Commercial Brief May 2019: market insights

A summary of recent developments raising issues in relation to the regulation of the Internet of Things, ethical guidance for artificial intelligence, a consultation to reduce the cost of litigation, environmental considerations in central government contracts, a review of the Consumer Contract Regulations, a consultation on confidentiality clauses, greater protection for residential tenants and an awaited appeal to decide the extent of an employers’ liability for their employees actions.

Regulatory proposals regarding Internet of Things security

On 1 May 2019 the Department for Digital, Culture, Media and Sport, launched a consultation on its proposals to regulate the security of consumer Internet of Things (IoT), which includes products connected to the internet, such as smart phones and smart appliances. This consultation follows the government’s publication of the voluntary Code of Practice for Consumer IoT Security in October 2018, which set out 13 good practice guidelines.

The consultation closes on 5 June.

Contact: Angela Bhaseen

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Ethics guidelines for trustworthy artificial intelligence

On 8 April, the European Commission’s ‘High Level Expert Group on Artificial Intelligence’ (AI expert group) published its ethics guidelines for trustworthy AI, superseding the draft guidelines issued in December 2018. The aim of the guidelines is to promote ‘ethical, secure and cutting-edge AI made in Europe’.

The guidelines provide that trustworthy AI has three core components, which is that it must be lawful, ethical and robust. The guidelines focus on the ethical and robust components and aim to provide guidance on how to put these principles into practice.

The European Commission intends to launch a pilot phase in summer 2019, seeking to encourage involvement from a wide range of stakeholders. Following the pilot, the aim is for the AI expert group, in early 2020, to review and propose any next steps.

Contact: Tom Gummer

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Fixed recoverable costs consultation

On 28 March, the MOJ launched a consultation on extending the use of fixed recoverable costs (FRC) to tackle the continuing high costs of civil litigation in most cases valued up to £100,000. Originally proposed in the 2017 report by Sir Rupert Jackson, this is the latest in a long line of reforms aimed at reducing legal fees. Such changes already introduced, include the two-year capped-costs pilot for cases valued between £100,000 and £250,000 in the business and property courts that commenced on 14 January 2019. Both changes should provide confidence for smaller businesses to defend their interests in courts.

The consultation, which Kennedys is providing a response to, closes on 6 June 2019.

Contact: Clare Johnston

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Environmental considerations in central government contracts

On 11 March, the Cabinet Office and the Department for Digital, Culture, Media and Sport launched a consultation on a new evaluation model for incorporating social value, including environment considerations, into awards of central government contracts. Part of the proposal is that a minimum of a 10% weighting would be applied to social value (where this is relevant) in the evaluation of bids. The consultation, which closes on 10 June 2019 with a government response is planned for 2 September 2019, is yet another clue towards policy priorities around tackling environmental impacts

Contact: Alison Loveday

Related item: Climate change and the Financial Conduct Authority

Consumer Contract Regulations 2013 review

On 7 March, the government opened a consultation to review the Consumer Contracts (Information, Cancellation, and Additional Charges) Regulations 2013 (the Regulations) to determine how it is working in practice.

The Regulations came into force on 13 June 2014 and regulate most contracts made between a trader and consumer, covering such things as the pre-contract information that must be provided to consumers and the right to cancel contracts whether contracting on premises, online or at their home.

The consultation closed on 1 May 2019 and the government will be publishing a report later this year. The consultation does not propose to change the regulations.

Contact: Reuben Berg

Confidentiality clauses under the spotlight

On the 4 March 2019, the Department for Business, Energy and Industrial Strategy opened a consultation to better understand how confidentiality clauses work in practice and to assess what changes are required to ensure individuals are appropriately protected from their misuse. The consultation closed on 29 April 2019 and we await government response.

Those wanting a ban on confidentiality clauses believe they protect predatory employees and enable a workplace culture in which sexual misconduct becomes normalised. Those against a ban, however, believe that restricting secrecy in settlement agreements will deter employers from settling claims, which will see those employees, who would prefer to settle and keep things confidential, suffer.

Whilst the consultation proposals fall short of the ban many campaigners had hoped for, it is clear that the government wants to look at ways to restrict the use of such clauses, particularly from any attempts to use them to conceal sexual misconduct.

Contact: Amanda Beaumont

Greater protection for tenants

The Tenant Fees Act 2019 received Royal Assent on 12 February 2019, seeking to shake up the landlord/agent/occupier relationship by giving greater protection to residential tenants, and landlords and their agents will need to navigate these new rules and satisfy the various conditions in order to avoid falling foul and suffering the consequences.

Whilst the new regime will only apply to new and renewed agreements when it first comes into force on 1 June 2019, from 1 June 2020 it will apply to all agreements, whenever they were entered into. This will have significant implications as certain charges will be newly classified as ‘prohibited payments’, and so unenforceable.

Contact: Sanam Hussain

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Third time lucky?

The UK Supreme Court has granted supermarket chain Morrisons permission to appeal against a landmark UK Court of Appeal ruling that found it vicariously liable for a data breach by a former employee.

The Court of Appeal acknowledged that data breaches caused by individuals acting in the course of their employment may lead to a large number of claims against companies for “potentially ruinous amounts” but that the solution is to insure against such catastrophes.

No date has yet been given for the appeal hearing.

Contact: Fiona Morgan

Related item: Court of Appeal upholds vicarious liability claim in data breach class action

Read other items in Commercial Brief - May 2019