in the market rent being solely attributable to the impact of the pandemic. This reflects the reality of pressure on retail rents in shopping centres but should not necessarily be taken as a new “rule of thumb.”

 

  • Pandemic rent suspension clauses – the court inserted a clause into the WHS lease which provided that only half the rent is payable in the event of a pandemic event whenever non-essential stores are required to close (even if the unit itself remains open as an essential retailer). Whether this becomes the norm remains to be seen. But crucially, there is still some debate as to the extent to which landlords may seek an uplift in rent by virtue of introducing new rent suspension clauses on renewal.  On the specific facts of the WHS case the court was not persuaded that the insertion of such a clause should attract an increase in the market rent.

 

  • Payment of rent under a lease is absolute – none of the arguments advanced by the tenants so far have persuaded a court to waive or reduce the tenants’ liability for rent. As indicated above though, the matter has not as yet been settled by the Higher Courts.

 

  • Business Interruption Insurance - it is clear that tenants should be looking to insure themselves as the case law to date shows they are not able to seek to invoke rent suspension provisions under their leases and to pass this burden onto their landlords.
What should you do if you are involved in a rent dispute or a 1954 Act renewal?

 

  • Watch this space – there are likely to be further judgments in the near future that will provide more clarity

 

  • In the meantime landlords and tenants would, at least initially, be well advised to try to follow the spirit of the existing Code of Practice and to seek to resolve their disputes rather than rushing into costly litigation

 

  • Take care when negotiating pandemic rent suspension clauses – they seem set to become more common but bear in mind there are many variations in play and one size does not fit all.

Our real estate disputes team can provide you with expert assistance in understanding your position whether as landlord or tenant before and during any negotiations or assist you with any prospective or ongoing Court proceedings.

We’re here to help

For help, please do contact Martin Edwards, James Fownes or Justine Ball in the real estate disputes team.

Our construction team is ranked as a Leading Firm in the Legal 500 2021 edition.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.   

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.   

How can we help?

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New legislation

Housing update - May 2021 | Debt Respite Scheme

On 4 May 2021, new changes were introduced that will impact landlords who are considering possession proceedings based on rent arrears.  In addition, there is also a change to the notice used to seek possession of a property.

What are the changes?

The government has introduced a new Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, also known as Breathing Space Moratorium, which gives someone who is in problem with debt the right to legal protection from their creditors.

What is a Breathing Space and who can apply for one?

The scheme sets out two types of Breathing Spaces;

 

  1. Standard Breathing Space

This is available to anyone with problem debt and provides a person with legal protection from creditor action for up to 60 days. The protection includes pausing most enforcement action and contact from creditors and freezing most interest charges on the debt.

 

  1. Mental Health Crisis Breathing Space

This is only available to someone who is receiving mental health crisis treatment. The protection that is offered here lasts as long as the person’s mental health crisis treatment lasts, plus 30 days after the treatment ends. There is no limit to how long the crisis treatment lasts.

A Breathing Space can only be started by a debt advice provider who is authorised by the Financial Conduct Authority to offer debt counselling or a local authority, where they provide debt advice to residents.

Who is eligible for a Breathing Space?

To be eligible for a Breathing Space, the person must be:

  • an individual;
  • owe a qualifying debt to a creditor;
  • live or usually reside in England or Wales;
  • not have a debt relief order or an individual voluntary arrangement, an interim order or be an undischarged bankrupt at the same time they apply; or
  • not already have a Breathing Space or have had a standard Breathing Space in the last 12 months at the time they apply.

There are also a further two conditions which must be met which are:

  • the debtor cannot, or is unlikely to be able to, repay all or some of the their debt; and
  • a Breathing Space is appropriate for the person.

When dealing with a Mental Health Crisis Breathing Space, the above criteria applies and the person must also be receiving mental health crisis treatment at the time that an application is made. Therefore, if a debtor has had a Standard or Mental Health Crisis Breathing Space in the last 12 months, they may not be eligible for another Mental Health Crisis Breathing Space.

How does the Breathing Spaces Scheme impact landlords?

The aim of a Breathing Space is to offer protection to a debtor for at least 60 days, depending on the type of Breathing Space they may have. The qualifying debt for a Breathing Space includes mortgage or rent arrears.

If a tenant, who is in rent arrears, seeks any one of the two Breathing Spaces and it is granted, a landlord would not be able to:

  • serve a Notice Seeking Possession;
  • purse a possession order which includes holding a hearing;
  • apply for a warrant for possession;
  • obtain a money judgment; or
  • enforce a money judgement

In addition, if a Breathing Space is granted, a landlord is not able to contact the tenant to request any payment(s) towards the debts or make any attempts to apply for third party deductions from any benefits the tenant may be receiving (unless the landlord has permission from the court).

In circumstances where the legal proceedings have already been commenced and the tenant applies for Breathing Space, those proceedings cannot be enforced until the Breathing Space ends, unless the landlord has permission from the court or tribunal to continue. If the Breathing Space means there is a pause in those proceedings and the time limit for enforcement or new claims relating to the claim runs out during the Breathing Space, this time is extended to eight weeks after the Breathing Space ends.

What about current rent owed by a tenant?  

Not all debts can be considered for a Breathing Space and these are known as ongoing liabilities which include current rent, but not rent arrears.

If a Breathing Space is in force and the tenant fails to continue paying their current rent, the Standard Breathing Space could be cancelled by a debt advisor unless, the debt advisor believes that the tenant does not have the financial means to pay the current rent. As part of the Standard Breathing Space the debt advisor must also complete a midway review between 25 and 35 days. This is to ensure that the tenant is complying with their obligations.

There is no midway review for a Mental Health Crisis Breathing Space as this continues as long as the treatment continues.

What can a landlord do?

The Debt Respite Scheme will impact many landlords who will need to put in to place additional steps to recognise if a tenant has a Breathing Space in place, and to ensure no contact is made with the tenant to chase any debt or no court orders are enforced or new proceedings are commenced.

Should a Breathing Space be applied for and granted during ongoing legal proceedings, landlords will also need to be put measures into place to ensure that such proceedings are put on hold and the courts are also properly notified, as well as key dates being noted should they need to rely  on the eight week extension period.

A landlord can also challenge a Breathing Space that has been granted by requesting a review of the Breathing Space, or of specific debts being included, if a landlord considers the Breathing Space unfairly prejudices its interests or material irregularity. For example, the tenant is not eligible for a Breathing Space.

Step one

The first step for a landlord would be to make an application to review the Breathing Space, which must be made within 20 days from when the Breathing Space was granted. The application must be made in writing and supporting evidence must also be provided to demonstrate why the Breathing Space should be cancelled.

Step two

If the grounds are made out, the debt advisor must consult with the tenant, unless the debt advisor finds the grounds for cancelling the Breathing Space make it unfair or unreasonable to cancel based on a tenants personal circumstances

What if the challenge to review is unsuccessful?

Should the challenge to review not be successful a landlord does have the option to make an application to the county court for cancellation of the Breathing Space. Again the application has to be made in writing with supporting evidence and the application has to be made within 50 days from the start of the Breathing Space. It is important to note that this step can only be taken if the challenge to review has been carried out and the landlord was unsuccessful.

When seeking to challenge a Breathing Space a landlord would need to balance out the prospect of being successful in challenging, versus the costs and time involved in making an application to challenge.

Changes to Form 3 – Notice Seeking Possession

As a result of the new Debt Respite Scheme there have been changes to Form 3 – Notice Seeking Possession to reflect the above. Landlords who issue a Notice Seeking Possession from 4 May 2021 will now need to ensure that they are using the most up to date Form 3 regardless of what ground(s) they are using to seek possession of the property.

Contact us

For further information contact Habib Khan in our housing management team, who can guide, help support and you and your teams to deal with any housing management and litigation issues you face during these evolving times.

Our updated guide to recovery and resilience covers everything you need to navigate your way out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

SHMA® ON DEMAND

Listen to our SHMA® ON DEMAND content covering a broad range of topics to help support you and your business.

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New legislation

Discrimination | Vento bands for injury to feelings awards increase from April 2021

The Presidents of the Employment Tribunals in England & Wales and Scotland have issued updated guidance on the bands for injury to feelings compensation, also known as the Vento bands or Vento scale. From 6 April 2021, the amount that can be awarded for injury to feelings increased.

Here we outline the updated guidance and why employers need to be aware of the change.

Injury to feelings compensation explained

Employees can receive injury to feelings compensation in cases where they have been discriminated against in the workplace. Injury to feelings awards are intended to compensate for the negative impact of discrimination on an employee's emotional wellbeing. The amount awarded is designed to take into account the degree of hurt, humiliation or distress an employee has suffered as a result of discriminatory conduct.

What are Vento bands?

The Vento bands provide an indication of how much money an employee should receive as part of an injury to feelings award. They were established in the case Vento v Chief Constable of West Yorkshire Police [2003], in which the Court of Appeal set clear guidelines for the amount of compensation to be given for injured feelings.

The three Vento bands outlining potential injury to feelings awards are:

 

  1. Lower Band - less serious cases, for example, where the act of discrimination is an isolated or one-off occurrence.
  2. Middle Band - cases that do not merit an award in the upper band.
  3. Upper Band - the most serious cases, for example, where there has been a lengthy campaign of discriminatory harassment on the grounds of age, sex or race. The guidance makes it clear that only in "the most exceptional case" should an award for injury to feelings exceed the top of this band.

These guidelines are interchangeably referred to as the Vento bands or the Vento scale.

What are the changes to the Vento bands?

From 6 April 2021, the new Vento bands for injury to feelings compensation are as follows:

 

  • Lower Band: £900 to £9,100 (an increase of £100 to upper limit);
  • Middle Band: £9,100 to £27,400 (an increase of £400 to upper limit); and
  • Upper band: £27,400 to £45,600 (an increase of £600 to upper limit).
What do the new Vento bands mean for employers?

The Vento bands provide useful guidance as to how to assess the potential cost of losing a discrimination claim. In other words, should an employer be unsuccessful in defending a discrimination claim, the Employment Tribunal will use the Vento scale to determine the compensation an employee is entitled to receive for injury to feelings.

This injury to feelings compensation will be in addition to any award for loss of earnings, which can amount to a considerable sum in cases where highly paid employees are unable to work due to discrimination for extended periods of time. Moreover, there is no cap on the overall compensation awarded in discrimination cases, so successful claims can be extremely costly for businesses.

In 2019/20, age discrimination claims received the largest award on average (£39,000) compared to other discrimination jurisdictions such as race or sex. The maximum award in 2019/20 was for disability discrimination at £266,000.

With this in mind, it is vital that your organisation has thorough employment policies, procedures and training in place to reduce the risk of discrimination claims arising.

We’re here to help

In addition to the updated guidance on Vento bands, there are also five other changes to employment law that HR managers need to be aware of from April 2021.

If you need support with handling discrimination cases or any other employment-related issue, get in touch today or visit our employment law page to learn more.

Our employment team is ranked as a Leading Firm in the Legal 500 2021 edition.

Our updated guide to recovery and resilience covers everything you need to navigate your business out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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Guides & Advice

Five changes to employment law that HR managers need to be aware of from April 2021

Following on from our winter update, here’s a reminder of the changes to employment law which come into effect from April 2021.

  1. IR35 comes into force in the private sector

Having been delayed for a year due to the COVID-19 pandemic, reforms to the IR35 rules on off-payroll working in the private sector come into force on 6 April 2021.

The rules will apply to medium and large private sector companies and are aimed at reducing tax avoidance for contractors employed via personal service companies.

Under the new rules the company appointing the contractor is responsible for determining the individual’s employment status and assessing whether IR35 applies. If IR35 applies, the company that pays the individual’s fees is deemed to be their employer for tax and national insurance purposes.

With April just around the corner, read more about the changes, what this means for employers and the practical steps you can take now.

  1. Increases in National Minimum Wage and National Living Wage

New rates for the National Living Wage and the National Minimum Wage will apply from 1 April 2021.

The National Living Wage, which currently only applies to workers aged 25 or over, will now be extended to cover 23 and 24 year-olds for the first time. The new rates will be:

  • Those aged 23 or over (National Living Wage rate): £8.91 (up 2.2% from £8.72)
  • 21 to 22: £8.36 (up 2% from £8.20)
  • 18 to 20: £6.56 (up 1.7% from £6.45)
  • 16 to 17: £4.62 (up 1.5% from £4.55)
  • Apprentice rate: £4.30 (up 3.6% from £4.15)
  • Accommodation offset £8.36 per week (up 2% from £8.20)

You can find out who is entitled to the National Minimum Wage and National Living Wage on the gov.uk website.

  1. Increase in statutory sick pay

On 4 April 2021 the weekly rate of statutory sick pay will increase to £96.35 (up from £95.85), paid for up to 28 weeks.

It is paid for the days an employee would normally work (called ‘qualifying days’) in the same way as wages, for example on the normal payday, deducting tax and national insurance.

As a reminder, if an employee is off sick or self-isolating because of COVID-19, or has tested positive, they are entitled to claim statutory sick pay from the first ‘qualifying day’ they are off work (as long as they are off for at least four days in a row).

Read more about statutory sick pay during COVID-19.

  1. Increase in parental leave pay

From 4 April 2021 the weekly statutory rates of pay for the following will be £151.97 (up from £151.20), or 90% of the employee’s average weekly earnings if this figure is less than the statutory rate.

  • Maternity pay
  • Maternity allowance
  • Paternity pay
  • Shared parental pay
  • Adoption pay

On 4 April 2021 we will also see the first annual increase for statutory parental bereavement pay. This follows the introduction of the right to parental bereavement leave, available to the parents of a child who died on or after 6 April 2020.

Read more about the above rates on the financial support for families section of the gov.uk website.

  1. Increase on the cap of weekly pay for redundancy payments

On 6 April 2021 the weekly cap on pay will increase from £538 to £544. Any statutory redundancy payments paid to employees made redundant on or after 6 April will need to take into account this increase.

To be eligible to receive statutory redundancy pay, an individual must:

  • have at least 2 years’ continuous service;
  • be an employee working under a contract of employment; and
  • have been dismissed, laid off or put on short-time working (those who opt for early retirement do not qualify).

You can find more information on the current level of statutory redundancy pay rates here.

It’s also worth noting that if an employee is made redundant whilst on furlough, their redundancy payment needs to be based on what they would have earned normally (not their furlough pay).

Read our guide on best practices if making redundancies during COVID-19.

We’re here to help

In addition to the five key changes above, Vento bands (for injury to feelings awards) will increase from 6 April 2021. Read more about the updated guidance here.

If you need support with any employment-related issue, speak to a member of your local employment team.

Our employment team is ranked as a Leading Firm in the Legal 500 2021 edition.

Our updated guide to recovery and resilience covers everything you need to navigate your business out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Timeline of changes - April 2021
Timeline of employment law changes from April 2021

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

SHMA® ON DEMAND

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Guides & Advice

The Corporate Insolvency and Governance Act 2020

UPDATED: 25 March 2021 – The government has given businesses more breathing space by further extending measures from the Corporate Insolvency and Governance Act.

A number of measures introduced in the Corporate Insolvency and Governance Act to protect businesses from insolvency, which were due to expire on 31 March 2021. However, the following have now been extended once again:

  • Statutory demands and winding-up petitions will continue to be restricted until 30 June 2021 to protect companies from aggressive creditor enforcement action.
  • Termination clauses are still prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process. However, small suppliers will remain exempted from the obligation to supply until 30 June 2021.
  • The modifications to the new moratorium procedure will also be extended until 30 September 2021. A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months. Measures will also ease access for companies subject to a winding-up petition.
  • Business owners affected by the pandemic will be protected from eviction until the end of June 2021.

The above extended measures follow on from The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 (SI 2020/1349). This came into force on 26 November 2020 - renewing the suspension of wrongful trading liability for directors to 30 June 2021. 

 

What is the Corporate Insolvency and Governance Act 2020?

The Corporate Insolvency and Governance Act 2020 received royal assent and came into force on 26 June 2020.

Central to this new legislation is a new moratorium, which will give a company in financial distress a 20-business day breathing space from creditor enforcement action. This can be extended for up to a year with the consent of creditors.

A full copy of the guidance can be found here.

This new moratorium gives protection to businesses that may be financially struggling, and may result in the rescue of the company as a going concern. The moratorium is intended to be a “light touch procedure” and is overseen by a monitor who must be a licensed insolvency practitioner.

 

What impact could the moratorium have on the business world?

The new moratorium gives protection to businesses from creditors and may save viable businesses that are struggling financially.

Saving viable businesses that are struggling could achieve a better result for the company’s creditors as a whole, than would be likely if the company were wound up (without first being subject to a moratorium).

 

What action can’t be taken against a company in moratorium?

Legal and enforcement action against a company in moratorium is extremely restricted. Without permission of the court:

  • a landlord cannot forfeit a lease or re-enter property;
  • no steps can be taken by a creditor to enforce security;
  • HP creditors cannot repossess goods;
  • legal processes for debt recovery cannot proceed (except employment claims); and
  • floating charge holders cannot crystallise their charges.

Supplying goods and services to a company in moratorium

When a company enters an insolvency or restructuring procedure, suppliers of goods and services will often either stop, or threaten to stop, supplying the company. The supply contract often gives them the right to do this, but it can jeopardise attempts to rescue the business. Suppliers will no longer be able to use contractual terms to jeopardise a rescue in this way.

Any goods or services supplied in the moratorium period should be paid for, and will be a priority debt to be paid, if the company in moratorium fails.

 

The role of the monitor

A monitor must be a licensed insolvency practitioner and can only consent to take office as monitor if a company can demonstrate that the moratorium will result in the survival of the company as a going concern.

They are required to bring the moratorium to an end as soon as it becomes clear that this purpose cannot be achieved.

 

The responsibilities of directors

Key offences have been introduced in relation to the duties of directors (including shadow directors) of companies that enter into a moratorium. They must supply information on request to the monitor (to satisfy the test that survival as a going concern can be achieved) and the monitor must submit a report on the conduct of the directors as part of this process.

Directors will commit an offence of fraud in anticipation of a moratorium if they:

  • conceal assets with a value over £500;
  • conceal debt due of over £500;
  • fraudulently remove assets to the value of £500 and above; or
  • make false representations to the monitor to secure consent for them to act.

What are the key provisions that secured lenders should be aware of and the impact on qualifying floating charge holders (QFCH)?

Lack of control over the process

A moratorium can be entered into by simply filing documents at court. There is no requirement to obtain consent (or even notify) a qualifying floating charge holder (QFCH), or other secured lender, ahead of entering the moratorium. A QFCH will be notified of the moratorium by the appointed insolvency practitioner (the “monitor”), alongside other creditors, once the moratorium is already in force. Therefore, unlike in an administration, a QFCH will not be able to “veto” the directors’ choice of insolvency practitioner.

The moratorium lasts for 20 business days and can be extended for a further 20 business days by the directors - and for up to 12 months with creditor (or court) consent. However, the required creditor consent for these purposes is from creditors whose debts fall outside of the moratorium. As set out below, debt arising from loan agreements and other finance documents still needs to be paid during the moratorium. Lenders would therefore be unlikely to form part of the voting class of creditors, and would not be able to vote down any requests for an extension for up to 12 months.

Lenders must still get paid

A company subject to a moratorium is given breathing space from “pre-moratorium debts” that have fallen, due from which the company has a “payment holiday” (whether due before or during the moratorium). This catches, amongst other things, trade creditors.

However, there are certain debts that the company must pay during the moratorium and failure to do so may cause the monitor to terminate the moratorium (and/or prevent the directors from seeking an extension of the moratorium). This includes debts and other liabilities arising under a contract or other instrument involving financial services. This means that the usual capital and interest payments due to lenders will still be payable (unless otherwise agreed with the lender).

Enforcement restrictions

Although lenders’ debts will still need to be paid during the moratorium, the restrictions may significantly impact the enforcement options available to QFCHs. Lenders may well wish to factor the following in to their credit and operational procedures to enable them to deal with the risk of a hostile monitor appointment by the company’s directors:

  • The moratorium suspends a QFCH’s ability to crystallise its charge or appoint an administrator;
  • Certain floating charge provisions enhancing a QFCH’s rights may be void (e.g. provisions providing for crystallisation of a floating charge – whether automatic or following notice, and restrictions on the disposal of property ); and
  • Under the moratorium, charge holders are unable to enforce security without the consent of the monitor or the court.
Other security risks

A company cannot dispose of property subject to fixed charge security without court consent. However, directors may apply to the court to dispose of property as if it were not subject to the fixed charge. There are provisions providing fixed charge holders with compensation for their loss of rights (effectively reimbursing the lender for what the court thinks the property would be worth in the open market). However, this effectively enables a restructuring package to ignore the security. This could result in fixed charge holders being put at a significant disadvantage, with a loss of rights (particularly in a potentially depressed market).

For floating charge assets, a company can either:

  1. deal with assets in accordance with the terms of the floating charge instrument; or
  2. obtain consent of the court to deal with the assets in another way.

As the floating charge cannot be crystallised, floating charge assets can usually be disposed of in the ordinary course of business (which we expect would be in accordance with the terms of the floating charge instrument), potentially materially depleting the assets available to a lender ahead of any post-moratorium enforcement. Once assets have been sold, lenders will have a floating charge over the proceeds of sale, but usually will not be directly entitled to the proceeds (and cannot enforce the charge to obtain payment).

Disposing of assets

Lenders should therefore review the terms of their security and facility to consider whether the restrictions and controls provide adequate protection. In particular, how and when companies can dispose of assets and fine tuning the definition of a disposal of assets in the “ordinary course of business” (e.g. should consent be required for a bulk stock sale). Whilst such controls are not ordinarily as important, the inability to crystallise a floating charge, or otherwise enforce security during a moratorium, may mean that restrictions need to be tighter to retain some control and dialogue with companies in the event of a moratorium (whilst still enabling the company to trade effectively).

Finally, lenders should also be comfortable that fixed charge security will withstand scrutiny and is not vulnerable to challenge as a floating charge. The risk of fixed charge assets being treated as floating charge assets could be substantial, as the assets could be sold without court consent and the proceeds of sale (and other compensation) would not be required to be paid to the lender. Lenders should therefore audit their charges and ensure that appropriate levels of control are exerted over fixed charge assets. For example, if taking a charge over plant and machinery, ensuring it is properly scheduled to the debenture and valuable items are plated. Similarly, if a lender intends to create a fixed charge over debts (as opposed to an assignment), they will need to ensure that the receipts are paid into a blocked account and other appropriate controls are both in place, and enforced.

 

What options are open to lenders?

Although a QFCH cannot appoint an administrator during the moratorium, the moratorium will automatically terminate upon directors filing a notice of intention to appoint administrators. At that point, the QFCH would be able to exercise its powers as usual and regain control of the appointment process by appointing its own nominated insolvency practitioner as administrator, if it was not comfortable with the directors’ choice.

The directors will not be able to extend the moratorium unless they confirm that all debts that have fallen due in the moratorium, or pre-moratorium debts that are not caught by the payment holiday (i.e. potentially bank debt), have been paid. In addition, the monitor must bring the moratorium to an end if they are of the view that it is no longer likely that the company can be rescued as a going concern.

Bringing the moratorium to an end

Entering into a moratorium, will in many cases, constitute an event of default that will automatically accelerate the entire debt. Even in those cases where acceleration is not automatic, it may be open to lenders to issue a notice accelerating their debt to make it payable on demand during the moratorium period and thus regain some control given the company is unlikely to be able to pay. If the entire debt is accelerated it becomes due and payable during the moratorium period. As a consequences, if the company cannot pay (which is likely to be in all cases) the monitor will either have to bring the moratorium to an end (as they would unlikely be able to continue to believe that the company could be rescued as a going concern) or the company will have to negotiate with the lender to agree a stay.

If a stay cannot be agreed, then acceleration could enable the lender to re-take control of the process via an administration appointment or other enforcement process once the monitor (as they will have to) terminates the moratorium.

Further if the debt is accelerated and becomes payable during the moratorium, the lender would also be in a better position in the event of a subsequent insolvency (see below).

We would expect that a moratorium would usually be an event of default triggering automatic acceleration of a loan.

Payment holidays and deferrals

In relation to any requests by borrowers for payment holidays, waivers or deferrals of covenants, lenders should consider making those waivers or deferrals void in the event that the company files for a moratorium without the consent of the lender. This would then avoid a position where the lender is prevented from accelerating their debt during the moratorium period as a result of a pre-moratorium waiver/deferral.

Other options

In addition, the following options seem to remain open to lenders:

  • The Act also introduces ipso facto provisions preventing termination of contracts upon insolvency. However, financial services providers are generally exempt from these restrictions. Therefore lenders could cancel non-committed facilities (e.g. overdraft and invoice discounting) and may also be able to rely on provisions in the facilities to, for example, charge default interest or impose an independent bank review (which would be payable as moratorium expenses);
  • Lenders may be able to obtain additional security for additional lending (subject to obtaining the monitor’s consent); and
  • Lenders can challenge the conduct of the directors or the monitor at court, which may result in the reversal of detrimental decisions.

How will lenders’ debts be ranked in a subsequent insolvency?

The Act makes consequential amendments to existing insolvency legislation to alter the priority of distributions, where a company enters into administration or liquidation within 12 weeks of the moratorium ending. The amendments rank moratorium debts and pre-moratorium debts that should have been paid during the moratorium (i.e. bank debt) ahead of preferential creditors (and ahead of paragraph 99 expenses and floating charge distributions in an administration). The amendments do not provide for the ranking within this class, instead making provision for changes to be made to the Insolvency Rules to govern the priority within this category.

In the meantime, the Act introduces temporary provisions that provide for the order of priority for debts payable under the moratorium to be paid in a subsequent administration or liquidation. Lenders’ debt would rank ahead of the monitor’s remuneration and expenses, but behind suppliers who are covered by the “ipso facto” provisions and employment-related costs. This would appear to be a significant disincentive for secured lenders to continue to support the company and provide working capital funding during the moratorium.

In addition:

  • CVA proposals submitted within 12 weeks of the moratorium ending cannot provide for debts payable during the moratorium to be paid otherwise than in full; and
  • any restructuring plan applied for within 12 weeks of the moratorium ending, cannot compromise moratorium expenses (or pre-moratorium debts without a payment holiday) without first obtaining consent of each of these creditors.

We’re here to support you

For further information, guidance and support on how the Act can help relieve the financial burden during the current COVID-19 outbreak, and allow you to focus your efforts on continuing to survive and operate, do not hesitate to contact a member of our corporate, insolvency and restructuring team.

Alternatively, you can get in touch online or visit our corporate restructuring and insolvency solicitors page to learn more.

Our insolvency team is ranked as a Leading Firm in the Legal 500 2021 edition.

Our updated guide to recovery and resilience covers everything you need to navigate your business out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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New legislation

Health and safety protection extended to workers from 31 May

During the coronavirus pandemic employees have benefitted from protection against being treated unfairly or dismissed as a result of raising serious health and safety concerns in the workplace. This long held right derives from section 44 of the Employment of Rights Act 1996. However, historically, workers (for example, those who work in the ‘gig economy’) have not had the same rights.

A case was brought against the government by the Independent Workers’ Union of Great Britain, which was heard by the High Court, in October 2020. As a result, new government regulations have been put before Parliament extending the health and safety detriment protection rights to workers.

Furthermore, there is also a plan to extend Regulation 4 of the Personal Protective Equipment at Work Regulations 1992 (“PPE Regulations”) that require employers to provide suitable personal protective equipment to employees, to also include workers.

What is changing from 31 May?

On 31 May 2021 the Employment Rights Act 1996 (Protection for Detriment in Health and Safety cases) (Amendment) Order 2021 is due to come into force.  If approved, the new regulations will extend to workers the rights currently conferred under section 44 (1)(d) and (e) of the Employment Rights Act 1996, which are rights not to be subjected to detriments in certain health and safety cases.

This is to say that workers, as well as employees, will be protected against being treated unfairly as a result of raising serious health and safety concerns. Subsequently, this will have a significant impact on the protection of workers’ rights through the challenges created by the coronavirus pandemic.

What does this change mean?

Workers are not able to bring claims for unfair dismissal, however, they will be able to bring claims in an employment tribunal if they suffer detrimental treatment in relation to health and safety cases as follows:

 

  • If they have to take absence, or propose to take absence, from work due to a reasonable belief that their presence in the workplace would put them in serious and imminent danger. This is provided that they could not reasonably be expected to avert that danger.
  • If they have to take, or propose to take, appropriate steps to protect themselves or others as a result of the reasonable belief that there is a serious and imminent danger.

However, this protection only applies if the date of the relevant act or failure to act (or the last of a series of similar relevant acts) occurs after 31 May 2021.

Change to PPE regulations for workers

The explanatory memorandum to the new regulations amending the detriment sections of the Employment Rights Act states that there is a proposal to consult and extend to all workers the Personal Protective Equipment at Work Regulations 1992. This is due to be laid before Parliament later this year.

The current regulations require that suitable personal protective equipment (PPE) is provided to employees who may be exposed to a risk to their health or safety whilst at work, except where the risk has been adequately controlled by other means which are equally or more effective. The proposal is that this will be extended to workers as well.

How could this change affect employers?

The coronavirus pandemic has raised the importance and awareness of the protections employees have under the Act.  As a result of the extension of the health and safety detriment protection rights, and potentially PPE protection to workers, employers will therefore need to increase their health and safety obligations to include workers as well.

What action should employers take now?

In conclusion, it is key for employers to communicate with employees and workers about the risks in the workplace as a result of the pandemic, and the steps that they are taking to mitigate those risks.

For instance, employers should encourage staff to work from home (where possible), complete a risk assessment, and take reasonable steps to prevent harm in the workplace. It’s also important to remember that employers are still responsible for their staff welfare, even if/when they work remotely. Our handy guide outlines how to deal with workplace injuries when your workforce is working from home.

There is also useful government guidelines on safer working practices, which include a range of different types of workplaces and sectors.

Each workplace will have different challenges. However, ultimately, employers should ensure that care is taken when dealing with employees and workers who have highlighted reasonable concerns.

Contact us

If you need guidance on your health and safety obligations then our employment team can advise you on your responsibilities – contact Esther Maxwell or Natasha Jasinska for more information.

Our employment team is ranked as a Leading Firm in the Legal 500 2021 edition.

Our updated guide to recovery and resilience covers everything you need to navigate your business out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

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New legislation

Procurement rules are changing and this is why utilities should take note

For too long, modern and innovative approaches to public procurement have been bogged down in bureaucratic, process-driven procedures. We need to abandon these complicated and stifling rules and unleash the potential of public procurement so that commercial teams can tailor their procedure to meet the needs of the market. The UK is ready.

The government’s Green Paper on transforming public procurement frames its search for the Holy Grail of fast, fair and effective procurement rules that also deliver value for money. The current UK rules implement EU Directives and are guided by EU case-law. Now that the UK has left the EU and is out of the Brexit transition period, the government is eager to flex its newfound independence.

The Green Paper is consulting on changes to the procurement rules to make them less burdensome.

By way of a recap, the UK’s procurement rules regulate contracts awarded by public sector bodies, quasi-public sector bodies and utilities so as to ensure fair competition; are set out in secondary legislation, specifically the Utilities Contracts Regulations 2016 (“UCR”). These Regulations which affect a large number of private companies, from network operators and water and sewerage companies through to ports and postal services, are in some respects, less onerous than their equivalents for public bodies.

 

How will procurement rules affect utilities?

The Green Paper proposes four big changes, which could have huge implications for utilities:

  1. Simplifying and modernising the multiple procurement regulations into a single set of rules

The public sector procurement rules set out in the Public Contracts Regulations 2015 (“PCR”) regulate almost £300bn per year of public spending and are extremely detailed and prescriptive – whereas the UCR is less prescriptive, thus providing utilities with a greater amount of flexibility.

The Green Paper acknowledges that consolidating both sets of rules will be a major and complex legislative exercise.  The key concern here is that the consolidated code (which must substantively cover the same things in the PCR) will overlook and do away with distinct characteristics of the utilities procurement regime – e.g. its greater flexibility.

So, should utilities contracts be regulated by detailed and onerous procurement rules? One argument is that current regulatory regime for utilities (i.e. the existing licences and codes etc. policed by independent regulators) ensures utilities deliver value for money by employing good procurement practices.

It is also worth noting that whilst the international Government Procurement Agreement (“GPA”) (within the framework of the World Trade Organisation), establishes rules requiring, open, fair, and transparent conditions of competition be ensured in government procurement, it does not require WTO members to implement procurement rules for the utilities sector.  Furthermore, the UK is no longer obliged under EU law to implement procurement rules for the utilities sector.  Indeed, the UK utilities sector is very different to those of its European counterparts, and therefore using solutions originally designed for European markets may not be appropriate for the UK.

A consolidated code for public sector procurement and the utilities sector may do away with niche procurement rule exceptions (e.g. some contracts for the purchase of energy by some utilities are exempt from the UCR) ) which could mean that procurement rules will apply where they currently do not  - thus increasing bureaucracy instead of speeding up procurement processes.

  1. Three simpler award procedures

The procurement rules currently provide for seven different procedures:

  • open procedure;
  • restricted procedure;
  • competitive dialogue procedure;
  • competitive procedure with negotiation;
  • negotiated procedure without prior publication;
  • innovation partnerships procedure, and
  • design contests.

 The proposals are for:

Retaining the open procedure which buyers can use for simpler, ‘off the shelf’ competitions;

A new competitive, flexible procedure - This new procedure replaces the current restricted, competitive dialogue, competitive procedure with negotiation, innovation partnerships and design contests procedures. This is similar to the existing “Light Touch Regime” (for social and other services under the PCR; and the negotiated procedure with advertisement under the UCR) and is designed to give “maximum flexibility to design a procurement process that meets their needs and the needs of the market”. This will mean that the detailed and prescriptive rules which apply would be reduced in order to give more flexibility to procurement teams; and

Retaining the negotiated procedure without prior publication but renaming it as the “limited tendering” procedure, and modifying it to include a ground for procuring in a “crisis” and including option to publish a voluntary transparency notice and apply a ten day standstill period before entering into the contract (except in cases of extreme urgency / crisis).

  1. New award criteria

There is a suggestion that the assessment of tenders should be based on which are the most advantageous overall, as opposed to which will deliver the cheapest price or costs.  This is not a change, so much as a shift in emphasis as these social concerns could already be taken into account.

  1. The procurement regulator

The most eye-catching structural change, set out in the Green Paper is the establishment of a new unit to oversee public procurement with new powers to review and, if necessary, intervene to improve the commercial capability of contracting authorities.

However, this new regulatory unit is not designed to assist commercial parties in seeking redress for unfair procurement competitions - but will have two functions: monitoring and intervention. The powers of intervention include what local authority lawyers would recognise as improvement notices. This raises a number of issues, not least whether the proposed powers of intervention are appropriate for any sectors outside of central government.

There does not appear to be any substantive change to the current system of the procurement review: many procurement specialists have argued for a cheaper, specialist review tribunal, as exists in many EU jurisdictions; and there is no similar (non-legal) investigatory role, similar to the EU Commission, within an independent body, such as the Competition & Markets Authority.

 

Have your say by 10 March 2021

The Green Paper is intended to spark discussion, and there is certainly plenty to consider! The value of modernising and simplifying procurement processes is clear, but procurement law is complicated because it regulates a range of complicated markets.

The consultation on the Green Paper: Transforming public procurement closes on 10 March 2021.

We are working with market participants and utilities companies who would like to give their input into this discussion before the consultation deadline. If you would like to take part in this once in a generation opportunity to influence utility procurement, please get in touch with Uddalak Datta or Sushma Maharaj in our energy team.

If you would like to read more of our energy blogs and guides sign up to our mailing list to join our quarterly energy mailer.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064 or request a call back.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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New Legislation

Employment case law updates | May 2020

Employment case law updates | May 2020

Here we take a quick look at some significant employment law decisions from the last couple of months

Vicarious liability – Morrisons Supermarkets and Barclays Bank

Morrisons Supermarkets

A 2018 case involving Morrisons saw an internal IT auditor Mr Skelton who, disgruntled that he had been subjected to disciplinary sanction, steal Morrison’s employee payroll data and put it on the internet. He also sent the data to three national newspapers, purporting to be a concerned member of the public. He was charged, and ultimately convicted of crimes under the Computer Misuse Act 1990 and Data Protection Act 1998, which was in force at the time.

However, in the meantime, 9,263 employees of Morrisons brought a class action against Morrisons. They argued that it was vicariously liable for the actions of Mr Skelton, even though he was clearly acting outside of the remit of his role. The Court of Appeal decided that Morrisons was vicariously liable, but this decision was appealed.

In the recent case of Wm Morrison Supermarkets plc v Various Claimants [2020] UKSC 12, the Supreme Court fortunately saw sense and overturned the decision of the Court of Appeal, deciding that Morrisons was not vicariously liable for unauthorised breaches of the Data Protection Act 1998 committed by an employee.

Barclays Bank

In a similar decision involving Barclay’s Bank, the Supreme Court decided that a self-employed medical practitioner was not in a relationship "akin to employment" with a bank that had engaged him to perform medical examinations on potential bank employees. The bank would therefore not be liable for sexual assaults allegedly committed by him. (Barclays Bank plc v Various Claimants [2020] UKSC 13)

Carluccio’s furlough case

The case of Carluccio's Ltd (in administration) Re [2020] EWHC 886 (Ch) (13 April 2020) related to the administrators of Carluccios furloughing employees under the Coronavirus Job Retention Scheme (CJRS).

When a company goes into administration, an administrator is appointed to promote its rescue as a going concern, or to realise its assets. The question here was whether the employees had validly agreed to the change in the terms and conditions of their contract of employment, such that they could be furloughed.

In what is no doubt one of many cases involving the CJRS, the High Court held that the employment contracts of employees, employed by a company in administration, had been varied by their explicit agreement to the administrators' proposal in a letter to furlough them under the CJRS. Note that this decision of the High Court pre-dates the new guidance from the Treasury, which provides that any agreement to furlough must be obtained in writing.

Homophobic recruitment policy comments made on a radio programme

In the case of NH v Associazione Avvocatura per i diritti LGBTI — Rete Lenford (Case C-507/18), the European Court of Justice has held that remarks made on a radio programme, that suggested a homophobic recruitment policy, are capable of falling within the scope of unlawful discrimination as defined in the Equal Treatment Framework Directive.

Employing someone subject to restrictive covenants – inducing a breach of contract

A former employer will often threaten legal action against a new employer on the basis that they have induced, or conspired with the former employee, to breach their contractual post-termination restrictions.

In an important judgement (Allen t/a David Allen Chartered Accountants v Dodd & Co), the Court of Appeal has held that an accountancy firm was not liable for inducing a breach of contract where it recruited an employee in breach of his post-termination restrictions (having received advice that the restrictions were probably not enforceable).

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General advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

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If you are a contracting authority, the document contains updated guidance on providing relief to construction suppliers together with some frequently asked questions.  This part of the document is helpful but the model variation agreements to the NEC3 ECC and JCT D&B 2016 are contradictory and inadequate.  If you wish to or need to vary your contracts be aware of these limitations and seek further advice.

What is the aim of the update?

The aim of the guidance is for public bodies to ensure continuity of service for at risk suppliers during and following the coronavirus disruption with differing payment relief options.  The guidance is for construction contracts and will be welcomed by the construction industry as it confirms that contracting authorities should continue to pay suppliers on a “continuity and retention” basis during this period of disruption until the end of June 2020.

The potential forms of relief to supplier cash flow include:

Any relief is to be contingent on an open book basis accompanied with the provision of supporting information by the supplier proving compliance with the commercial principles behind the relief are complied with. These commercial principles include paying employees as well as the supply chain and not enforcing security against a third party once relief is given.  Additionally, the guidance requires that claw back provisions accompany any payment relief in the event that the supplier has claimed on a non-transparent basis.

A supplier is unable to claim relief under these provisions if it has accessed another source of government relief, although furloughed staff costs under the Coronavirus Job Retention Scheme are expressly not included.

The Model Forms

So far so good but the model forms provided with the updated guidance then ignore and preclude the relief of time extensions due to supply chain difficulties emphasised in the previous guidance. The worst of the model variation deeds relates to the NEC3 ECC.  The problems with this form include:

The definition of “Average Amount”

One of the provisions of the contract allows payments of an average of the three previous payment certificates.  In the event that no certificates have been raised by the time relief is sought, the form confusingly states that the amount would be that “reasonably forecast by the Contractor in accordance with the [Shorter Schedule of Cost Components] / [Schedule of Cost Components].  There is a lack of understanding of the role of the Shorter Schedules of Cost Components (“SSCC”).

For an Option A contract (Priced with Activity Schedule), the SSCC is used only for calculation of compensation events and would not support the use asked of it here.  It would be easier for the parties simply to agree a payment profile.

Retention

The model form assumes that retention is a default or core provision of the ECC when it is only relevant if Option X16 is utilised.

Prevention, Change in Law and Compensation Events

The form defines COVID Related Hardship as “the Contractor’s inability to meet its contractual obligations pursuant to this contract, having been adversely affected as a result of COVID-19”.  The document then expressly states that a COVID event is not an event of prevention (the NEC equivalent to force majeure) and cannot be grounds for a compensation event due either to prevention or to a change in law. In obtaining the potential relief of payments during from the date of the variation deed to 30 June, the contractor is then unable to defend against liquated damages claims or general damages for delay due to an event that would otherwise probably be a compensation event.  It should be remembered that the period between now and 30 June is usually the period of the driest weather in Britain and would be programmed as such.  Additionally, the coronavirus disruption may well extend in some form beyond 30 June but a compensation event for prevention after that date would still be precluded by the suggested document.

This approach to compensation events is in contradiction with previous guidance issued by the Cabinet Office.  A better solution would be to allow the contractor a programme extension but not additional costs under the compensation event provisions.

Style

The model deed of variation ignores the drafting style of the NEC. Whilst this appears to be a very small point to raise, it may well prove to be significant.  Where the provisions of the deed will be read in conjunction with the usual core and optional clauses of the NEC it will create ambiguity and confusion.

The objective and aims of the guidance note are laudable but if you wish to vary your JCT or NEC3 contracts to implement its recommendation you would do well to start with a blank sheet of paper.

For further information and advice on any of the issues raised in this update please contact Ian Griffiths.

Shakespeare Martineau has launched a free legal helpline offering bespoke guidance on a range of subjects from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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