“We must choose dialogue over confrontation, and peaceful settlement of disputes over unilateral acts of imposition”
-Nguyen Phu Trong
We are delighted to present Issue 15 of the ThoughtLeaders4 Disputes magazine, Year In Review: 2024 on International Disputes. This issue, our final of 2024, provides an exciting round-up of articles from the full spectrum of international disputes. This issue promises an excellent collection of submissions, and we extend our thanks to all the authors. We’d also like to take the opportunity to thank our event attendees, speakers, and partners for another fantastic year within the Disputes community.
As ever, thank you to our valued Corporate Partners for all their support - we wish readers a very happy festive season, and look forward to welcoming you all back in the New Year.
The ThoughtLeaders4 Disputes Team
Paul Barford Founder/ Managing Director 020 3398 8510
email Paul Chris Leese Founder/Chief
Danushka De Alwis Founder/Chief Operating Officer 020 3580 5891
email Danushka
Maximus McCabe-Abel Senior Strategic Partnership Executive 020 3998 9908 email Maximus
CONTRIBUTORS
BRG
Leah Dudley, DRD Partnership
Hannah Gannagé-Stewart, Bond Solon
Dina Hudson, Byfield Consultancy
Bryan Wang, Byfield Consultancy
Christopher Edwards, 3PB
Emily Hayward, 3PB
The Rt Hon Michael Tomlinson, 3PB
Stefano Braschi, Serle Court
Francesca Cassidy-Taylor, Rahman Ravelli
Nikolai Budnetskii, ADG Legal
Alex Houston, Crowe
Malcolm Kerr, Howarth Hotel, Tourism & Leisure UK
Officer
3398 8554
Chris
Briggs
Partnership Senior Manager
3398 8545
Maddi
Eliot Sheasby, Howarth Hotel, Tourism & Leisure UK
Jonathan Smart, Shoosmiths
Kamil Piekarski, Shoosmiths
Minul Muhandiramhe, TrialView
Désirée Maghoo, Questor Consulting
John Olatunji, Charles Russell Speechlys
Michael Mulligan, Haynes and Boone
Simon Boschat, Hill Dickinson
Moya Clifford, Hill Dickinson
James Thomson, Mediatasks
Ben Elliott, Pump Court Tax Chambers
Arthur Wong, Pump Court Tax Chambers
Harry Bithell, Three Stone Chambers
Byfield – Protecting
Reputation in the Court of Public Opinion
When a client is involved in a dispute or investigation, managing public and stakeholder interest is critical.
When a client is involved in a dispute or investigation, managing public and stakeholder interest is critical.
We are specialists in Disputes & Investigations communications. Our team is instructed by claimants and defendants in high profile domestic and international cases across a wide range of business sectors. Clients call on Byfield’s specialist expertise to support their legal strategy, or to provide alternative solutions that help them achieve their objectives.
We are specialists in Disputes & Investigations communications. Our team is instructed by claimants and defendants in high profile domestic and international cases across a wide range of business sectors. Clients call on Byfield’s specialist expertise to support their legal strategy, or to provide alternative solutions that help them achieve their objectives.
MARRYING THE LEGAL AND PR RESPONSE
This article recaps a webinar Byfield Consultancy led with ThoughtLeaders4 in October 2024, ‘Managing Reputations In High Profile Disputes: Marrying The Legal and PR Response.’
In today’s fast-paced media landscape, high-profile disputes are increasingly fought not just in the courtroom but also in the court of public opinion. Social media, 24-hour news cycles, and coordinated online campaigns have dramatically changed the nature of reputation management. A recent panel discussion – hosted by Byfield in partnership with TL4 – brought together legal, PR, and investigative experts to discuss how to navigate these challenges effectively. Here are some key takeaways.
1. The Modern Challenges of Reputation Management
Disputes and Investigations are growing increasingly high-profile in nature and attract increasing media attention. As the UK and Europe becomes increasingly litigious, and as the regulatory landscape tightens, managing public perception and protecting reputations is increasingly essential for navigating complex legal landscapes.
Gus Sellitto, founder of Byfield Consultancy, highlighted how the media landscape has transformed: “Highprofile disputes today are increasingly played out in the court of public opinion, with details of those disputes often appearing on the pages of national and trade media and now across social media and 24-hour news.”
This represents a seismic shift compared to 20 or 25 years ago when news would break in newspapers before spreading further. Now, Sellitto noted, “you’re getting news and leaks and smear campaigns on social media before newspapers even pick those stories up.”
This shift raises critical questions: How do you bring together legal, PR, and intelligence strategies? And how do you effectively manage a client’s reputation before, during, and after a dispute?
2.Building an Early Strategy
Clients should engage with investigative and PR teams as early as possible before litigation enters the public domain. This helps to shape the overall legal and reputation management strategy proactively, maintaining control over the narrative.
Authored by: Dina Hudson (Senior Consultant) and Bryan Wang (Graduate Account Executive) - Byfield Consultancy
This is important not only in shielding clients from adverse publicity that sometimes accompanies litigation, but also in helping to maximise the impact of litigation in achieving their commercial goals.
Dina Hudson, a Senior Consultant at Byfield Consultancy, underscored the importance of involving PR specialists at an early stage: “Ideally, we should be called in as early as possible —before there’s any kind of active litigation, and certainly before there’s anything in the public domain. Clients are becoming more aware of the need to bring in PR and investigations specialists at an earlier stage and early alignment ensures the client is in a stronger position when a story breaks.”
Jess Alden, a senior associate at specialist reputation management law firm Slateford, stressed the importance of proactive planning and explained that the first step is mapping out key stakeholders and assessing reputational risks before litigation begins. “No one knows your client’s business or your client’s life better than they do. Early collaboration with PR and intelligence teams can help feed into the strategic decisions you make early on.”
Hudson described how PR strategies can either take a defensive or offensive approach. “Sometimes clients want the article taken down or an angry 17-page letter written to the journalist, but often the better solution is to relay facts to adjust their perspective or balance their reporting.”
She also stressed the importance of stakeholder mapping the clients’ audiences at an early stage: “PR professionals often think about stakeholder mapping and how different audiences need to be communicated with—when, and about what.”
3. Investigative Intelligence: Understanding Adversaries and Audiences
Once the key stakeholders and issues affecting them are framed, engaging with investigative teams becomes important. Investigative teams can encourage a degree of creative thinking as they provide a client with a deeper and more holistic understanding of the issue before them, challenging their preconceptions about a claim and can be used to feed into decisions taken about the legal and media strategy.
Nick Bortman, co-founder of Raedas, the investigations firm specialising in contentious work, shared insights on uncovering the forces behind reputational attacks: “The first question is, where’s this coming from? Who’s behind it? Who’s driving it?” He emphasised the importance of creative thinking:
“You shouldn’t presuppose the outcome of these things, because it’s never what you think.”
Bortman highlighted the need to consider the intended audience of a campaign. “In any kind of wellconsidered campaign, it’s often not just scattergun—it has a direction. There’s someone or some group of people it’s trying to reach,” he explained. This might be a business community, the public, or even a single judge making a decision in litigation.
Adam Cannon, Legal Director at The Sun, offered a media perspective, clarifying that reputable newspapers do not engage in baseless smearing: “Newspapers go out to smear people? That’s not what we do... Claimant lawyers sometimes think that’s the case, but it’s not.”
However, Bortman acknowledged that social media and pay-to-play press can muddy the waters: “A campaign will often start with fake Twitter accounts or obscure outlets, and then it gets presented to credible outlets as evidence of public interest in a story” to which Cannon clarified that this is where it is crucial for journalists to work with the team behind them, including the PRs to verify the information.
4. The Media’s Perspective: Navigating Credibility and Smear Campaigns
Understanding adversaries and audiences also entails having an understanding of how the media works. This allows clients to engage in a process of open dialogue with journalists which can reframe the relationship away from an oppositional or adversarial relationship, making the relationship far more productive for both parties.
5. Social Media: The “Wild West” of Reputation Management
Besides engaging with traditional media outlets, the team can also help to shape public perceptions through social media, which has become a central battlefield for reputation management.
Alden referred to platforms like X (formerly Twitter) as the “Wild West,” particularly since Elon Musk’s takeover. “Where you have a court order or an injunction, social media companies are usually quite compliant,” she explained. “But when you’re dealing with borderline cases—like defamation or privacy issues—it’s harder to get things removed quickly.”
Alden noted that social media attacks are sometimes highly coordinated:
“When it looks like a smear campaign— lots of anonymous accounts, funding trails, and inauthentic behaviour— that’s when we dig deeper. Legal mechanisms, such as court orders for disclosure, can help uncover who’s behind these campaigns.”
This is where PR teams can help to supplement legal solutions, by proactively shaping the narrative on social media channels, through reactive statements and rebuttal strategies. SEO tools can also be employed to help minimise the reach of undesirable content.
Bortman emphasised the importance of broader strategies: “Is it better to play whack-a-mole, or to figure out who’s behind it? That’s where investigative intelligence and legal discovery can be really potent.”
7.The Human Element
In closing, Cannon encouraged professionals not to fear journalists, lawyers, or PR teams:
“Often, something can be caused by misunderstanding and just needs to be explained... By picking up the phone, making a friend, and building trust, you can save yourself a lot of time and money.”
6. The Delicate Act Of Employing Legal Tools
While legal tools can be helpful for clients navigating complex litigation, these legal tools often come with accompanying reputational risks, which further demonstrates the importance of aligning the legal and PR strategies in such cases.
Alden highlighted the complexities of using legal tools like injunctions: “Injunctions can be a necessary tool, particularly for privacy matters. But a failed injunction can often lead to more information coming out than initially intended. You need to carefully weigh the risks before proceeding.”
Cannon agreed, adding: “Lawyers should only threaten injunctions when they really mean it, if they want to be taken seriously by the papers and not as the boy who cried wolf.”
In summary, managing reputations in high-profile disputes requires a multidisciplinary approach. Legal, PR, and investigative professionals must work together to navigate today’s complex media and legal landscape. The key is preparation, collaboration, and a well-executed strategy to protect clients from the multifaceted threats of modern reputation crises.
COMPANY LAW
A YEAR IN REVIEW
The key development in company law in the last 12 months was the coming into force of large sections of the Economic Crime and Corporate Transparency Act 2023 (‘ECCTA 2023’), which amended the Companies Act 2006 (‘CA 2006’) to radically change the role and powers of Companies House.
By way of contrast, the last 12 months also saw the definitive end of the attempt by activist NGO ClientEarth to use the existing structures of CA 2006 to pursue an aim for which they were arguably not intended.
This article sets out the courts’ refusal to go beyond the orthodox boundaries of a derivative action and what that means for activists’ use of litigation as a policy tool.
The article concludes by considering the scope for pursuing social goals through company legislation, and the best means to pursue this.
ECCTA 2023
As the name suggests ECCTA is an attempt to reduce the use of UK companies in economic crime and to increase their transparency. Two major points are considered below.
Firstly, ECCTA significantly changes the role and powers of the Registrar,
marking a shift from Companies House’ role as a passive data repository to that of warden and enforcer. Key to this is the insertion of four objectives for the Registrar at s.1081A CA 2006, these being:
1. Ensuring that any person who is required to deliver a document to the registrar does so (and that the requirements for proper delivery are complied with).
2. Ensuring that information contained in the register is accurate and that the register contains everything it ought to contain.
3. Ensuring that records kept by the registrar do not create a false or misleading impression to members of the public.
4. Preventing companies and others from carrying out unlawful activities, or facilitating the carrying out by others of unlawful activities.
Authored by: Christopher Edwards (Barrister) and Emily Hayward (Pupil Barrister) - 3PB
To this end the powers of Companies House have also been increased to include, amongst other things, the ability to:
• Reject a new filing if it appears inconsistent with information held by Companies House such that there are reasonable grounds to doubt whether the new filing is correct (s.1073A CA 2006).
• Require additional information to satisfy a query that Companies House has about information delivered to it (including information already on the register) (ss.1092A-C CA 2006).
On 27 September 2024 Companies House published an enforcement policy that reflects its new objectives and powers. Within it, it sets out its willingness to:
• Utilise all enforcement methods available to it, including the imposition of financial penalties, civil actions, criminal prosecutions and directors’ disqualifications; and
• Work with the Insolvency Service and the Crown Prosecution Service where necessary to carry out such enforcement actions.
Secondly, the implementation of ECCTA also introduced the requirement for directors, people with significant control and those delivering information to Companies House to verify their identities through an Authorised Corporate Service Provider. As all such providers are supervised by an anti-money laundering supervisory body, such as HMRC or the FCA, this provides welcome transparency in respect of those individuals directing and controlling UK companies.
Whilst much depends on the energy and competence that Companies House brings to its new role, it must nevertheless be considered a positive development that the Registrar of Companies is now required to ensure that its records are accurate and that companies are not committing unlawful activities.
ClientEarth v Shell plc CA-2023-001866
On 14 November 2023 the Court of Appeal (Newey LJ,) refused activist NGO ClientEarth permission to appeal from the earlier decision of Trower J1 to refuse it permission to bring a derivative claim against Shell plc.
ClientEarth, a shareholder of Shell, had sought mandatory injunctions requiring, amongst other things, that the directors of Shell adopt and implement a strategy to manage climate risk. It did so on the basis that the directors had breached their statutory duties to promote the success of the company (s.172 CA 2006) and exercise reasonable care, skill and diligence (s.174 CA 2006).
In this respect, ClientEarth referred to the directors’ acts and omissions in Shell’s climate change risk assessment strategy, citing a 2021 order made by the Hague District Court in Milieudefensie v Royal Dutch Shell plc.2
Newey LJ’s refusal of permission is entirely supportive of that of Trower J, supporting the latter’s conclusions that:
• ClientEarth had failed to make out its prima facie case against the directors. It had needed to show that there was no basis upon which they could have come to the conclusion that their actions in respect of Shell’s climate change risk assessment strategy were in the interest of Shell, but had failed to do so.
• The mandatory injunctions sought would have a serious impact on the success of Shell, something which ClientEarth claimed the derivative proceedings were seeking to avoid.
• A person seeking to promote the success of Shell would not seek to continue the derivative claim.
Newey LJ further commented that there was every reason to think ClientEarth had brought the claim to advance its policy agenda rather than to enhance or protect the value of its very small shareholding.
This case demonstrates the difficulties in seeking to use existing company law procedures (in this case, the derivative action,) to regulate companies in respect of new challenges facing society.
Conclusion
The two cases above show that in the statute-bound sphere of company law, reform is likely to come from the top-down, rather than the bottom-up. If a government can be persuaded to implement reforms of company regulation, then such reforms may well have a long-lasting and positive impact. On the other hand, attempts to re-purpose existing legislation for novel purposes is unlikely to succeed, as ClientEarth v Shell demonstrates. Accordingly, those seeking to enforce changes in company behaviour to promote social change may well find that parliament is a more productive venue for their efforts than the courts.
60-SECONDS WITH: THE RT HON MICHAEL TOMLINSON BARRISTER 3PB
Q Imagine you no longer have to work. How would you spend your weekdays?
A I would try to spend my time playing sport. However, I am not getting any younger and I am certainly not getting any better at cricket, hockey or golf, and so I think I had better stick to the day job.
Q What do you see as the most exciting thing about your job?
A The sheer variety of work, whether it is helping and advising individuals or businesses. Having the opportunity to delve deep and give practical and rounded advice.
Q What’s the strangest, most exciting thing you have done in your career?
A Having just returned to the Bar from a 9 year career break in Parliament, by far my strangest and most exciting job was writing to Her Majesty the Queen a letter every sitting day setting out the day’s proceedings in Parliament. Despite the formal format, I tried to inject a touch of humour. Sadly I will never know what Her Late Majesty made of my sketches.
Q What is the best life lesson you have learned?
A Be true to yourself.
Q What is one important attribute that you think everyone should have?
A Be willing. Get stuck in. Give it your all.
Q What film do you think everyone should watch, and why?
A The Shawshank Redemption Justice; action; redemption. What more could you want?
Q Dead or alive, which famous guests would you invite to a dinner party?
A St Paul; William Wilberforce; and to ensure that proceedings remain lively, Viv Richards and Ian Botham.
Q What is the best novel of all time?
A Surely one by court and parliamentary reporter Charles Dickens. Perhaps Bleak House, depicting the long-running legal case in the Chancery Court.
Q What legacy would you hope to leave behind?
A That above all else his family was the most important.
Q What is the most significant trend in your practice today?
A The continued increase in the use of technology.
Q Do you have any hidden talents?
A I have a cap for minor counties cricket. But such glories should be tempered with the knowledge that during my one and only outing, I did not bat and did not bowl.
Q What is one work related goal you would like to achieve in the next five years?
A I would like to keep encouraging those entering the profession and just starting out on their legal career.
"3PB Barristers is a very professional, approachable and friendly set." Legal 500 2024
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david.fielder@3pb.co.uk
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M&A DISPUTES REPORT: FIVE YEARS IN REVIEW
LESSONS LEARNED & FUTURE OUTLOOK
BRG
Deals and Disputes
Outlook Snapshot
The first half of 2024 suggests a partial return to form for a mergers and acquisitions (M&A) market that has whipsawed between famine and feast since 2020. An early surge of big-ticket transactions drove global M&A values to an estimated $1.2 trillion1 at the halfyear—up 12% from the same period in 2023. However, deal volumes remained lacklustre, declining 13% year over year.
While dealmakers are willing to pursue large transactions, the M&A market has yet to fully recover from the slowdown that began in 2022, according to S&P Global Market Intelligence.
The second quarter also saw the largest increase in take-private deals in the past two years, with $67 billion transacted2 across thirty-two deals.
Notable transactions include Capital One Financial’s planned $35 billion acquisition3 of Discover Financial Services, Conoco Phillips’ $17.1 billion deal4 for Marathon Oil and, in August, Mars Inc.’s $36 billion takeover5 of food-maker Kellanova. Private equity (PE)–backed M&A is also rebounding6 , with major transactions like BlackRock’s $12.5 billion purchase of Global Infrastructure Partners and Apollo Global Management’s $6.3 billion
However, 2024 also saw regulatory and deal-related developments that could drag out transactions or cause M&Arelated disputes. They include a slowdown in PE healthcare rollups7 in the US due to antitrust scrutiny and lawmaker pushback8, as well as increased Federal Trade Commission review9 of serial acquisitions that could harm competition. Increased scrutiny of foreign investment10 is also shadowing the M&A landscape, with US pushback over Nippon Steel’s proposed takeover of US Steel11 a prominent recent example.
Against that backdrop, it makes sense that 83% of respondents expect deal volumes to increase in the coming year and 70% expect dispute volumes to rise—a higher level of anticipation on both than in our annual 202412 and mid-year 202313 reports, particularly when it comes to M&A volumes.
“Given the economics of the dispute process—where a relatively small investment may result in a material payout—it is difficult not to bring a dispute when there is a positive expective value from doing so,” said BRG
Managing
Director Frank Dery14
Our findings also inched closer to the trend we’ve observed over much of our research: expectations for M&A deals and disputes move largely in tandem, though the latter tends to lag. Our February 2024 survey, published on the heels of a notoriously down year for M&A, was a prominent exception to that rule, with a gap of 18 percentage points between expectations for deal and dispute volumes (47 and 65%, respectively).
Regional and industry factors are also expected to impact deal and dispute volumes. A greater share of Asia–Pacific (APAC)–based respondents, for instance, expect that deal volumes will increase in the coming year (91%), compared to 83% in Europe, the Middle East and Africa (EMEA) and 67% in North America.
However, APAC had the lowest share of those expecting an increase in disputes (63%), compared to 83% in EMEA and 66% in North America).
The results of the US presential election could significantly impact deal activity— driving either an increase or decrease once dealmakers have greater clarity on policy direction for the next four years, Dery said.
“Lower interest rates are also on the horizon, with changes there likely to release some of the pent-up demand for M&A.”
In EMEA, “Lower economic growth may constrain companies’ ability to grow organically and so push up deal numbers in order to deliver growth by acquisition— leading in turn to more disputes,” BRG Managing Director Peter Bird15 said. More broadly, the potential increase in artificial intelligence–related deals by newcomers to that sector which are more likely to make valuation errors could also drive an uptick in disputes, he said.
COVID-19 upended the global economy in 2020, putting M&A temporarily on ice as dealmakers scrambled16 to adjust to the fallout. The uncertainty heightened tensions between parties and widened the gap between deal terms and business realities in many transactions. Even as the pandemic receded and M&A activity bounced back, our research revealed increasingly complex deal structures17 amidst increased geopolitical and market volatility.
With that in mind, we asked respondents which transaction elements have been most likely to generate a dispute in the years since the pandemic. PPAs and termination provisions— such as force majeure, material adverse change (MAC) or material adverse effect (MAE) clauses—led the way,
selected by 46% apiece. However, while PPAs still top the list of likely dispute generators in the year ahead (increasing to 58%), termination provisions dropped significantly, to 25%.
That shift reflects that parties are having fewer disputes where one side walks away from a deal— instead, they’re completing transactions but having more disputes in relation to deal elements such as PPAs.
“The environment isn’t as choppy as it was four years ago,” said BRG Managing Director David Rogers18. That more stable M&A landscape comes as the global economy moves on from economic shocks like pandemic shutdowns and the rapid run-up of interest rates in 2022.
“Instead of trying to get out of deals altogether via termination, parties now may be focusing on extracting value from deals they have entered into based on the mechanisms in a sales and purchase agreement,” BRG Director Calvin Qiu19 said. Those include put and call option clauses— the second-ranked dispute driver for the coming year— which provide a mechanism for an investor to sell or increase their stake.
“Most of the termination provisionrelated disputes that I have seen arose from COVID issues and the seller fundamentally changing the way it operated the business before the deal closed,” Dery said. Such disputes are less frequent in the post-pandemic period. “PPAs continue to be the most common type of dispute I see.”
Additionally, as M&A deals become more complex, so do the accompanying PPAs—giving rise to ambiguity that deepens dispute risk, Dery said. “During negotiations, the parties may have one understanding of what the terms mean, but it is not uncommon for that understanding to change post-closing.”
For example, in a recent dispute the parties had agreed that there would be an adjustment to lower the contractually defined amount of cash by the amount of repatriation taxes calculated on cash held in overseas jurisdictions. Once the transaction closed, the buyer calculated the adjustment based on all cash balances in overseas jurisdictions, whereas the seller calculated the adjustment based only on cash that could be hypothetically repatriated to the US.
Ultimately, the matter was resolved in favour of the seller on the basis that all adjustments had to be determined based on the company being a going concern— and on that basis, it was not reasonable to calculate the adjustment on all cash being held overseas because not all cash could be repatriated back to the US.
Another factor may be driving the emphases on PPAs, put and call options and earnout clauses: the accelerating importance of private equity, “whose focus may be on short-term value more than longer-term strategic benefits,” Bird said, “and which may be less ready to take an immediate value hit.”
The risks that threaten the reputations of corporates develop and change every year. The evolving landscape is largely driven by the emergence of new technologies, shifting public expectations, and the implications of external political, geopolitical and regulatory advancements.
The last year was no exception, and while some established risks became more pronounced, with matured perspectives and implications, new considerations also surfaced.
Importantly, as every year brings new trends, the ability of companies to anticipate, respond to and navigate these changes will have notable consequences for their reputations.
Impact Of A New Government
After 14 years of the Conservative Party in power, 2024 saw the election of a Labour Government. It represented a moment of reset and reflection for companies as they considered the focus, strengths and challenges pertaining to the new administration.
Among these considerations, companies can expect Labour to have an increased focus on conduct, treating workers fairly and acting in the consumer interest. As a result, MPs may become more vocal about cases related to businesses,
and draw attention to issues within the corporate world to solidify the Government’s stance to the general public. Companies should therefore be prepared for increased political engagement, particularly with the return of Select Committees, and plan their communications approach accordingly.
In addition, at a time when AI shifts from theory to implementation, with cyber security being an everincreasing threat, there is a question mark around the new Government’s strategy and strength in the area.
With the onus predominantly placed on companies to secure their operations, and a lack of uniformity apparent in the market, it offers both an opportunity and a risk for companies leading the charge and shaping the narrative, as regulators and the CMA become more involved.
This ties into the Prime Minister’s desire that, more generally, regulators take a more directional approach. Companies can therefore expect regulators to come under more pronounced political pressure to pursue certain political objectives – such as economic growth, and carbon emissions targets – within their regulatory activities. Companies should also brace for the fact that the CMA recently has been given much more substantial enforcement powers in respect of breaches of consumer law under the Digital Markets Competition and Consumers Act 2024, powers which were previously much more in the hands of otherwise preoccupied and cash-strapped local authorities.
Given the expected changing regulations within listed markets, companies will also be considering the benefits of being publicly listed versus privately held under the new Government. This is against the backdrop of evolving requirements for listed businesses, as nonfinancial reporting provisions acquire greater significance, together with an extended definition of ‘public interest entities’ takes hold, which will in turn increase reporting requirements for some privately held companies. How businesses communicate, and the structures they are required to communicate within depending on their ownership status, has a large bearing on investor, customer and employee sentiment.
A lack of understanding around its impact leaves companies exposed to reputational harm, as well as potential legal backlash.
In many ways, businesses are in a period of exploration, testing what works for them, their operations and their employees, while the landscape is simultaneously in a time of high scrutiny and rapidly advancing regulation. There is an urgent need for companies to understand AI, its limitations, and its unwanted side effects to effectively plan and communicate to keep stakeholders on side.
While internal roll-out posed its own challenges to businesses during the year, the risk of AI to company reputation from external bad actors continued to increase.
For deep fakes to truly impact public sentiment two things needed to be present: the proliferation of social media and its use as a news source, coupled with advanced technology able to impersonate individuals and companies.
Inescapable Growth of AI
AI has been a hot topic in boardrooms and on event panels for some time, but 2024 saw a sharp uptick in its widespread use, bringing into focus some of the more complex challenges it presents.
As businesses explore the use of AI within their own organisations, the potential risks must remain front of mind. This includes introducing potential biases in operations, increased cyber security risks, loss of quality and liability for error, lack of transparency around how decisions are reached – or unchecked decision making – and privacy concerns.
While businesses and regulators scramble to verify content and halt harmful fake news, without proactive strategies and clear protocols of how to identify and manage deep fakes and misinformation, companies are at increased risk of experiencing harmful consequences.
Culture Wars, Misconduct and Safeguarding Issues
Companies experienced challenges throughout the year as they navigated issues of gender, political affinities and beliefs, and race, which was further complicated by polarised debates against the geopolitical backdrop. In the current febrile environment, it is easy for businesses to be caught up in a sprawling narrative, with their issues being used as ammunition within culture wars.
In instances of misconduct, there is continued media and public interest in safeguarding and behaviour issues, resulting in businesses facing complex communications challenges.
Maintaining anonymity of those involved and avoiding prejudicing any legal process, while speaking to the progress of the proceedings and company values can be a difficult line to tread. Getting stakeholders to understand the importance of anonymity and the risks of unwittingly breaching someone’s rights creates an additional layer of complexity in an area where trust is paramount.
To combat frenetic conversations in an emotive environment, companies must have strong processes, policies and messaging in place, to build their resilience and effectively manage issues as they arise.
Greenwashing
There has been consistent pressure on companies from investors, consumers and media to do more in relation to climate change, and as a result a swathe of ‘green language’, targets and reporting requirements quickly became part of corporate vernacular.
More recently, and particularly in 2024, focus shifted from the demands made of companies, to the unearthing of businesses that were not doing as they claimed. The implications for businesses that failed to qualify and substantiate their ESG credentials, and the impact on consumers that had been misled as a result, led to collective actions, financial penalties and a faltering of consumer trust.
With the increase in regulations regarding false advertising and misleading claims, heightened scrutiny by investors, watchdogs and
the media, companies must be ever more cognisant of the evidence that substantiates their ESG strategies, and how they communicate them to their stakeholders, to avoid ongoing reputational issues.
Geopolitical Risk
The underlying current of geopolitical discourse continued to impact decision making for companies throughout the year, both operationally and reputationally, as they navigated charged environments and divided viewpoints.
It has brought into clearer focus the importance of supply chain due diligence, and the ease with which seemingly inconsequential information can be misinterpreted and weaponised against businesses to draw conclusions.
It has prompted companies to genuinely interrogate their understanding of what information is available to them, and what it could mean for their reputation through the lens of other perspectives. These Know Your Customer (KYC) challenges are particularly pronounced for High-Net-Worth Individuals (HNWI) and those that have done business in more difficult to navigate regions, whether currently or historically.
Conclusion
As we move into 2025, companies that take the time to look ahead, and plan for the risks that they are most exposed to, will be best placed to ride the tide of change and effectively manage their reputations against whichever backdrop emerges. Outside of planning for appreciated risks, companies that will fair best are those that have a best-inclass crisis response, and are prepared to expect the unexpected.
DRD is a strategic communications consultancy focused on building value for our clients and protecting their reputations at moments of challenge and change.
DRD Partnership combines the level of client attention and commitment of a boutique consultancy with the experience and seniority of a national-level advisory firm.
Chambers and Partners
CLAIRE DAVIDSON Partner
T +44 (0)7767 351433
E Claire.Davidson@drdpartnership.com
KATE MILLER Partner
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E Kate.Miller@drdpartnership.com
LAWRENCE DORE Partner
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E Lawrence.Dore@drdpartnership.com
JON MCLEOD Partner
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E Jon.McLeod@drdpartnership.com
ARE UK WITNESSES AT A DISADVANTAGE IN INTERNATIONAL ARBITRATION?
Extensive witness prepping is par for the course in the US but prohibited in the UK. Is it time the Bar Council levelled the playing field by revisiting the rules in respect of international arbitration?
In international arbitration, where the two sides are from different jurisdictions, one issue has the potential to put the two parties on an unequal footing: witness preparation.
In the UK, lawyers are bound by the Bar Standards Board (BSB) guidance, which prohibits any witness preparation beyond familiarisation with the procedure and roles of the participants in the hearing.
The strict limits on witness preparation were highlighted in R v Momodou in 2005. The Court of Appeal held that: “There is no place for witness training in our country, we do not do it. It is unlawful.”
While Momodou was a criminal case, the BSB guidance states that the same rules apply to civil cases and, by extension, have been taken to apply to arbitration, although guidance on the subject from the International Bar
Association (IBA), or other bodies overseeing international arbitration, is less prescriptive.
As such, in the UK witnesses must not be prepped in any way that affects the accuracy of evidence, by working on testimony, evidence, or facts similar to those of that witness’s hearing. Conversely, US lawyers do mock crossexamine witnesses on their own evidence.
“Preparing witnesses primarily includes educating them about the procedure, ensuring that they know the issues of the case, the claims and defences, and familiarising them with the documents and other physical evidence,” Rievman explains. “It can include rehearsing with the witness the answers to questions expected to be asked and conducting mock depositions or cross-examinations.”
Whatever the extent of the preparation, he is emphatic that “it is essential to instruct the witnesses to always tell the truth and provide their own accurate and genuine recollection of the facts.”
Solicitor advocate Paul Gilbert is a Bond Solon witness familiarisation trainer and believes, where international arbitration is concerned, the transatlantic differences can put witnesses from the UK at a disadvantage.
US Approach
Josh Rievman is the New-York-based founding partner of Dunning Rievman & MacDonald. He has 34 years of experience in international dispute resolution.
“Bond Solon’s witness familiarisation training is conducted in accordance with the Bar Council BSB Handbook, and the note issued by the Ethics Committee of the Bar Council,” Gilbert says. “It is a cornerstone of the training that we would never ‘coach’ a witness.”
However, he points out that an international arbitration hearing is unlike a criminal trial. “In international arbitration the cross examination is on a written witness statement submitted prior to the hearing. In criminal proceedings the witness gives all their evidence orally at the trial, so it is arguably less of a concern or a risk that they may be ‘coached’ to misrepresent their evidence.”
Both Rievman and Gilbert agree that the current situation creates imbalances in international arbitration, and that a common cross-jurisdictional approach should be adopted.
Last year an updated note on witness preparation published by the Bar Council did hint at a review of the UK’s rules when it comes to international arbitration.
At paragraph 36, it said: “The BSB has said that it will in due course reconsider how far barristers can be involved in witness preparation for the purposes of international arbitration.”
Moreover, “some English lawyers might also engage foreign attorneys for the hearing or, when part of international law firms, let their non-UK lawyers handle the witness preparation to avoid doing it themselves and risk to not be in compliance with their ethic rules.”
Article 4 of the IBA rules state: “[I]t shall not be improper for a party, its officers, employees, legal advisors, or other representatives to interview its witnesses or potential witnesses and to discuss their prospective testimony with them.” However, they do not define the extent of the interview or explicitly describe what is considered to be improper.
Rievman suggests it may be possible to level the playing field by setting ground rules from the start or seeking guidance from the arbitral tribunal, although doing so may be difficult in practice.
“On one side, English lawyers cannot exclude the application of their ethics rules for the purpose of one case. On the other side, it would be difficult to imagine US attorneys agreeing to limit their usual hearing preparation out of courtesy to their fellow English lawyers,” says Rievman.
Fail To Prepare…
Gilbert believes this brief acknowledgment of the issue “suggests there is a recognition by the Bar Council that international arbitration has unique features that would benefit from a proper consideration of whether the guidance should be different.”
In practice, Rievman has seen the approach of UK lawyers vary greatly in international arbitration. “Some will strictly abide by their ethic duties and limit the preparation of their witness to the minimum. Others will prefer to play by the rules generally accepted in international arbitration and prepare their witnesses”, he says.
“Perhaps the only way, then, would be to include such a requirement in the arbitration clause itself”, he adds. “However accomplished, we strongly recommend adaptation of concrete principles regarding the witness preparation to level the playing field between the parties from different jurisdiction.”
characteristics, Gilbert says US lawyers increasingly see the appeal of the witness familiarisation techniques he teaches.
The Value of Familiarisation
While UK regulators may not yet be ready to overhaul the approach to witness preparation on the basis of international arbitration’s unique
“I have travelled to the US to do Bond Solon training, which I have always thought is interesting, because you might think they wouldn’t need it, or want it”, he says. “However, an attorney who sat in on the session, said to me, ‘You know what, I really like what you do as we just don’t focus enough on the way the witness is testifying or the concerns the witness has.’”
In the US, attorneys are focused on how the witness will answer the question, not on their familiarisation with the process or demeanour. Gilbert says that after doing cross-examination practice on an unrelated case study, he will ask: ‘How was that? What was going on in your head?’, because “it helps guide the witness to give evidence in a way that is right for them and be as effective as they are able to be”.
Josh Rievman’s comments were the joint product of Josh and his team, on whom Josh relies a great deal throughout his practice. His dispute resolution team is currently Gokce Onder, a dual-qualified New York and Turkish lawyer, who has five years of experience and Diane Caron-Laviolette, a dualqualified New York and French lawyer, currently on secondment to Dunning Rievman from Teynier Pic in Paris.
The Witness Familiarisation Specialists
Witness evidence can make or break a case. Give your clients the support they need to mitigate the risk of a poor performance at court.
Bond Solon’s team of specialists are experts in understanding the specific requirements of a case. Over the last 30 years, our essential pre-hearing service has helped over 250,000 witnesses achieve a positive outcome at the hearing stage.
Working with our clients, we create bespoke training and interactive workshops that will build witness confidence - allowing them to perform at their very best, taking chance out of the equation.
OVERVIEW OF DIGITAL ASSETS REGULATORY CHALLENGES IN THE UAE, GERMANY, AND RUSSIA
Authored by: Nikolai Budnetskii (Of Counsel) - ADG Legal
Abstract
Regulation of a specific type of electronic property – be it (defined as) crypto/ digital/ virtual assets, cryptocurrency, etc. -- is subject to different regulatory patterns and dispersed across many sources of law in Germany, Russia, and the UAE.
Prima facie, the reason for this is the misconceived perception of the history of regulation of securities and the lack of systematics in regulation. It is tempting to say that it would help to first clarify whether a particular item of electronic property may be handled as a bearer, order, or non-negotiable security, be defined as a thing, or as a security in general (or use any other analogous or comparable notion readyexisting in a national legal system).
However, this theoretical difference between bearer securities and registered securities will prove to be useless for a lawmaker because, in any event, the owner of an electronic property item will be using an electronic medium (e-wallet, website, etc.) to make a transaction and prove their title. Digital assets and cryptocurrencies are new-era creatures
and thus have totally new features -such as smart contracts, forks, or mining -- not known to the “old” law.
Thus, the resolution of the regulatory challenges starts with understanding the electronic property–specific features and assessing the current geopolitical environment, rather than applying usual regulatory approaches. A classic method of analogy of law (in our case, of securities law), systematic method, or prohibitions are not the best methods to regulate digital assets.
Practice shows that a de-centralized (not to say chaotic) regulation with sufficient powers granted to local authorities may in some societies be more fruitful than prohibitions.
case, (d) define precisely the completely abstract possibilities for action which necessarily underlie every declaration of intent.
Overview of Regulatory Challenges
Crypto News
The major topics in the crypto field have recently been that cryptocurrencies can be stolen, fraud is perpetrated on custodians of digital assets, the nature of the client – custodian relation (fiduciary, services, agency, etc.) is often not transparent, and there are many insolvencies of all types of parties involved in the digital assets market1
One of the remarkable tendencies in Russia is that a hostile takeover of data centres is a real risk that should be taken into consideration when drafting a colocation services agreement.
Theoretical Achievements
The digital assets were analyzed by many practitioners and academics, including S Abdulkasimov, J Brockhurst, MA Gitlitz, M Gutbrod, F Müller, D Kozlov, S Richter, A Schmidt, E Sukhanov. In a plethora of his articles and books devoted to digitalization Dr Gutbrod2 points out that a sensible regulation of digital assets would (a) examine the source, flow, and use of funds provided, (b) check compliance of the actual rules on adherence to a digital assets project with what has been declared to the outside world (digital assets prospectus or resolution, etc.), (c) check the “smart contracts” to see whether the persons who concluded them could have expected them to work as they did in the given
German Approach
Definition Of Digital Assets
Digital assets are defined by the German Banking Act3 as “digital representations of a value that has not been issued or guaranteed by a central bank or public body and does not have the legal status of a currency or money, but is accepted by natural or legal persons as a means of exchange or payment or serves investment purposes based on an agreement or actual practice and that can be transferred, stored and traded electronically”.
According to the German regulator, BaFin, there are two main questions to be resolved – based on which rights a specific token provides – as to the digital assets issuance and trading: (a) does it require a prospectus, and (b) does it require a regulatory permit4.
The new German Law On Digital Securities5 allowed to issue bearer bonds and some funds units through the inclusion of certain information in
the licensed digital securities register. According to the colleagues from a German office of another international law firm6, not every token that has the characteristics of a bond (interest, repayment, etc.) is a digital bond within the meaning of the new law.
Although registered securities per se are designed to be more restricted in circulation than the bearer ones7, the German systematic approach to regulation seems to have so far resulted in spreading of less regulated/ lower protected registered digital bonds’ issuances8
Definition And Practical Use Of Cryptocurrency
The German Banking Act regulates digital assets (including cryptocurrency), but there is no specific statutory definition of cryptocurrency in Germany. Generally, it seems that German courts9 and BaFin10 take different approaches to cryptocurrencies, allowing for the existence of the alternative cryptopayment system in the absence of a strict ban, a dialogue, and development of regulations.
In practice, it is possible to buy and use cryptocurrencies in Germany as a means of payment11
Russian Approach
Definition Of Digital Assets
Russian law concentrates on regulation of so-called “digital rights”. The content (generally, (a) digital financial assets including monetary claims, (b) utility digital rights including the right to demand the transfer of a thing, and (c) hybrid digital rights including both utility
1 ThoughtLeaders4. Crypto Exchanges and Custodial Services: Contract, Trust, Fraud and Insolvency; URL: https://youtu.be/x8OrXqtfF4E?si=W92WoZGvM8HNYrab
2 Among many other works, M. Gutbrod. Autonomy of Will in Times of Artificial Intelligence, Blockchain and ICO’s; URL: https://www.academia.edu/38149653/Autonomy_of_Will_in_ Times_of_Artificial_Intelligence_Blockchain_and_ICOs_German
8 Frankfurt School Blockchain Center. Industry Insights (CAC23A) – The Legal Frameworks of Tokenized Debt in Europe; URL: https://youtu.be/3l0ZemDI1qs?si=UeX6sWGmDgIRC5u
10 Concentrating on warnings to consumers, URL: https://www.bafin.de/DE/Verbraucher/GeldanlageWertpapiere/verbraucher_kryptowerte.html
11 Jens der Finanztester. Tether (USDT) kaufen & verkaufen mit Euro. Einzahlen, Umtauschen, Versenden (bei Binance, Kucoin); URL: https://www.youtube.com/ watch?v=k7XhMkKpe_U
digital rights and digital financial assets) and conditions for the exercise of digital rights are determined in accordance with the rules of the information system; one can dispose of them only through the information system/ investment platform and without involvement of third parties.
The main actors are (a) the operator of exchange/ information system/ investment platform, (b) the issuer, and (c) the investors. The operator should have a Russian Central Bank license and register there its internal regulations.
Definition And Practical Use Of Cryptocurrency
Despite the recent attention of the President12 and the opportunity to use digital rights in international trade13, Russian operators of digital rights digital rights’ exchange platforms grapple with sanctions issues (both currently licensed exchange operators are sanctioned by the US and the UK).
Russian Law on Digital Financial Assets prohibits the use of cryptocurrencies as the means of payment for individuals residing in Russia and Russian companies.
investment purposes; this does not include the digital representation of fiat currency, securities or other assets.
The UAE Cabinet Decision No. 111/2022 identifies the SCA as the authority responsible for regulating virtual activities and virtual assets service providers across the UAE and sets out that the issuer’s offer and/or sale of virtual assets requires a license.
The UAE Cabinet Decision No. 112/2022 delegates wide powers in Dubai to the VARA exclusively.
Virtual assets in the UAE include, among others, payment tokens (Central Bank Circular No. 2/2024) and security tokens (DFSA Consultation Paper No. 138).
As for the issuance of security tokens or their exchange, both federal (of SCA and/or of the Central Bank) and local jurisdictions’ (for example, of VARA (Dubai), DFSA (DIFC free zone), or FSRA (ADGM free zone)) licenses are likely to be required.
Remarkably, so-called utility tokens are not considered digital assets – they are less regulated; their issuers are considered as DNFBPs that are subject to the UAE Anti-Money Laundering Law.
UAE Approach
Definition Of Virtual (Digital) Assets
The major difference of the UAE regulatory approach is that, firstly, it is very much practice-oriented and, secondly, granular in terms of levels and intertwined regulations in the federal and local jurisdictions.
Under SCA Decision No. 26/RM/2023, a virtual asset is a digital representation of value that can be digitally traded or transferred and can be used for
Definition And Practical Use Of Cryptocurrency
Cryptocurrencies status in the mainland UAE is not clear, and although Central Bank Circular No. 6/2020 and some other authorities classify cryptocurrencies as virtual assets or have defined them in a way, there are published decisions and rulings restricting their use as a means of payment.
Like in Germany, license(s) are required to exchange fiat/ cryptocurrency.
In practice, there are many companies offering fiat/ crypto exchange and settlement to the public at large.
HOSPITALITY DISPUTES
IS AN INCREASE IN PREVENTION CAUSING A DECLINE IN ARBITRATION?
With the hotel industry still facing significant challenges and an increase in the number of transactions the potential for disputes is high. However, despite this there appears to have been a decrease in the number of arbitrations. This article explores the possible reasons for a reduction in arbitration including enhanced due diligence and the use of alternatives to arbitration such as adjustments to contractual arrangements. The article also explores instances where it might not be possible for parties to avoid arbitration.
The UK hotel industry has experienced significant fluxes over the past few years, largely influenced by the COVID-19 pandemic and the following economic challenge.
The pandemic basically brought the industry to standstill, with lockdowns creating dramatic drops in occupancy rates.
However, as these restrictions eased, there was a notable rebound driven by
domestic tourism and the “staycation” trend. London and other major cities saw a resurgence in demand, particularly from corporate and inbound tourism.
competitive market have forced hotels to innovate and adapt quickly, requiring appropriate amendments to outdated legacy agreements.
This dynamic landscape underscores the importance of flexibility and resilience in the UK hotel industry.
Despite this rebound, the industry continues to face difficult operating conditions. Cost of living concerns have dampened demand in some areas while rising finance, labour and utility costs, are making it difficult for hotel owners and operators to maintain profitability.
This economic strain has led to increased scrutiny of commercial and contractual relationships. For instance, some hotel management agreements have become more contentious, as owners seek to control costs while franchisors insist on maintaining the service and product quality to brand requirements. In parallel, rapidly changing guest preferences and access to new technology in a
Despite the apparent challenges, investment activity in the sector has been robust, with a notable increase in transaction volumes, particularly in London, in 2024.
The economic backdrop and increase in transaction volumes is leading to increased scrutiny and the potential for disputes in commercial and contractual relationships. When it comes to the management of these potential disputes it is common for the hospitality sector to prefer to adopt arbitration clauses in their agreements for several reasons. Firstly, arbitration is highly confidential and with a limited number of big players, the negative publicity associated with disputes can be avoided. Secondly, the hotel industry is very international in
Authored by: Alex Houston (Partner) - Crowe, Malcolm Kerr (Managing Director) & Eliot Sheasby (Manager) - Howarth Hotel, Tourism and Leisure UK
nature, arbitration allows the flexibility to choose jurisdiction, procedures and rules that suit their needs. Finally, arbitration can be faster than litigation, particularly with the current focus on speeding this up further.
However, whilst parties might look to adopt arbitration clauses in their contractual documents, there are scenarios where disputes can be resolved without relying on an arbitration process.
Interestingly, looking at the statistics for the London Centre for International Arbitration (LCIA) which provides a breakdown for Hospitality and Leisure, these suggest a decline in arbitration for this sector. In 2020, 6% of arbitrations under LCIA were in the Hospitality and Leisure sector.
Furthermore, where there is a contractual dispute, alternative dispute resolution such as mediation and seeking industry expert opinions are also commonly used to facilitate amicable resolutions. For example, an industry expert might be able to suggest agreed contractual changes, typically due to an economic downturn where both parties agree to amend revenuesharing models to ensure the hotel’s financial viability. This might involve reducing the operator’s fees temporarily until market conditions improve. Others have been around performance metrics where the initial contract includes KPIs that are no longer relevant due to changes in the market or the hotel’s target demographic.
The benefit of these measures is crucial in maintaining stable commercial relationships, reputation and ensuring the smooth operation of hotels.
This is particularly so in places where there is a complete loss of trust, the agreement is no longer fit for purpose and there can be no commercial adjustments, and there have been elements of misrepresentation that result in a transaction not being as presented.
That party may look to find a breach of contract and rely on the arbitration clause. As part of the dispute, it is likely that hospitality and quantum experts will be required to ascertain the losses suffered due to the breach of contract, either through an assessment of the loss of profits over the contract term or if stipulated in the contract, liquidated damages. These calculations can be complex particularly so when considering operator agreements with well-known international brands.
With an increase in transaction volumes coupled with the significant challenges in the market this could lead to an increase in disputes.
This has seen a steady decline over the years to 2% in 2023. It is clear that there is a changing landscape and there might be several reasons for this.
Contractual disputes typically arise from breaches of management agreements, disagreements over franchise terms or disputes related to termination fees and rebranding efforts. As referenced above, these conflicts can be exacerbated by the financial pressures on hotel owners and operators to maintain their profitability.
We have seen an increase in parties conducting preliminary enhanced due diligence using sector expertise to assess the commercial reality of a contractual relationship and the parties ability to deliver on these expectations. An example being enhanced due diligence for a hotel chain which discovered significant financial instability in a potential partner, leading to a prudent decision not to enter into a contract, thereby avoiding future disputes and financial losses.
It is not surprising that parties may choose to avoid arbitration, and clearly there is still a need for arbitration, given that 2% of disputes under LCIA are in this industry. Whilst there appears to be an effort to ensure prevention of disputes some of the examples and factors above will not be enough to avoid arbitration in certain circumstances. For example, if one party simply wishes to terminate a contractual agreement there may be limited options to find a resolution.
Time will tell whether these transactions are less prone to disputes due to enhanced due diligence, are able to use industry expertise to find commercial adjustments to contractual agreements or will ultimately lead to a rebound in the number of arbitrations.
MAXIMISING DISTRIBUTION TO CLASS MEMBERS MUST BE TOP OF MIND
At the 2024 TL4 Class Actions Forum in October, Sir Marcus Smith stated that the opt out regime “is principally concerned with the compensation side” and he made it abundantly clear that the level of distribution of damages to class members is going to be the principal measure of the regime’s success. He even went as far as to say that the regime could be labelled a “failed experiment” if we end up with a “purely retributive” regime and that the CAT should seek assurances “that not 50, not 60, but 80, 90% of the money that’s recovered” is distributed to the class.
Recently, the Tribunal asked a class representative to provide a robust distribution plan and threatened decertification, and as more of these claims reach the distribution stage through settlements or awards, critics of the opt out regime will be quick to highlight examples of poor distribution to policy makers.
Holding bad actors accountable and deterring poor governance is essential to upholding the rule of law and promoting what the new Attorney General Lord Hermer KC recently referred to as a “rule of law culture”. But whilst many may see the regime as having a dual purpose of deterrence and compensation, the Tribunal sees it primarily as a compensatory regime.
Based on the US experience, distribution to UK class members will be challenging, particularly when the details of class members are unknown to the representative or defendants. However, communicating with class members early once certification is
granted would help to encourage class members to register their interest on claims websites. Traditional media has proven to be highly effective in raising awareness of collective proceedings and encouraging consumers, businesses and investors to opt in to legal actions and register their interest in opt out claims.
When we launched the VW dieselgate legal action in 2017, one of the largest GLOs in English legal history, the media coverage generated in the national press, radio and broadcast news was by far the most effective channel for bookbuilding from a volume and cost perspective.
Consumers who arrived at the claim website via traditional news websites were four times more likely to instruct solicitors than those who had clicked on an online ad or sponsored search.
Claimant acquisition costs across digital marketing including social media posts were also significantly higher because the costs of digital advertising quickly add up and visitors from these channels had lower conversion rates.
Despite the rise in social media, traditional media is far from dead: Subscriptions to the Financial Times have risen by 17% in the last year and each week, over 40 million people in the UK read a newspaper either online or in print. News articles are effective not only because of their broad reach but also because they have the space to explain highly complex claims including what a case is about, the alleged wrongdoing and who is affected. And perhaps most importantly, an article can help to endorse a claim.
Social media plays an important role in bookbuilding and is useful for targeting certain groups however it is less trusted than traditional media.
With one in 10 Britons having been the victim of a scam or identity theft in the last 12 months, it is not surprising that individuals are reluctant to click on an advertisement that says they may be entitled to £10 or £100 in compensation. A claim being written up in the Financial Times or The Times on the other hand provides confidence that a legal action being brought on their behalf is legitimate, so getting the balance right between the various communications channels is key.
However, PR needs to be strategic and targeted to be effective. If class members are retail businesses, focusing on tabloid media alone like The Sun and The Mirror is unlikely to reach the decision makers who will join the claim. There are also articles where claims are poorly explained and highly confusing.
Competition cases are complex, so it’s important for lawyers, class representatives and their PR advisors to spend time with journalists to ensure they properly understand the claims and have their facts right.
The journalists at the national media who cover these claims are not legal experts, and even legal and court reporters need the case to be explained to them. This time with journalists will be well spent and it is far harder to correct an article after it has been published.
Lastly, engaging with the class only after there has been a settlement or judgment could be too late. If the purpose of communicating with the class is to raise awareness of the claim, ensure that the claim is perceived as credible and maximise distribution, then starting early is crucial to building trust with class members. The same is true for representative actions because when settlements are reached, the terms are often confidential and come with strict communications restrictions.
Ensuring that all communications with class members are joined up from the beginning will also help to build trust. Whether through traditional or social media, messaging needs to be consistent and the customer journey should be efficient and reassuring so that claimants know they are in the right place and not at risk of being scammed.
Putting money back into the pockets of class members needs to be prioritised to ensure that this opt out ‘experiment’ as Sir Marcus Smith described it doesn’t fail. It is a new regime, so class representatives, law firms and litigation funders must communicate with class members early on in the litigation to help overcome scepticism and inertia and encourage class members to receive what is owed to them.
Keidan Harrison specialises in dispute resolution and insolvency.
We act for international and UK businesses, high-net-worth individuals (HNWI) and insolvency practitioners. Our approach is partner-led and highly personalised, ensuring our clients’ needs are met every step of the way. Our partners have been trusted by clients for many years to assist them on substantial and often challenging cases. They have a reputation for their entrepreneurial, dynamic and commercial approach, as well as their technical expertise.
We are proud to be associated with the Disputes community and delighted to be a supporting partner to ThoughtLeaders4. We look forward to sharing our unique perspectives and expertise more widely with the various stakeholders in the community. By connecting through this platform, we hope to broaden the debate on the impact of legal developments, share our perspectives on how the law and practice of disputes in England & Wales are evolving and connect with fellow lawyers and businesses.
Finding common ground, even with opponents, is at the heart of any successful settlement strategy. With our colleagues in the Disputes community, we look forward to exploring common ground about best practice and long overdue reform in a post-pandemic disputes landscape.
WINNING BEFORE THE GAVEL
INJUNCTIVE RELIEF IN UNFAIR PREJUDICE DISPUTES AND LESSONS FROM GAROFALO V CRISP [2024] EWHC 1737 (CH)
In English corporate law, unfair prejudice claims serve as a crucial mechanism for protecting the interests of minority shareholders.
These claims provide shareholders with the right to seek redress when a company’s affairs are being (or in some instances are about to be) conducted in a manner that is unfairly prejudicial to their interests.
One of the most immediate and powerful remedies available in such claims is injunctive relief. When effectively utilised, injunctive relief can provide a significant strategic advantage.
The recent case of Garofalo v Crisp [2024] EWHC 1737 (Ch) where the applicant secured an interim injunction forcing a change of the board on an ex parte basis serves as a contemporary illustration of how this remedy can be strategically employed, in some instances avoiding the need for a contested trial entirely.
Understanding Unfair Prejudice Claims
Unfair prejudice claims arise when the conduct of a company’s affairs by the majority shareholders or directors unfairly harms the interests of one or more minority shareholders. This harm may manifest in various ways, such as the exclusion of a shareholder from management, dilution of shareholding, or the misuse of company assets.
The remedies available in such cases are diverse and include orders for the purchase of shares, damages, or alterations to the company’s articles of
association. However, in most cases these remedies must await trial and they do not protect the interim position. One of the most powerful alternatives is injunctive relief which can be sought on an interim basis before trial.
The Role of Injunctive Relief in Unfair Prejudice Claims
Injunctive relief is a court order that either compels a party to do something (mandatory injunction) or restrains them from doing something (prohibitory injunction). In the context of unfair prejudice claims, injunctive relief can serve several strategic purposes:
Authored by: Jonathan Smart (Partner) and Kamil Piekarski (Associate) - Shoosmiths
1. Preservation Of The Status Quo: One of the most common uses of injunctive relief in unfair prejudice claims is to maintain the status quo pending the resolution of the dispute. This is particularly important in cases where there is a risk that the majority shareholders may take actions that would further harm the interests of the minority shareholder, such as diluting a shareholding or selling key company assets. By securing an injunction, the minority shareholder can prevent such actions, preserving their position until the court has an opportunity to adjudicate the underlying issues.
2. Secure The Management Of The Company Whilst The Claim Is Ongoing; The court can order the company to change its constitutional documents and resolutions or halt management changes from being made. At the lower end of the spectrum the Courts have ordered a single meeting be held1, but in more extreme instances the court went so far to set out a code of conduct for future company business.2 If the management of the company is secure this may encourage the majority shareholders to come to the negotiating table and possibly avoid the need for a contested trial.
3. Mitigating Delay Tactics: Majority shareholders may sometimes employ delay tactics to wear down the minority shareholder, hoping they will abandon their claim before trial due to financial or emotional exhaustion. Injunctive relief can counter these tactics by providing swift interim relief, preventing the majority from dragging out the process and causing further harm to the minority’s interests. In some circumstances particularly involving share issuance or potential dilution that are time sensitive might avoid the need for a protracted trial entirely.
Garofalo v Crisp: A Case Study
Garofalo v Crisp is a useful example of how injunctive relief can be used strategically in unfair prejudice claims. In this case a minority shareholder succeeded in obtaining an order forcing an entirely new board pending trial.
The petitioner alleged that Crisp, the majority shareholder and director, was conducting the company’s affairs in a manner that was unfairly prejudicial to his interests. The core of Garofalo’s claim revolved around Crisp’s decision to enter into transactions that were in breach of Russian sanctions.
Recognising the potential for irreversible damage, Garofalo swiftly applied for an interim injunction. The court granted the injunction, removing one director from the companies and installing an entirely new board on an interim basis without necessitating going to trial. What is perhaps even more surprising is that it did so on a without notice application and the director was removed without becoming aware of the application. This outcome illustrates how the strategic use of injunctive relief can shift the dynamics of a dispute, giving the minority shareholder a significant advantage.
The case was exceptional in the sense that the court was only willing to grant the injunction because there was a high degree of certainty that the petitioner would succeed at trial.
2. Balance Of Convenience: The court will also consider the balance of convenience—whether the harm caused to the minority shareholder by refusing the injunction outweighs the harm caused to the majority shareholders by granting it.
3. Adequacy Of Damages: The court typically refuses an injunction if damages would be an adequate remedy. Garofalo successfully argued that financial compensation alone would not suffice, given the irreversible nature of the harm that would be caused by the transactions. This has also been considered in cases where there has been a share issuance/dilution where either a minority shareholder is not permitted to participate or where one shareholder is offered shares on preferential terms.
4. Undertaking As To Damages: Courts often require the party seeking an injunction to give an undertaking to compensate the other party for any losses suffered as a result of the injunction if it later turns out that the injunction should not have been granted. Garofalo’s willingness to provide such an undertaking demonstrated his confidence in the merits of his case and his financial capacity to back it up.
5. Timeliness: Injunctive relief will only be effective when sought promptly.
Conclusion
Strategic Considerations
While injunctive relief offers powerful advantages, its strategic use requires careful consideration. Several factors need to be borne in mind:
1. Likelihood Of Success: To secure an injunction, the claimant must demonstrate a strong prima facie case—that is, a case that appears likely to succeed at trial. Garofalo’s ability to present compelling evidence of Crisp’s actions and their likely prejudicial impact was crucial in convincing the court to grant the injunction.
Garofalo v Crisp illustrates the strategic importance of injunctive relief in unfair prejudice claims under English law. When deployed effectively, as in Garofalo’s case, injunctive relief can avoid the need for a contested trial entirely. However, its effectiveness depends on careful legal analysis, timely action, and a clear understanding of the risks involved. By leveraging injunctive relief judiciously, minority shareholders can secure a significant strategic advantage.
COVID-19 made virtual hearings a norm. ChatGPT with its nearly 100 million users a week has made generative AI a norm. There is already evidence of Judges and lawyers alike using ChatGPT to assist with their cases. US AI court-saga; of US judges using AI to interpret terms and US lawyers using ChatGPT to write submissions are prime evidence of this. Point is, AI is no longer a futuristic ideal.
AI has managed to seamlessly integrate itself into behind-the-scenes litigation practice. AI can enhance efficiency, reduce costs and make the process of litigation preparation more accessible to lawyers and clients alike.
AI can assist with document review, disclosures, legal research, summarising documents, and data analysis without disputing the existing process. Lord Reed for instance, in his lecture on “Oral Hearings in the United Kingdom Courts: Past, Present and Future” in 2023 called AI the “next major development” in in litigation. This article will look at how AI can assist in case preparations making the process smoother and more accessible, which will eventually lead to AI becoming an integral part of the litigation process.
How Can AI Assist With Case Preparation?
Bundling/Collaborative Platforms
One of the main aspects of case preparations is creating the case bundle containing all the documents, this is a cumbersome process of manual labour including several rounds of amendments and edits. Traditionally, this involves hours of leg work, the creation of separately tagged physical bundles for every party involved in the case and manual amendments for every bundle, as and when required.
It is also extremely difficult to only give partial access to content in the bundle without manually perusing the documents and physically removing them from the bundle with traditional methods.
This is where AI comes in; AI can make the process of creating your case bundle extremely convenient. Virtual bundling platforms such as TrialView act as comprehensive workspaces where all case-related documents are stored, updated, and accessed by authorised personnel in real-time from one platform. In this platform, documents can be tagged and amended as needed, parties can interact with the documents individually or collaboratively work on them. Document editing can be personalised for each party involved in the case and the access can be restricted based on the level of permission allowed to a particular individual. The creation of confidentiality rings in the platform based on permissions granted to specific groups/ individuals makes disclosures much more efficient.
All of this can be done almost at a click of a button (perhaps several clicks). This virtual bundle can also be shared with judges making it much easier for not just lawyers but also for judges to engage with the case material from a single platform.
E-Discovery
There is already a significant increase in the sheer volume of data involved in discovery since the interlocution of e-discovery. AI makes it easier to access this discovery, retrieve content, and highlight contradictions in the plethora of documents used in litigations.
Administrative Aspects
AI can further enhance these collaborative platforms by automating routine tasks such as scheduling, deadline reminders, and even generating case timelines. For instance, an AI can automatically update a case timeline when new evidence is added or when court dates change, ensuring that stakeholders stay informed without manual intervention. This level of automation reduces administrative burdens and allows legal professionals to focus on more strategic aspects of litigation.
Ai In Cross-Examination
There is a possibility to use AI to prepare cross-examination questions. There are already counsels who have spoken about getting AI’s aid when creating potential cross-examination questions and improving the quality of their questions. These insights indicate the value of AI not just as a tool to assist with logistical and written aspects of cases but also with oral aspects of case preparation.
Furthermore, AI can be used in cross-examination to identify contradistinctions in real-time. In cases involving voluminous amounts of documents, AI could identify contradictions that might even go unnoticed or take a significant amount of time to identify. Think of this as a counsel, whose iPad gives them feedback on contradictions made by witnesses while the cross-examination is ongoing. Counsel will be able to access thousands of documents/data points in a matter of seconds, making the process much more thorough.
Predictive Analysis
Furthermore, AI tools provide insights that were previously unattainable, such as predictive analytics that forecast case outcomes based on historical data. These AI platforms can analyse past court decisions to help lawyers understand how certain judges might rule or how opposing counsel might behave, allowing for more informed strategy development.
AI and Timelines
AI also can search and retrieve the necessary documents fed into the platform and even create timelines of evidence with links to the source documents. These timelines can be a useful tool when drafting submissions later. AI can even spot certain facts which a counsel might miss. While verification of these data is a must due to potential accuracy issues, this makes the initial workload of a lawyer much less burdensome.
Legal Research
AI has already made legal research much more accessible to even inexperienced practitioners. Although past experiences have taught us that a lack of AI literacy could lead to hallucinations and errors, the value of AI in making legal research more efficient cannot be easily disregarded. For instance, Canadian courts have actively encouraged the use of AI in legal research to reduce costs. One of the most important benefits of AI is that, while traditional legal research tools are quite good at narrow and focused research, AI can understand legal search queries in plain English using machine learning algorithms and provide more comprehensive outcomes. They also have access to a broader data pool and the ability to peruse this data without the constraints of narrow search parameters of traditional models. It can also efficiently summarise content reducing the lawyers’ workload, particularly that of the junior associates.
Is AI Risky?
While the benefits of AI in litigation are substantial, it’s important to address the challenges. Concerns about data privacy, algorithmic biases, and the ethical use of AI must be carefully managed.
Legal professionals need to ensure that AI tools are transparent and that their use complies with legal standards and professional regulations.
Moreover, the adoption of AI requires investment not just in technology but also in training. Lawyers and staff must understand how to use these tools effectively and interpret their outputs accurately.
In the near future, AI won’t just be an added advantage; it will be a fundamental part of legal operations. As AI continues to integrate into legal workflows, it sets new standards for how legal work is conducted and how value is delivered to clients. Embracing AI is not just about staying current with technological trends; itis about reimagining the practice of law to be more proactive, data-driven, and client-focused. Legal professionals who embrace AI will be better equipped to deliver value, manage larger caseloads, and offer more competitive services. Clients are also beginning to expect this level of sophistication, seeking law firms that leverage technology to provide faster and more cost-effective solutions.
60-SECONDS WITH:
STEFANO BRASCHI BARRISTER SERLE COURT
Q Imagine you no longer have to work. How would you spend your weekdays?
A I used to spend a lot of my time painting. That passion sort of fell away during and after university but I have started being more disciplined, taking up classes and committing myself to spending a little time each weekend doing something that is incredibly calming. I forgot how much I loved it. With more time to spare I would develop that further, travel to new places to paint landscapes and people. But I’d still find time to walk my dog and eat delicious food. What would life be without good food?
Q What do you see as the most rewarding thing about your job?
A Solving problems, each one different from the last. People come to you expecting a solution, but there isn’t always an obvious answer at the tip of your fingers right away. The process can be long, daunting and at times overwhelming. But working with a team of people to develop and deploy an effective strategy in the best interests of your client, finding your way to a positive resolution, that is always a rewarding process.
Q What book do you think everyone should read, and why?
A Michael Chabon’s The Amazing Adventures of Kavalier and Clay. It was recommended to me when I was in Berlin many years ago. I couldn’t put it down. It made me laugh, cry, get totally lost and inspired. It was the first gift I gave my partner, and here we are 11 years later, married. So… I suppose it’s a good luck charm too.
Q What legacy would you hope to leave behind?
A As long as people remember me as someone who was a good friend, and someone who knew how to have a good time, that’s more than enough for me.
Q Do you have any hidden talents?
A Whatever they might be, I like to think that they’re in there somewhere, waiting to surprise me one day!
Q What’s the most important quote you’ve heard that you have adapted to your personal or professional life.
A Take the work seriously, not yourself.
Q Is there anything you want to do/achieve that you haven’t already?
A I would like to visit the Amazon. I have travelled to South America but never to Brazil, and it’s right at the top of my bucket list.
Q What piece of advice would you give to your younger self?
A Be braver, sooner.
Q Where has been your favorite holiday destination and why?
A Not really as a holiday destination, but the three months I spent in Cuba before my final year of university made me fall in love with the country and the people I met there. It’s an incredible place. As a pure holiday destination, I would pick Baja or Sardinia.
Q Dead or alive, which famous person would you most like to have dinner with, and why?
A Perhaps Leonardo da Vinci. All round renaissance man, artistic genius, lover of animals and good times. The perfect dinner party companion.
Q What’s your go to relaxing activities to destress after a long day at work?
A Eating my favourite food and collapsing in front of a good series. Recent choices include ‘We Might Regret This’ and ‘The Penguin’.
Q What brings you the most joy.
A Travelling. And spending time with my friends.
Q What has been a ‘stand out’ moment for you this year?
A In June of this year I completed the postgraduate Diploma in Intellectual Property Law and Practice at Oxford University. The course was fantastic; I really enjoyed covering the material, spending time in Oxford and meeting some great people amongst the cohort. It was very demanding alongside regular practice, so getting through it with a result I could be proud of feels like a substantial achievement. I hope it will serve me well in building my practice moving forward.
...impress both as active participants in major pieces of litigation and as thought leaders in the international dispute resolution market.
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CONFLICTS OF INTEREST IN INTERNATIONAL ARBITRATION: 2024 IBA GUIDELINES
Authored by: John Olatunji (Associate) - Charles Russell
In international arbitration, arbitrators are required to make disclosures to allow parties to identify and assess potential conflicts of interest and institutions and national courts to address challenges properly. However, this exercise can be difficult, as conflicts questions may be nuanced, and answers are typically case-specific. Accordingly, the IBA Arbitration Committee published guidelines on the subject initially in 2004, titled “IBA Guidelines on Conflict of Interest in International Arbitration” (the “Guidelines”), which included the “General Standards and Explanatory Notes on the Standards” (the “General Standards”) that were developed to be the primary source for evaluating the existence of conflicts of interest.
The Guidelines also listed specific situations, designated Red, Orange, and Green Lists (the “Application Lists”) with the aim of illustrating the General Standards, assisting arbitrators in making their disclosures, and aiding parties in assessing whether
disclosed information may be such as to create a doubt as to the arbitrator’s independence and impartiality. For the situations on the Red List, a conflict of interest is understood to exist.
An arbitrator should decline appointment or refuse to continue to act in circumstances described in the Non-Waivable Red List. The Waivable Red List covers situations that may be considered as waivable, but only if and when the parties, being aware of the situation, expressly state their willingness to have such person act as arbitrator.
The situations on the Green List are understood not to create a conflict of interest or appearance thereof. The situations on the Orange List may, depending on the facts of a given case, give rise to a justifiable doubt in the eyes of the parties and must therefore be disclosed.
The Application Lists were updated in the 2014 revisions to the Guidelines, and, in this round of revisions by the IBA Arbitration Committee, both the General Standards and Application Lists have been further updated. This article will explore the updates. As before, the Guidelines are to supplement and not override any applicable national law, arbitral rules, codes of conduct, or other binding instruments chosen by the parties.
Speechlys
Key Updates To The Guidelines:
1) General Principle (General Standard 1): The explanatory note has clarified that the obligation for the arbitrator to be impartial and independent of the parties ends when the arbitral tribunal has rendered its final award (and any correction or interpretation as may be permitted under the relevant rules has been issued, or the time for seeking the same has elapsed, the proceedings have been finally terminated (for example, because of a settlement), or the arbitrator otherwise no longer has jurisdiction) and does not extend to the time period during which the award may be challenged before any relevant courts. If after setting aside or other proceedings, the dispute is referred to the same arbitral tribunal, a fresh round of disclosure and review of potential conflicts of interest will be necessary.
2) Conflicts Of Interest (General Standard 2): The explanatory notes have added guidance on when an arbitrator must decline an appointment or refuse to continue to act, noting that “the arbitrator should bear in mind the objective standard to evaluate the relevant facts or circumstances. An arbitrator must decline an appointment or refuse to continue to act…because an objective conflict of interest exists unless that objective conflict is waived…. When justifiable doubts exist, an arbitrator should decline appointment or refuse to continue to act, for example in circumstances described in the Non-Waivable Red List. However, the existence of justifiable doubts may instead lead the arbitrator to make a disclosure…such as in circumstances described in the Waivable Red List.”
3) Disclosure By The Arbitrator (General Standard 3): More flesh has been added to this standard, as follows:
a) Subject to the arbitrator’s duty to investigate under the Guidelines, in determining whether the facts or circumstances should be disclosed, an arbitrator should take into account all facts and circumstances known to the arbitrator.
b) If the arbitrator finds that the arbitrator should make a disclosure, but that professional secrecy rules or other rules of practice or professional conduct prevent such disclosure, the arbitrator should not accept the appointment, or should resign.
c) An arbitrator’s failure to disclose certain facts and circumstances that may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence does not necessarily mean that a conflict of interest exists, or that a disqualification should ensue.
4) Waiver By The Parties (General Standard 4): This standard has been extended to include General Standard 4(a)(ii), which has helpfully clarified that a party shall be deemed to have learned of any facts or circumstances that a reasonable enquiry would have yielded if conducted at the outset or during the proceedings.
5) Relationships (General Standard 6): This standard has been extended to include General Standard 6(c), which explains that any legal entity or natural person over which a party has a controlling influence may be considered to bear the identity of such party. The
explanatory note to this standard has also been updated to guide parties and arbitrators on when their relationships may or could raise concerns of conflicts, as follows:
a) As a general proposition, a law firm for conflict purposes is any firm in which the arbitrator is a partner or with which the arbitrator is formally associated, including in the capacity of an employee of any designation, as counsel, or of counsel. Structures through which different law firms cooperate and/or share profits may provide a basis for deeming an arbitrator to bear the identity of such other firms. Similarly, although barristers’ chambers should not be equated with law firms for the purposes of conflicts, disclosure may be warranted in view of the relationships between and among barristers, parties, and/or counsel.
b) With respect to companies, where a parent company is a party to the proceeding, its subsidiary may be considered to bear the identity of the parent company when the parent company has a controlling influence over it. The same result is obtained for natural persons. For example, if a natural person is a party to the proceeding, that person’s closely held company, over which he or she has a controlling influence, may be considered to bear that person’s identity.
c) With respect to states, their organisation typically comprises separate legal entities such as regional or local authorities or autonomous agencies, which may be legally and politically independent from the central government. Such relationships are not necessarily covered by the criteria of “controlling influence” or “direct economic interest”. Because the relationships between such entities vary widely, a catch-all rule is not considered appropriate. Instead, the particular circumstances of the relationship and their relevance to the subject matter of the dispute should be considered in each individual case. Thus, whenever a state or a state entity, subdivision, or instrumentality is party to
the arbitration, even when the status of such entity is disputed, the arbitrator should consider disclosing relationships with entities such as regional or local authorities, autonomous agencies, or state-owned entities, irrespective of whether they are part of the organisation of the state or have a private status, and vice-versa.
6) Duty Of The Parties And The Arbitrator (General Standard 7): This standard now requires parties to undertake “reasonable enquiries” and provide all relevant information available to them in order to comply with General Standard 7(a), which sets out the information that the parties are required to provide to avoid conflicts of interest and foster comprehensive disclosures. There are two additions to the types of relationships that need to be disclosed: (a) a person or entity over which a party has a controlling influence, and (b) any other person or entity that an arbitrator should take into consideration when making disclosures in accordance with General Standard 3.
In addition, the explanatory note to this standard now provides that, when providing the list of persons or entities the parties believe an arbitrator should take into consideration when making disclosures, the parties are required to explain the relationship of these persons and entities to the dispute. Also, counsel advising on or appearing in the arbitration must be identified by the parties at the earliest opportunity. A party’s duty to disclose the identity of counsel advising on or appearing in the
arbitration extends to all members of that party’s counsel team and arises from the outset of the proceedings.
7) Updates To Waivable Red And Orange Lists: Parties are unable to waive conflicts that arise in cases where an arbitrator’s firm or employer derives “significant income” from past or ongoing work for a party or its affiliate. However, paragraph 2.3.1 of the Waivable Red List clarifies that, when an arbitrator advises a party but does not derive significant financial income from the engagement, the arbitrator may make a disclosure, and the parties to the arbitration can decide to waive the conflict of interest.
The Orange List has also been updated to include instances where (a) the arbitrator has, within the past three years, been appointed to assist in mock-trials or hearing preparations on two or more occasions by one of the parties, or an affiliate of one of the parties in unrelated matters, (b) the arbitrator currently serves, or has acted within the past three years, as an expert for one of the parties, or an affiliate of one of the parties in an unrelated matter, (c) an arbitrator and counsel for one of the parties currently serve together as arbitrators in another arbitration, (d) an arbitrator and his or her fellow arbitrator(s) currently serve together as arbitrators in another arbitration, or (e) the arbitrator has publicly advocated a position on the case through social media or on-line professional networking platforms.
Conclusion
The updated Guidelines provide helpful clarifications reflecting changes to modern practice. Despite being non-binding, the Guidelines remain internationally accepted standards of soft law and of best practice in international arbitration matters, in assessing arbitrators’ independence, impartiality and disclosure duties.
PART 26A RESTRUCTURING PLANS
Authored by: Michael Mulligan (Partner) - Haynes and Boone
We predicted1 ground-breaking cases for restructuring plans as they evolve alongside parallel proceedings in various jurisdictions, and 2024 has not disappointed. Only this week, Thames Water, Britain’s biggest water supplier, has launched a restructuring plan to address its US$19.6 billion of debt with the sanction hearing anticipated to take place in January 2025.
In this article, we discuss the lessons learned after a raft of restructuring plan decisions from the English court this year including the Court of Appeal’s landmark decision in Adler, a German property group.
Directors will likely use a restructuring plan to restructure their company’s balance sheet where the underlying business is viable but for the existing debt burden.
A restructuring plan does not necessarily need to be approved by all of the creditors so can be a useful option when dissenting creditors that are not ‘in the money’ are preventing a consensual restructuring or other formal compromise arrangement. Because the creditors do not vote together, but in classes, even large individual debts cannot block a restructuring plan where the relevant conditions are met.
What Is A Restructuring Plan?
Restructuring plans have been available since June 2020 and enable a company to propose a compromise or arrangement to its creditors that can bind secured creditors, unsecured creditors, dissenting creditors and compromise members’ rights.
Lessons Learned From The Emerging Case Law
Following Adler, the UK restructuring market eagerly awaited the outcome of the restructuring plans for global
construction and engineering group, McDermott. Indeed, the English court presided over two packed courtrooms for the duration of McDermott’s sanction hearing. Lasting six days, McDermott’s hearing was the longest sanction hearing to date. It was also the first Part 26A restructuring plan to compromise an ICC arbitration award, and the first time a Dutch WHOA had been successfully combined with the English restructuring plan.
McDermott and, very shortly after, another German real estate group, Aggregate, put the Court of Appeal’s guidance from Adler into practice. These cases demonstrate that the use of parallel proceedings offers greater flexibility to debtor companies with international operations and certainty of outcome in those jurisdictions.
A few lessons learnt from the recent jurisprudence are:
• Cost And Complexity. Formal challenges to restructuring plans in which a cross-class cram down is proposed are increasingly common and the parties must be on a litigation footing from day one. Cross-border cases are becoming more complex and expensive than ever. Mr Justice Green was “horrified” by the $150 million spend on professional fees in McDermott and was concerned that costs of this magnitude may
prevent the sort of restructurings that the legislature had envisaged under Part 26A. As things stand, it is difficult to see restructuring plans becoming commonplace for small and medium-sized enterprises in UK due to the expense, although several plans (at varying debt levels) have been sanctioned e.g. Houst, a property management services company. There is certainly room for procedural reform such as slim lining the process to a single court hearing for SMEs and generally narrowing the issues to be decided by the judge at the sanction hearing.
• Leverage The Courts. The facts of McDermott in particular were unique. Unprecedented settlement negotiations took place throughout the UK sanction hearing, which did not cut across the “relevant alternative” to the plan, i.e., liquidation. Those without prejudice discussions were played out before the English judge who had initially expressed a “lot of sympathy” for Reficar’s position, which evaporated as Reficar failed to accept McDermott’s offer in a timely manner (on terms it had originally sought).
• English Jurisdiction Issues. The Adler ruling provides that the English court does not have jurisdiction to sanction a Part 26A plan which compromises stakeholders’ rights for zero consideration. Rather, the plan must constitute a “compromise or arrangement” with every class involved. This low jurisdictional threshold was met in both McDermott and Aggregate. Plan companies will, however, continue to push the boundaries on this issue and further clarification is needed from the English Court.
• Relevant Alternative Analysis. In McDermott, the relevant alternative to the proposed plan was a key battleground. There must be “real substance” to an assertion by the plan company that liquidation is most likely to occur. McDermott satisfied this evidentiary burden with testimony from credible witnesses that without the contemplated restructuring, McDermott would immediately liquidate with adverse consequences, not only for itself, but for its many employees and project partners.
• Fairness Analysis. The views of “out of the money” stakeholders are not relevant when determining “fairness” under a Part 26A plan (Aggregate following Adler). In McDermott, Reficar’s arguments as to unfairness were undermined by the substantial offer of equity which it received. Substantial fairness must be done and going forward what is a fair allocation of benefits to stakeholders overall will continue to be looked at carefully by the English court.
• Centre Of Main Interests Issues. Evidence that COMI migration is in the best interests of stakeholders and the plan company will be tested in appropriate cases, but Mr. Justice Richards was untroubled by the issue in Aggregate.
• Extending Letters Of Credit. McDermott’s foreign plans included the first Part 26A plan to extend the maturity dates of letter of credit facilities. There was no express consideration of the extensions by the English court so this may be another area where we may see some further argument.
• Landlord Compromises. The clothes retailer Superdry, the Revolution Bars pub group and most recently the Cineworld chain have all used restructuring plans to compromise landlord liabilities, as well as dealing with other classes of creditors. In the Cineworld case, two landlords sought injunctions to remove certain leases from the plans on the basis that the landlord and Cineworld had earlier entered into side letters whereby it was agreed that Cineworld would not seek to compromise the leases further by including them in a restructuring plan. The injunction was refused and the landlords were “crammed down”. Cineworld’s position had deteriorated more than expected and there was a requirement to treat creditors equally. However, the English court did grant one of the landlords permission to appeal the decision.
• HMRC’s Position. HMRC enjoys secondary preferential creditor status in relation to certain taxes and has successfully opposed restructuring plans in Nasmyth and Great Annual Savings. HMRC has since issued guidance on when it will support restructuring plans, which it did in Revolution Bars.
• Each Case Is Unique And Consent Helps. McDermott’s application for enforcement and recognition of its foreign plans was unopposed in its U.S. Chapter 15 Cases. The U.S. Court carefully considered the consensual nature of the foreign plans, and the different approaches to priority taken when compared to the U.S. approach. The U.S. Court explicitly “reserved the right to think about things differently” in subsequent Chapter 15 cases.
• Non-Consensual Third-Party Releases. In the U.S., one of the most significant issues bankruptcy and restructuring practitioners are currently facing is non-consensual third-party releases. The U.S. Supreme Court’s recent ruling in Harrington v. Purdue Pharma (144 S.Ct. 2071) prohibits nonconsensual third-party releases in U.S. Chapter 11 plans. This opinion does not directly address whether a U.S. court may extend comity to, and thus enforce, an order granting non-consensual third-party releases entered by a foreign court in a non-U.S. proceeding. This question remains open.
The final point to note is that a restructuring plan will take time to negotiate, document and implement. The English court has made it very clear that you must ensure you start the restructuring plan process while you have time to agree and implement the plan. The English court will not be held to hostage.
Haynes Boone acted for a significant stakeholder in the McDermott case and were assisted by Wijn & Stael Advocaten in the Netherlands. Our restructuring attorneys are regularly instructed on cross-border and international insolvencies. Should you wish to discuss any issues arising from this article, please do not hesitate to contact one of the team.
Co-written and credit to Charlotte Mullis (Associate) and Martha Wyrick (Associate).
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NATIONAL CRIME AGENCY IN THE SPOTLIGHT
UNLAWFUL DECISION NOT TO INVESTIGATE WHETHER CHINESE MANUFACTURED COTTON GOODS IMPORTED TO UK WERE THE PRODUCT OF FORCED LABOUR
Authored by: Simon Boschat
The Court of Appeal has recently considered, on appeal, a judicial review application brought by World Uyghur Congress (“WUC”) against the National Crime Agency (“NCA”) on whether it misdirected itself in law when reaching decisions (i) not to investigate alleged offences under Part 7 of the Proceeds of Crime Act 2002 (“POCA”) and (ii) not to commence a civil recovery investigation under Part 5 of POCA, in respect of certain cotton products brought into the UK from China and monies derived from or connected to their purchase - R. (on the application of World Uyghur Congress) -v- National Crime Agency [2024] EWCA Civ 715.
The Court of Appeal overturned the decision of the High Court and held that the NCA’s decision not to investigate was unlawful, and the question of whether to investigate should “be remitted to the NCA for reconsideration”.
The decision is an important one as it confirmed that criminal conduct in a supply chain can attract liability for money laundering offences under POCA and a low threshold will apply for investigations to be initiated.
This decision may have significant impact on many UK organisations.
Background
WUC is a non-governmental body which promotes the interests of the
Uyghur people, a Turkic ethnic group primarily resident in the Xinjiang Uyghur Autonomous Region (XUAR) of China.
WUC had originally submitted a ‘substantial body of evidence’ to the NCA alleging criminal activity regarding forced labour and human rights abuses in the XUAR cotton industry. Its aim was to persuade the NCA to commence an investigation into whether cotton products manufactured in XUAR and imported into the UK were the product of criminal activity.
It was not disputed that there was a diverse, substantial, and growing body of evidence that serious human rights abuses, including forced labour, are occurring in the XUAR cotton industry on a large scale. The unchallenged evidence before the court was that 85% of cotton grown in China comes from the XUAR.
The NCA also accepted that products derived from forced labour occurring anywhere in the world can amount to “criminal property” for the purposes of
(Senior Associate) and Moya Clifford (Legal Director) - Hill Dickinson
a money-laundering offence in Part 7 of POCA, or “recoverable property” for the purposes of civil recovery in Part 5 of that Act. It was agreed that funds from the sale of such products, and any property into which such funds were put, could also be criminal property or recoverable property.
Nevertheless, despite the evidence submitted by WUC, the NCA said it would not investigate whether cotton consignments originating from XUAR were the product of forced labour or other human rights abuses. The NCA provided two principal reasons for not investigating, namely:
1. That an investigation could not begin until a ‘specific product’ was identified as criminal property; and
2. Where ‘adequate consideration’ is paid for criminal property, an exemption from liability under section 329(2)(c) of POCA would apply, meaning that the product was ‘cleansed’ and free to be bought and sold without consequence in the UK.
WUC challenged the NCA’s decision not to investigate in a judicial review but lost at first instance in the High Court. WUC appealed that decision to the Court of Appeal.
Further, whilst s.329(2)(c) of POCA would protect someone who has acquired, used or had possession of criminal property for adequate consideration (even if they know it is criminal property), it would not protect them if, for example, they transferred it to someone else, or took it out of the country in the knowledge that it was criminal property.
The Court of Appeal also stated that it is not necessary to establish criminal conduct or criminal property before an investigation can begin under POCA. Insufficient evidence to prosecute at the time the goods were imported should not preclude the launch of an investigation. Otherwise there would be a real risk that enforcement agencies would be discouraged from investigating potential corruption in the absence of upfront “concrete evidence of particular crimes carried out by particular persons.”
The decision also comes at a time when ESG concerns are being increasingly prioritised by company shareholders and other stakeholders. Group actions have already been commenced by shareholders against companies for alleged non-disclosure of serious ESG related issues (including alleged labour rights violations in supply chains). Such claims are only expected to increase as more light is shone on supply chains and working practices. Taken together with the Court of Appeal’s ruling in the WUC case, companies will have every incentive to look seriously at their operations and take steps to avoid unlawful activity occurring in their supply chains.
What Should UK Companies Do Now?
This case reiterates the need for organisations to be increasingly vigilant when importing products or operating in potentially high-risk areas. Companies should:
1. Take action to ensure policies, due diligence and risk assessment measures are stress-tested and fit for purpose.
Implications of the Decision
Court of Appeal Decision
In allowing the appeal and quashing the NCA’s original decision, the Court of Appeal held that the High Court decision was wrong in law in appearing to accept that goods would not be tainted by criminality “where the importer is paying market value for the purchased goods”.
The Court of Appeal clarified that the exemption from liability for certain money laundering offences in s.329(2)(c) of POCA “has no impact on the status of the property”. The fact that someone pays the market value for goods is not enough in and of itself to prevent those goods from being recoverable.
In order for criminal property to cease being recoverable, it must be acquired by someone in good faith, for value and who is not on notice that the property was obtained by unlawful conduct.
Following the Court of Appeal’s decision, the question of whether to commence an investigation into cotton imports from XUAR will be referred back to the NCA for reconsideration. However, whatever decision the NCA ultimately reaches in this case, the judgment potentially has far wider ranging consequences for businesses.
Businesses, especially those with complex and international supply chains, face a real risk of becoming embroiled in criminal investigations if they do not take steps to properly understand the impact of POCA on their operations.
In practice, this may require heightened due diligence in supply chains and divergence away from high-risk areas such as XUAR. A failure to comply with POCA could result in prosecution for potential money laundering offences and/ or having goods seized as criminal property.
2. Consider whether there is any known or suspected illegal conduct already in supply chains. Have concerns been raised internally or externally to put the company on notice of any potential unlawful activity? How confident is the company that its buying and selling arms do not have the requisite level of knowledge or suspicion that goods are the product of forced labour or other illegal activity?
3. Audit supply chains and consider diverging from any high-risk areas. Supply chain risks now require ever more careful consideration given the potential liability of any individuals involved and the significant reputational damage to an organisation that may result from any supply chain issues coming to light.
For further information on this topic or ESG disputes generally, please contact Simon Boschat1 and Moya Clifford2
This article was originally published by Hill Dickinson, click here3
Authored by: James Thomson (Director) - Mediatasks
The past year has highlighted significant challenges in the dynamic world of class action law, particularly around claimant engagement and trust.
Many firms have faced growing claimant apathy, which has impacted not only the legal process but also the outcomes for those involved. Addressing these challenges requires more than traditional methods; it demands a comprehensive and innovative approach.
In 2024, there has been a shift towards integrating advanced technologies and strategic innovations to tackle these issues head-on.
By leveraging AI capabilities and performance marketing strategies, firms have begun to see improvements in claimant engagement and trust.
These advancements have not only enhanced communication but have also fostered a sense of transparency and accountability that claimants value.
Reflecting on recent successes, it’s evident that these integrated solutions have made a tangible difference. From increased engagement to improved claimant satisfaction, the results speak
for themselves. Sharing these success stories serves as a testament to the power of innovation in overcoming traditional barriers in the legal sector.
Looking to the future, the commitment to continuous improvement and innovation must remain strong, even if it comes at the cost of billable hours. By focusing on claimants’ needs and fostering trust, legal teams can continue to evolve and set new standards for success. As we move forward, law firms must consider how these integrated approaches can help them address claimant challenges and achieve better outcomes in 2025.
apathy and trust deficits as the sector grows. These issues have been exacerbated by the complexities of legal proceedings and the often intimidating nature of legal jargon, which can alienate claimants and diminish their engagement.
As a result, many claimants have felt disconnected from the process, leading to lower participation and satisfaction rates.
Reflecting On The Past Year
Throughout 2024, collective actions have encountered significant hurdles, particularly with increasing claimant
Market dynamics have also played a crucial role in shaping claimant behaviour. With the rise of digital communication and the demand for transparency, claimants now expect more accessible and straightforward interactions. The legal landscape has seen a shift towards more claimantcentric approaches, emphasising clarity and trust-building measures. These changes reflect a broader trend towards enhancing claimant experiences by making legal processes more understandable and approachable. By acknowledging these challenges and adapting to the evolving market dynamics, the legal sector can better address claimant needs, fostering more robust engagement and trust in the process.
The Evolution of Integrated Solutions
While the transition to integrated solutions is still underway, the past year has seen promising developments in addressing claimant apathy and trust deficits. The journey has been characterised by a growing commitment to innovation and strategic adaptation, with a focus on integrating new technologies and methodologies to enhance claimant engagement.
One critical advancement has been the enhancement of AI capabilities like our own, which offers the potential for more personalised and efficient communication with claimants en masse.
This technology aims to enable firms to provide timely updates and precise information, thereby improving the claimant experience. Additionally, the adoption of performance marketing strategies is beginning to help reach and engage claimants more effectively, ensuring that communication is relevant and impactful.
These innovations are gradually improving the efficiency of claimant interactions and playing a crucial role in rebuilding trust. As legal teams continue to embrace these integrated solutions, they will be better equipped to meet claimants’ evolving expectations, fostering a more transparent and engaging legal process.
enhancements can be made in claimant engagement. For instance, we’ve been able to increase clients’ in-house engagement rates by 31%, showcasing the effectiveness of a more innovative, strategic approach in activating previously unresponsive prospects.
Financial outcomes using these techniques have also been noteworthy. One of our campaigns achieved a 2,606% return on investment, highlighting the economic benefits of these methods.
Positive feedback from claimants also emphasises restored trust and satisfaction, appreciating the instantaneous communication provided by AI, which ensures clarity and impact.
These results demonstrate the effectiveness of combining innovative AI solutions with established marketing practices like call centres, print media, and PR, setting a new benchmark for engagement and financial success in the legal sector.
Summing Up
Over the past year, significant achievements have been made in transforming claimant engagement, driven by a blend of innovative AI technologies and traditional marketing techniques. These comprehensive solutions have effectively addressed claimant apathy and trust issues, resulting in improved engagement rates and financial outcomes.
The success stories from the Diesel NOx Emissions cases highlight the potential of integrating modern strategies with established practices.
Looking Forward
As we look to the future, legal teams need to focus on innovation and improvement in addressing claimant apathy and trust issues. To achieve this, consider refining your strategies by integrating advanced AI technologies with proven marketing techniques. This blend can enhance claimant engagement by fostering transparency and trust, ensuring claimants feel valued and informed throughout the process.
Aligning with broader industry trends, it’s essential to prioritise claimant-centric services. As the legal sector continues to evolve, recognise the growing need for integrated solutions that combine technology with a personal touch and deep professional know-how.
Embrace these developments to contribute to more effective and empathetic interactions with claimants.
Success Stories from the Year
This past year has seen notable achievements, particularly in Diesel NOx Emissions cases. By integrating advanced AI technologies with traditional marketing techniques, significant
To move forward successfully, focus on delivering measurable outcomes and setting new standards for success and efficiency. By adopting these integrated approaches with many facets, legal teams can better meet the evolving needs of claimants, enhance satisfaction, reduce costs, and pave the way for continued success in the legal industry.
As we look forward, law firms must reflect on their experiences and embrace integrated, well-rounded approaches for continued success, recognising that it’s not about using a single system but rather a combination of tools, techniques and knowledge.
By doing so, they can enhance the satisfaction of their claimants and set new benchmarks in the legal industry for others to follow.
DIRECTORS, CREDITORS AND INSOLVENCY
INSIGHTS FROM RE BHS GROUP LIMITED
Authored by: Harry Bithell (Barrister) - Three Stone Chambers
The judgment in Re BHS Group Limited [2024] EWHC 1417 (Ch) is an important case for understanding the responsibilities owed by directors to companies during times of financial distress. This extensive 533-page ruling is the culmination of the protracted saga that followed the demise of BHS, a once-prominent UK retailer, which entered administration and subsequently liquidation shortly after the defendants were appointed as directors. The case will be of particular interest to insolvency practitioners, directors and those advising directors of companies facing financial difficulties.
transactions worsened the company’s financial position and that the former directors should have instead placed the company in administration. This article focuses on the wrongful and misfeasant trading claims brought by the Liquidators against the former directors.
In his judgment, the Judge held that Mr Chappell and Mr Henningson were jointly and severally liable to pay equitable compensation in the sum of £110,230,000.
Background
Following their appointment on 11 March 2015, the defendant directors, entered into a number of transactions that the Liquidators argued contributed to the collapse of the company. The Liquidators argued that entering those
Wrongful Trading
Wrongful Trading is a statutory cause of action under section 214 Insolvency Act 1986. The Liquidators had to establish that the former directors “knew or ought to have concluded” that there was no reasonable prospect of avoiding insolvent liquidation or administration.
The Judge said that this so-called ‘Knowledge Condition’ could be satisfied by proving actual knowledge or by showing that the former directors should have concluded that was the case.
The Judge also noted that if directors appreciate the company is insolvent but reach the conclusion, they can trade out of insolvency there must be a rational basis for that conclusion.
The Liquidators identified six possible dates starting on 17 April 2015 (a little over a month after their appointment) and ending on 8 September 2015 where the directors knew or should have known that the companies could not avoid insolvent liquidation.
In his judgment, dismissing all but one date, Mr Justice Leech found that by 8 September 2015 the former directors ought to have known that insolvent liquidation or administration was inevitable. The Judge recognised the reality that for directors the decision to put a company into liquidation is a difficult one and that the court should be slow to encourage directors to take
that step at the first sign of trouble. This re-statement of the reality in which directors of distressed companies may find themselves is to be welcomed.
One of the most important considerations in the context of the Wrongful Trading claims was the impact of professional advice. It was argued that where directors have relied on the advice of reputable professionals, they will prima facie have fulfilled their duties. Although the Judge accepted this as a general proposition, he said that the weight attached to such professional advice will vary depending on a number of factors.
In the instant case, based on the retainers with the professional advisors, the Judge held that the question of avoiding insolvent liquidation or administration was not one the professional advisors should have been expected to express an opinion and that was a matter for the individual judgment of the former directors. The Judge accepted that carefully considering and following legal advice may provide an evidential basis for dismissing a wrongful trading claim but was not satisfied the former directors did so in this case.
The judgment emphasises the importance that directors not only seek professional advice and give those charged with advising them proper instructions accompanied by any realistic assumptions but that the advice given is considered and followed.
The Judge considered in some detail the scope of the duties owed by directors but it is the consideration of the duty under section 172(3) Companies Act 2006 that has created the most interest. The scope of that duty was recently considered by in Sequana where the Supreme Court rejected that there was a separate and free-standing duty to creditors, but the majority held that directors must have regard to the interests of creditors where the company was bordering on insolvency or where insolvency or liquidation was probable.
The Judge found that by 17 June 2015, the third knowledge date for the Wrongful Trading Claim, the modified duty to consider the interests of creditors as set out in Sequana had arisen.
This is an important part of the judgment as the Judge had, at an earlier stage in the judgment, found that at this point the companies were not cash flow insolvent and insolvent administration, or liquidation was not inevitable. Despite that, the Judge found that had the former directors considered the interests of the companies’ creditors they would have concluded that it was in the interests of existing creditors to place the companies into administration immediately. The Judge said that the entry into a loan agreement known as ‘ACE II’ on 25 June 2015 was a ‘good example’ of what Lord Hodge and Lady Arden referred to in Sequana as an ‘insolvency-deepening activity’.
underscores the need for directors to specifically consider their personal obligations at an early stage.
Misfeasance
Section 212 Insolvency Act 1986 provides a procedure for the recovery of property or compensation by a liquidator against an officer of a company. Unlike section 214, however, section 212 does not provide a new cause of action to liquidators instead allowing them to enforce an existing cause of action which the company claims to have against the director.
The question of whether Sequana creates a wider wrongful trading liability remains open but it is clear that a director should consider whether there is a reasonable prospect of avoiding liquidation and also consider whether their proposed actions are in the interests of creditors. In any event, this overlap emphasises the importance that directors know and understand the scope of their duties. Further, it
Conclusion
The judgment in Re BHS serves as a crucial reminder of the significant responsibilities that directors bear, particularly during periods of financial distress. It underscores the importance, particularly in light of the Supreme Court’s judgment in Sequana, of considering those responsibilities and personal obligations at an early stage and the need to take (and follow) professional advice from experienced lawyers, insolvency practitioners and accountants to ensure that the duties owed by directors are not breached.
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Q Imagine you no longer have to work. How would you spend your weekdays?
A Initially pondering what to do with myself! A combination of travelling far and wide and volunteering for causes close to my heart (youth crime intervention programmes, mentoring).
Q What do you see as the most exciting thing about your job?
A Meeting and advising different clients and navigating individual psychology/ client needs. Every client is different, and I love the combined challenge of achieving the best outcome in their case as well as providing a specifically tailored service which leaves them feeling heard and valued. There is also no better feeling when a client is justly acquitted, or you get to break the news that criminal charges have been dropped/ discontinued and their nightmare is over!
Q What’s the strangest, most exciting thing you have done in your career?
A Walked through the newsroom of the Daily Mail flanked by counter terror police officers and/or been having to wait in a police station for hours with a high-profile individual who regaled me with many stories of celebrity anarchy from the 1980s.
Q What is the best life lesson you have learned?
A Your voice does not belong in every conversation. Learn to listen.
And Keep it simple stupid (applies to everything).
Q What is one important attribute that you think everyone should have?
A Common sense.
Q What film do you think everyone should watch, and why?
A Ferris Bueller’s Day Off – they don’t write scripts of the same quality anymore! The underlying message of that movie is to be bold and embrace what life has to offer.
Q Dead or alive, which famous guests would you invite to a dinner party?
A Derren Brown (I have questions!), David Niven, Curtis Jackson (aka 50 Cent) and Dame Edna Everage.
Q What is the best novel of all time?
A The Catcher in the Rye by J.D. Salinger or Beloved by Toni Morrison.
Q What legacy would you hope to leave behind?
A If it can’t be a statute in my native Bristol, I hope to lead a life that leaves those I knew with a little reminder that quiet determination and a little grit can propel you further than you might have ever hoped for. In short, be bold.
Q What is the most significant trend in your practice today?
A Police avoiding the expiration of applicable bail periods by converting suspects’ bail status to ‘released under investigation’. It’s an increasing trend that circumvents the requirement to have an extension of police bail (beyond three months) authorised by a senior officer.
Q Do you have any hidden talents?
A I can play a mean game of pool and have uncanny ability to identify music samples in songs!
Q What is one work related goal you would like to achieve in the next five years?
A Become a CILEX advocate and appear in a Crown Court trial.
The Chambers UK Guide
EXPLAIN YOURSELF!
THE DUTY OF CANDOUR IN TAX LITIGATION
The duty of candour is of critical importance in judicial review proceedings – both in terms of the burden that it places upon both parties and its strategic importance in ensuring that a claimant has been provided with complete explanation of the decision under challenge. Recent cases provide clarification of the relevant principles but also illustrate the challenges (both legal and practical) in their application.
This article is focused on the duty of candour in relation to tax litigation (where HMRC will generally be the defendant), but the principles are of general application in cases against government departments.
The Scope Of The Duty
At its core, the duty of candour is a duty placed on public authorities to assist the court with a full and accurate explanation of the reasoning process underlying the decision under challenge and the facts relevant to the issue the Court must decide (R (oao IAB) v Secretary of State for the Home Department (“IAB”) [2023] EWHC 2930 (Admin) at [12]; Secretary of State for Foreign and Commonwealth Affairs v Quark Fishing Ltd [2002] EWCA
Civ 1409 at [50]); its foundation is the principle that the relationship between the courts and public bodies is one of partnership and therefore there is a common aim in maintaining the highest standards of public administration (R v Lancashire CC ex p. Huddleston [1986] 2 AER 941 at 945c), in addition to promoting open government (IAB at [36]).
The duty of candour also serves a practical justification, namely to prevent the need for applications for disclosure or extensive disclosure (the ordinary CPR rules on disclosure do not apply to judicial review - R (Al-Sweady and ors) v Defence Secretary [2009] EWHC 2387 (Admin) at [28]). Properly applied, the duty ensures that the public body has volunteered and placed before the Court all relevant material to enable the court to determine whether the public authority has acted lawfully.
Authored by: Ben Elliott (Barrister) and Arthur Wong (Barrister) - Pump Court Tax Chambers
Important Practical Points
(1) The duty of candour applies prior to the Court’s consideration of whether to grant permission for judicial review and is a continuing duty (the ‘Permission-Stage’ Principle: R (Police Superintendents’ Association) v Police Remuneration Review Body (“PRRB”) [2023] EWHC 1838 (Admin) at [10(9)]. As stated in the Treasury Solicitor’s ‘Guidance on Discharging the Duty of Candour and Disclosure’1 (a highly quotable publication setting out the obligations that the Government lawyers accept apply to them): “The duty of candour applies as soon as the department is aware that someone is likely to test a decision or action affecting them. It applies to every stage of the proceedings including letters of response under the pre-action protocol, summary grounds of resistance, detailed grounds of resistance witness statements and counsel’s written and oral submissions”.
(2) Disclosure must not be selective but must include the unwelcome along with the helpful (the ‘NonSelectivity’ Principle: PRRB” at [10(6)]. Correspondingly, the duty also extends to documents and information which will assist the claimant’s case or which may give rise to further grounds of challenge which might not otherwise occur to the claimant (the ‘UnpleadedGrounds’ Principle: PRRB at [10(10)]).
(3) The duty does not necessarily require disclosure of documents, but equally disclosure may not always be sufficient. Whilst a witness statement summarising the content of documentation might (in some cases) be sufficient, the Privy Council has recently warned that even a conscientiously-prepared summary of a document may result
in distortion and therefore it is good practice to exhibit the primary document (Pyaneandee v Lam [2024] UKPC 27; the ‘Best Evidence’ Principle: PRRB at [10(7)]). Equally, the duty to provide a full and accurate explanation of all relevant facts may in an appropriate case oblige the public body to provide a witness statement containing a true and comprehensive account of the way in which relevant decisions were made including the underlying reasoning (the ‘Information-Too’ Principle: PRRB at [10(4)]; R (Quark Fishing Ltd) v Foreign Secretary [2002] EWCA Civ 1409 at [50]).
Pressure Points
Whilst the principles are well-established (most clearly summarised by Fordham J in PRRB), their application is a frequent subject of dispute. Common points of conflict include:
(1) The extent of disclosure that a public body must provide at pre-action stage – HMRC often assert that any disclosure at all is disproportionate at that stage, which may be incompatible with the authorities and the Treasury Guidance.
(2) The extent of disclosure required in relation to the decision-making process – for a recent example, see Rettig Heating Group UK Limited v HMRC [2024] UKUT 315 (TCC) in which the Upper Tribunal did not require HMRC to disclosure internal notes and correspondence recording discussions informing the decision under challenge. However, the Upper Tribunal emphasised that such disclosure might be required in an appropriate case: “That is not to say there would not be cases where the duty to explain the decision making process or relevant facts would extend to needing to address the various steps taken, and discussions and considerations prior to the decision (for instance where there are allegations of
bias, failure to consult, or improper purpose)” (at [28]).
(3) Cross-examination – where a witness statement has been produced by HMRC in judicial review proceedings, it is exceptional for the witness to be cross-examined; however, there are cases where cross-examination may be permitted to ensure the fair and just disposal of the claim (see R (Fluid Systems Technologies (Scotland) Ltd v HMRC [2024] UKUT 322 (TCC)).
In terms of strategy, a taxpayer pursuing a claim for judicial review would be welladvised to consider prompting HMRC to make disclosure in accordance with their duty of candour and to do so as early as possible in the proceedings. There will be cases where the taxpayer believes that particular information or a certain category of documents is relevant to the issue, in which case they should request that information and disclosure from HMRC. Though the duty of candour is ultimately self-policing, the risk of (very public) censure from the Court can often be sufficient to focus the mind of HMRC on whether or not they have satisfied their obligations.
A further point that can be overlooked inadvertently is that the duty of candour applies to all parties to judicial review. The focus on the public body’s decision means that the duty will weigh most heavily on HMRC, but there will be issues which require scrutiny of the claimant’s factual circumstances, most notably when seeking to demonstrate detrimental reliance in relation to a breach of legitimate expectation.
The Duty of Candour in Statutory Appeals
The duty of candour does not apply in ordinary civil litigation: “Ordinary civil litigation is very different from proceedings in the Administrative Court. There is no duty of candour equivalent to that imposed on public bodies defending judicial review claims” (IAB at [24]). But are statutory appeals ‘ordinary civil litigation’?
1 Guidance on Discharging the Duty of Candour and Disclosure in Judicial Review Proceedings (January 2010): https://assets.publishing.service.gov.uk/ media/5a7b8f4fed915d13110600a3/Tsol_discharging_1_.pdf
All such proceedings involve a challenge to a decision of a public body (usually HMRC) and there is no obvious reason why the ‘common partnership’ between the courts and public bodies should not apply equally in statutory appeals before the First-tier Tribunal.
In Kryiakos Karoulla t/a Brockley’s Rock v HMRC [2018] UKUT 255 (TCC) the Upper Tribunal observed that it is HMRC’s practice to accept that the duty of candour applies to them in tax appeals: “It is trite that the duty of candour is a concept derived from and developed in the area of judicial review. However, as HMRC will be well aware, it is long-established practice that HMRC usually accept that the duty applies to them in normal tax appeals” (with reference to Gardner-Shaw UK Ltd & others v HMRC [2018] UKFTT 313 (TC)). However, the facts of that case were arguably exceptional given HMRC had in their possession important evidence, namely the only copies of the taxpayer’s till receipts, which they had not disclosed until after the decision of the First-tier Tribunal. More recently, the Upper Tribunal in Nottingham Forest FC v HMRC [2024] UKUT 145 (TCC) observed “It is correct that HMRC has a duty of candour to the appellant and the FTT” with reference to Karoulla (albeit distinguishing it).
However, the authors are not aware of any published statement issued by HMRC accepting that the duty of candour applies to them in tax appeals. Moreover, there are statutory appeals in which HMRC’s decision-making process is directly or indirectly in issue yet HMRC often resist making disclosure concerning their decisionmaking process (for a recent example, see Jeneruhl Trading Ltd [2024] UKFTT 735 (TC)).
In the authors’ view:
• HMRC have a duty to help the Tribunal further the overriding objective of dealing with cases fairly and justly (and their professional representatives have a duty not to mislead the Tribunal), but this is not the same as the duty of candour as applied in judicial review proceedings.
• In the majority of tax appeals, the better view is that the duty of candour does not strictly apply because it is the correctness of HMRC’s decision that is in issue rather than HMRC’s decisionmaking process, and in any event the duty would have limited application in such cases. That being said, HMRC have been recorded as accepting (or at least not disputing) in a number of cases that they treat the duty of candour as applying to them in tax appeals and, if they hold relevant evidence that is not in taxpayer’s possession, then it might be hoped that they would consider it appropriate to disclose that evidence in
accordance with their duty to further the overriding objective.
• There are statutory appeals in which HMRC’s decision-making process is in issue and the Tribunal is exercising a supervisory (quasi-judicial review) jurisdiction in respect of that process (for example, under section 16(4) FA 1994). However, taxpayers should not assume that HMRC will treat the duty of candour (in its judicial review form) as applying in such cases and should make requests for specific disclosure as appropriate.
The duty of candour is an important principle in the taxpayer’s toolkit and its existence and enforcement promote both the interests of justice and the highest standards of tax administration by ensuring accountability in the administration of the tax system.
