‘Tis the Christmas auction season – the other bidder is behind you!’
- AIM traded Inspecs Group announced on 20 November that it is now juggling indicative offers from: H2 Equity partners; a consortium comprising Risk Capital Partners and Ian Livingston; and Safilo Group. The PUSU deadline for all three has been extended to 18 December 2025. It also told the audience (and the other actors) that the highest proposal is currently from H2 – which is a cash offer with an unlisted share alternative.
- Cometh (not quite midnight on) the third PUSU deadline on 7 November for JTC suitors Permira and Warburg Pincus, and JTC (Cinderella) was in receipt of proposals from each at an equivalent offer price and where both had completed due diligence; agreed the form of transaction documentation; and wanted to move to make a firm offer asap. Permira ultimately got the nod with a further revised proposal which led to it announcing a recommended all cash offer on 10 November which values JTC at approximately £2.3 billion on a fully diluted basis.
- To round out the show Bluefield Solar Income Fund Limited (main market), PPHE Hotel Group (main market), Kore Potash plc (AIM) and Management Consulting Group plc (delisted) all announced formal sale processes.
The November Data
Offers Announced
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What’s Happened
BHP no longer in ore of Anglo – talks off
BHP never wanted the deeds to a platinum mine for Christmas. The demerger of Anglo Platinum was a condition (together with the parallel demerger of Kumba Iron Ore) to its £38.6 billion indicative proposal put to the Anglo American board in April last year. Anglo cited the implementation risk of an unprecedented two public company spin outs as one of the reasons for not taking discussions further. But with (now renamed) Valterra Platinum successfully spun-out in June (and ignoring for a moment Anglo’s announced merger with Teck Resources), there were thoughts as to whether this could be another “boomerang” return deal, similar to compatriot Macquarie’s acquisition of Renewi.
In 2023, Macquarie (like BHP) came up against the hard edges of the PUSU regime in its initial approach to Renewi but, together with British Columbia Investment Management, successfully revived/“recycled” that transaction in June this year. However, last week BHP announced that following preliminary discussions with Anglo it is no longer considering an approach. Although BHP may have to consider what to do about its long-standing investment in Solgold, with Solgold announcing earlier in the week that it had received a non-binding proposal from its largest shareholder Jiangxi Copper Company. JCC currently has a festive PUSU deadline of 26 December.
Just not cricket! They play by different rules Down Under
Australian public M&A has a new pantomime villain (not the English cricket team). Back in February, Cosette Pharmaceuticals Inc. announced a recommended scheme of arrangement for Mayne Pharma. Two months later Mayne put out a profit downgrade. Cosette attempted to rely on a MAC condition to back out, but was ultimately denied. It also announced that, if the deal still went through, it would close one of Mayne’s plants in South Australia. The scheme was conditional on Australian foreign investment approval and the plant closure was seen by some as gaming that approval. Last month, to the disappointment of Mayne shareholders, the Australian Treasurer declined to approve the deal (there having been a separate debate about what would happen if it was approved but subject to conditions).
The UK has very different rules on MACs (with a notoriously high hurdle of “striking at the heart of the purpose of the transaction”); it is also not possible to invoke a regulatory condition without Panel approval; and the Code requires a bidder to set out its intentions for the target business and employees in detail in the offer announcement and documentation. However, in the case of a regulatory approval, without which it is almost impossible to proceed, and which is refused, would the ultimate outcome be different? The UK rules would hopefully never have let the genie out of the bottle in the first place.
Pens down, tools down on HICL Infrastructure and TRIG merger
Another bidder with a change of heart is HICL. On 17 November, HICL Infrastructure and The Renewables Infrastructure Group Limited announced an agreed merger to create the UK’s largest listed infrastructure company with net assets of £5.3 billion. Despite both being FTSE 250 companies, and it being one of the larger announced transactions of the year, it is not covered by the Code as it involved the reconstruction and voluntary winding up of TRIG under Guernsey law. This has proved pivotal. After reported feedback from HICL shareholders, the parties announced earlier this week that the merger is off. Something which would not have been possible under the Code (without the express consent of the Panel). HICL stated that it could not progress the transaction without a substantial majority of support from its investors. HICL shares jumped more than 4% on the news.
Looking Ahead
Predictions for December:
Will the ghosts of schemes past come back to haunt Cicor’s bid for TT Electronics?
At the end of October, Six Swiss listed Cicor Technologies announced a recommended cash and share offer for TT Electronics. There would appear to have been shareholder feedback on the Swiss share component, as on 18 November Cicor announced a revised final all cash offer (with an optional only share alternative). Cicor should then have been able to sleep better with an equity raise planned post the shareholder vote to pay down the resulting additional borrowings. However, the day after, significant shareholder DBAY Advisors (which came out against the deal when it originally broke and which itself had previously put proposals to the TT board), disclosed that it had increased its shareholding from 16% to over 24%.
Last month saw the unusual event of the scheme of arrangement for Natara’s offer for Treatt being voted down by Treatt shareholders (with Döhler amassing a 28% blocking stake). It will be interesting to see what is unwrapped at the TT shareholder meeting scheduled for the week before Christmas.
P2P Financing
The most significant debt financing backing a public to private bid in November was the £1.5 billion private credit facility provided to support Permira’s acquisition of funds administration and services provide JTC plc in a deal that values the target at £2.3 billion. The financing is led by Blackstone and other lenders include CVC Credit, Singapore’s GIC, Oak Hill, Blue Owl, PSP Investments and Jefferies. The debt will consist of £1.3 billion worth of senior term loans (split into sterling, euro and dollar tranches) to fund the acquisition and refinancing of target debt, as well as a £250 million delayed draw term loan and a £150 million bridge to a revolving credit facility.
The documentation disclosed in connection with the bid assumes a financing EBITDA of £160 million (subject to final structuring analysis) indicating that leverage through the drawn term loan exceeds 8x. This is higher than the leverage usually available for broadly syndicated deals, proving once again the importance of the private credit space to fund competitive bids for acquisitions.
Another feature distinguishing private credit facilities from syndicated loans is the availability of PIK toggles, allowing borrowers to reduce the burden of cash pay interest in difficult markets. The JTC plc financing documents give the borrower an option to capitalise up to 50% of the margin on its term loans (at a sliding scale premium rate capped at 0.25%) for a period of up to three years during the life of the loans.
However, perhaps the most notable term of these facilities is the pricing. The sterling and euro facilities are priced at 4.75% over the respective reference rates, whilst the dollar tranche is priced at 4.50% and further margin step downs are available beginning 6 months after closing. This is very close to the levels of pricing recently seen on broadly syndicated loans for new acquisitions and shows that, for deals with a strong credit story, private credit now provides a welcome alternative liquidity source for bidders, with the ability to absorb larger deals without a huge pricing premium.
Equity Capital Markets
After several London main market IPOs in September and October (The Beauty Tech Group, Shawbrook and Princes Group), no main market IPOs were announced in November, reflecting in part the usual slow-down in IPO activity following the expiry of the 135-day negative assurance accounting comfort period for issuers with a 31 December year end, going to market on the back of 30 June interim numbers. The most notable primary ECM transaction in November was a capital raise by SSE.
SSE Placing
On 12 November, energy utility SSE announced, pre-market open, an equity raise of approximately £2 billion as part of its £33 billion investment programme for FY26-30. This represented the second largest equity raise by a company on the LSE in the past five years after the £7 billion rights issue by National Grid in May 2024. The equity raise amounted to approximately 8.8% of SSE’s existing issued share capital and included an approximately £2 billion institutional placing (on a “soft” pre-emptive basis), alongside an £8 million retail offer conducted via RetailBook and a £330,000 director subscription. In total, 97,916,637 new shares were issued at a price of 2,050 pence per share, reflecting a 3.8% premium to the closing price on 11 November. The equity raise was well received by the market with the share price increasing to 2,307 pence at market close on 12 November.
Key Contacts:
| Will McDonald Partner, Corporate |
Chris Haynes Partner, Corporate |
David Irvine Partner, Finance |
Kavita Davis Partner, Finance |
| James Addison Of Counsel, Corporate |
Thomas Barker Of Counsel, Corporate |
Sarah Leiper-Jennings Of Counsel, Corporate |
Pete Usher Associate, Corporate |
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
‘Shareholder activism was flavour of the month – while numerous P2P bidders continue to look and talk, rather than walk’
- AIM traded glasses maker Inspecs Group became the latest target to catch the eye of multiple suitors: H2 Equity Partners, Safilo Group and a consortium comprising Risk Capital Partners and Ian Livingston.
- Discussions between JTC and its potential bidders, Permira and Warburg Pincus, continue. Both are now working to the same PUSU deadline: they have until 7 November to put up or shut up.
- BasePoint Capital has also been given additional time to finalise its financing for FTSE 250 constituent, International Personal Finance, which the IPF board “would be minded to recommend unanimously” if ultimately made. BasePoint has until 19 November to announce a firm offer or walk away.
- Interest in the real estate and logistics sectors continues following the take private of Warehouse Reit earlier in the year, with Blackstone announcing it was in the early stages of considering a possible cash offer for Big Yellow Group, which sent BYG’s shares up 22%.
The three firm offers in October all came from overseas bidders:
- TXSV-listed Sintana Energy Inc. announced a recommended all share offer for Challenger Energy Group. The bid is supported by irrevocables representing a healthy 34% and, to help win over shareholders, Sintana intends to seek a dual listing on AIM.
- Six Swiss listed Cicor Technologies has also offered foreign scrip as part of its recommended cash and share offer for TT Electronics. 16.5% shareholder DBAY Advisors was quick off the block to say that they did not intend to vote in favour – notwithstanding the healthy 64.6% premium. This statement triggered the sensors of TT which disclosed it had received three unsolicited proposals from DBAY in the last three months.
- Long Path Opportunities Fund announced a recommended all cash offer for software and data solutions provider Idox having been a “supportive and patient shareholder” for the last seven years. The Long Path funds currently hold approximately 12% of Idox and the offer values Idox at approximately £340 million.
The October Data
Offers Announced
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What’s Happened
Natara’s increased offer not sweet enough for Treatt’s shareholders
In our September edition, we trailed that natural ingredients producer Döhler had acquired a 10% holding in Treatt. Despite Natara raising its bid by 11.5% to 290 pence and declaring its offer final, Döhler continued to build an impressive 28% blocking stake. As a result, Treatt’s board found itself in the uncommon position of having its shareholders vote down their recommendation and reject the offer at Treatt’s shareholders’ meeting on Monday 3 November. The success of Döhler’s strategy highlights the challenges in fending off determined interlopers in circumstances where the original bidder is either unwilling or unable to switch to a contractual takeover bid with a lower minimum acceptance condition. It is made all the harder when an interloper stake builds to such a significant extent, as was the case here, that it can block any attempt to delist the target.
Canadian professional services firm, WSP Global, picks off Ricardo
Another company which saw stake-building activity earlier in the year was Ricardo. AIM-traded Science Group built a 20% stake and requisitioned a general meeting to oust Ricardo’s Chair. While Ricardo was grappling with activists, WSP made several indicative proposals to Ricardo. These culminated in WSP announcing a recommended cash offer for Ricardo and simultaneously entering into a share purchase agreement to acquire Science Group’s stake at the offer price ahead of the Scheme. The WSP offer was final from the outset. The Science Group shares did not form part of the Scheme, but it was still well supported by irrevocables in respect of more than 45% of Ricardo’s shares. With these in hand – even though WSP could not vote the shares – the Scheme was decisively approved by shareholders.
Magnum demerger temporarily on ice
The demerger of Unilever’s ice cream business, to be known as The Magnum Ice Cream Company N.V., was expected to complete on 8 November with shares in Magnum to commence trading on the NYSE, the LSE and Euronext Amsterdam on Monday 10 November. The general meeting to approve a simultaneous consolidation of Unilever’s shares went through smoothly on 21 October. The consolidation was being undertaken, as is common following a demerger, to counteract anticipated movements in Unilever’s share price resulting from the demerger. However, the on-going US Government shutdown has thrown a spanner in the works: the SEC has been unable to declare effective the US registration statement required for Magnum shares to be listed on NYSE. Unilever still expects the demerger to be implemented this year.
Looking Ahead
Predictions for November:
The focus this month is on Inspecs Group: Inspecs, which designs, manufactures and distributes eyewear frames, saw a major investor, Downing, attempt to requisition a shareholder meeting in the spring to remove then Executive Chair – founder Robin Totterman. Pressure has mounted on Inspecs this autumn following an announcement on 23 October that it had received indicative and unsolicited proposals from H2 Equity Partners and from a consortium comprising Risk Capital Partners and Ian Livingston. Each of these notably (and not surprisingly given the founder’s stake) included an unlisted securities alternative, continuing the recent trend for paper alternatives.
At the same time, Inspecs also announced it had received a proposal from fellow eyewear manufacturer, Safilo Group, to acquire parts of its business. First Seagull – which holds a 5.5% interest in Inspecs – has been quick to express its view that the Inspecs board should prioritise a ‘sum of the parts’ divestment and that it would not hesitate to requisition an EGM “to ensure that the necessary steps are taken by this Board or, if required, a refreshed Board”. The situation is complicated by the fact that founder Robin Totterman remains the largest shareholder with over 18% and, earlier in the year, Luke Johnson (of Risk Capital Partners) built a 5.9% stake.
November could be a busy month for the Inspecs independent directors.
EasyJet’s shares soared 12% after a report from Italian newspaper, Corriere Della Sera, that Swiss headquartered shipping company MSC was considering an offer for Europe’s second-largest budget airline. The founder of the FTSE100 airline, Stelios Haji-Ioannou, remains its biggest single shareholder, with a stake of about 15%. Dan Coatsworth, head of markets at AJ Bell, said that “EasyJet’s shares are cheap…and shareholders could be receptive to a bid if the price was right”.
The Financial Times reported that ITV’s shares dropped 8% after Liberty Global, its largest shareholder, sold half its stake in the British broadcaster. The FT said that Liberty’s large shareholding meant that it had been talked about as a potential buyer for ITV or as kingmaker in any takeover by one of the groups that have circled ITV in the past.
P2P Financing
The debt-raising environment for prospective bidders remains largely positive, with pricing in both the syndicated and private credit loan markets continuing to trend downwards. Substantial debt raisings for private acquisitions, including a €2.6 billion loan for GCTR’s acquisition of generic pharmaceuticals company Zentiva, were over-subscribed and priced lower than the initial guidance. However, signs appeared in October of a bifurcated market, with the best prices and terms reserved for high quality credits while lenders adopted a more hesitant approach to borrowers in less-favoured industries.
Absorbing the shock of the First Brands collapse in the US, the loan markets have become more cautious, and a prospective deal for specialty chemicals company Nouryon, which was seeking an extension of its existing loans as a bridge to a potential IPO, was pulled after its 8 October commitment deadline. Lenders cited concern about the company’s high leverage, but other chemicals borrowers also struggled and it is likely that broader concerns about the sector’s exposure to tariffs played a role. While highly-rated software borrower Verisure was able to borrow at Euribor plus 2.25%, Rovensa, a Portugese chemicals issuer, priced its loan at Euribor plus 5%.
This volatility means that lenders might think twice before entering into the relatively lengthy underwriting commitments necessary to finance P2P acquisitions. However, the issuance of leveraged loans and bonds in 2025 is nevertheless on track for a record year, with lenders’ ‘dry powder’ far exceeding M&A supply, so any public to private deal for a target with a compelling credit story is still likely to be well received by the market.
Equity Capital Markets
The IPO activity that started in September with Beauty Tech Group and Fermi Inc. (see our September update), continued into October, with Princes Group and Shawbrook Group announcing London listings.
Princes Group, best known for its eponymous brand of tuna and Napolina tomatoes, priced its London IPO on 31 October at 475p (vs a 475p – 590p price range) implying a market capitalisation of c. £1.1 billion. Admission is due to occur on 5 November. The all primary offer raised £395 million to fund future acquisitions. NewPrinces S.P.A, the 100% owner pre-IPO, and related interests subscribed for £255 million of the offer. NewPrinces S.P.A is known for an expansive acquisition strategy, with the company finalising a deal to takeover Carrefour Italia for EUR 1 billion in 2025.
The shares ended the first day of conditional (i.e. pre-Admission) dealings at the offer price, meaning that the underwriter acting as stabilising manager will have been able to purchase shares to stabilise the share price. Such purchases are permitted at or below the offer price. The extent of stabilisation purchases should become clear when it is announced whether the over-allotment option (“OAO”, aka the “greenshoe”) has been exercised, as the OAO exercise will typically decrease by the volume of stabilsation purchases that are made. The OAO is 5% of the offer size vs the usual 15%.
Shawbrook Group, the UK digital bank, priced its IPO on 30 October at 370p, in the middle of the 350p – 390p price range, giving it a market capitalisation of c. £1.92 billion. Admission is due to occur on 4 November. Its private equity backers, BC Partners and Pollen Street, partially exited their investment, receiving c. £350m (assuming the OAO is exercised in full), while the company issued c. £50m in new shares and received net proceeds of c. £28m. The listing comes after the PE firms took the bank private in 2017, in a deal valuing the lender at c. £868 million.
Key Contacts:
| Will McDonald Partner, Corporate |
Chris Haynes Partner, Corporate |
David Irvine Partner, Finance |
Kavita Davis Partner, Finance |
| James Addison Of Counsel, Corporate |
Thomas Barker Of Counsel, Corporate |
Sarah Leiper-Jennings Of Counsel, Corporate |
Pete Usher Associate, Corporate |
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
If implemented, the changes could materially increase penalties, reduce discounts for voluntary disclosure, and introduce new ways of resolving cases involving breaches, such as settlement options.
The UK Office of Financial Sanctions Implementation (OFSI)—the UK government entity in charge of financial sanctions implementation and enforcement—is considering substantial reforms to its enforcement practices for financial sanctions breaches. If implemented, these changes could materially increase penalties, reduce discounts for voluntary disclosure, and introduce new ways of resolving cases involving breaches, such as settlement options. These proposed changes would move OFSI even closer to the enforcement model used by its U.S. analog—the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC)—with which it has had an increasingly comprehensive partnership since 2022. OFSI—which celebrates its 10th anniversary in 2026—is also drawing inspiration from other more-established UK regulators, such as the Financial Conduct Authority (FCA), with which it is collaborating extensively. OFSI is evolving, and with it are the UK sanctions risks faced by banks and companies within UK enforcement jurisdiction.
Background: OFSI’s Expanding Enforcement Activity
Much like sanctions enforcers throughout the G7, the inflection point for OFSI’s development as a consequential enforcer can be traced to Russia’s invasion of Ukraine in 2022. Since then, OFSI has more than doubled its staff—with a particular focus on licensing and enforcement—to 135 current employees and created a dedicated Compliance Enforcement team in 2024-2025 to better identify and enforce against breaches of license terms. During the 2023-2024 financial year, OFSI opened a record 396 investigations, more than double the previous year’s figure. This trend continued into 2024-2025, during which OFSI opened 394 investigations. This increased activity has brought growing recognition that OFSI’s enforcement procedures, largely unchanged since OFSI’s establishment in 2016, need updating to handle the volume and complexity of current sanctions cases.
The UK enforcement landscape fundamentally shifted in June 2022 when the UK moved to enforce financial sanctions breaches on a strict liability basis, i.e. using the same standard that OFAC uses. This means that OFSI no longer needs to demonstrate that a person knew or suspected they were breaching sanctions to impose a penalty. While OFSI may choose not to pursue such cases, even a de minimis misstep can be a violation. Similarly (and also in line with OFAC practice), OFSI now has the power to publicize breaches even when it chooses not to impose a monetary penalty. These changes, combined with the unprecedented expansion of the UK sanctions list, which now includes over 4,700 designated persons and entities, the increase in scope and sophistication of the UK’s sanctions programs, and the increasingly extraterritorial reach of UK sanctions, leads to a material increase in compliance challenges and enforcement risk for those subject to UK jurisdiction.
OFSI has already demonstrated its willingness to use this expanded toolkit. For the first time in August 2023, OFSI publicized details of sanctions breaches without imposing a monetary penalty. It used this power again in March 2025, indicating that this will likely be common practice for OFSI in cases of non-serious breaches. In August 2024, OFSI issued its first penalty related to the 2022 Russia sanctions, and has indicated that several more Russia-related enforcement actions are in its pipeline. In April 2025, OFSI issued a penalty to a company solely for the failure to respond to an information request, and in September 2025 it reduced voluntary disclosure credit from 50% to 35%, having deemed that a four month delay between detection of breaches and initial notification to OFSI mitigated the positive effects of cooperation.
Proposed Changes to OFSI’s Enforcement Approach
Material changes to OFSI’s enforcement practices are under consideration. As part of the review, OFSI published a consultation paper, on which it invited comment, setting out five main areas of reform. This process of consultation is also similar to how OFAC proceeded when it proposed its current enforcement guidelines.
I. Increased Statutory Maximum Penalties
OFSI has proposed raising the maximum penalties that it can impose. The current statutory maximum is the greater of £1 million or 50% of the breach value. OFSI proposes increasing this to the greater of £2 million or 100% of the breach value.
It is important to note that these changes would not automatically result in higher penalties across the board. OFSI would still assess what penalty is reasonable and proportionate within the new maximum. Indeed, eight of OFSI’s twelve penalties to date have only been 5% or less of the maximum available. However, the higher ceiling would give OFSI more scope to impose substantial penalties in the most serious cases.
OFSI is also seeking feedback on alternative approaches to calculating maximum penalties, such as basing them on a percentage of company turnover or setting a maximum penalty per breach rather than per case. The idea of basing breaches on percentages of turnover resembles the practices of the UK’s Competition and Markets Authority. The European Union has recently also recently adopted this idea, and issued EU-wide legislation requiring Member States to set maximum corporate fines of at least 1–5% of worldwide turnover, or €8–€40 million, depending on the violation’s gravity.
II. Clearer Assessment Framework and Adjusted Discounts
OFSI has proposed publishing a more transparent matrix showing how it combines severity and conduct factors to reach an overall case assessment. This also mirrors the OFAC model which is based on a matrix. The proposed OFSI matrix would guide businesses on likely outcomes: less severe cases would typically receive warning letters, moderately severe cases would be publicly disclosed without penalties, while serious cases would face monetary penalties.
Importantly, OFSI has proposed to increase not only the maximum potential penalty, but also the baseline penalty ranges for serious cases. Currently, serious cases attract baseline penalties of 0-50% of the statutory maximum, while most serious cases range from 50-100%. Under the proposals, serious cases would attract up to 75% of the maximum, and most serious cases would range from 75-100%.
OFSI has also proposed altering how it rewards voluntary disclosure. The current system offers up to 50% discount for serious cases and up to 30% for most serious cases. The proposal would cap the disclosure benefit at 30% for both categories, and would make the discount conditional on more stringent requirements: in order to benefit a respondent would have to demonstrate prompt reporting, the provision of a complete account of the facts, and fully cooperate with OFSI throughout the investigation. Where OFSI considers that the requirements are only partially met, a discount of lower than 30% could still be applied. These changes reflect OFSI’s view that the current 50% discount for a voluntary self-disclosure can sometimes undermine the penalty’s deterrent effect.
III. Streamlined Resolution Through Settlement
Drawing inspiration from the FCA’s approach (and OFAC’s process), OFSI has proposed introducing a formal settlement scheme. Under this model, once OFSI completes its investigation and determines a penalty is warranted, it could offer companies an opportunity to settle the case within 30 business days.
The proposed settlement process would proceed as follows: OFSI would provide a draft penalty notice to a party found to have violated sanctions and would allow without-prejudice discussions about the terms. If OFSI and the party reach agreement within the timeframe, the party under investigation would receive a 20% discount on top of any voluntary disclosure discount already applied. In exchange, the company would accept OFSI’s findings and waive their rights to ministerial review and tribunal appeal.
OFSI has indicated it would not offer settlement in cases involving knowing or intentional breaches, suspected circumvention, or where the company has failed to cooperate in good faith. During settlement discussions, companies may be able to negotiate the wording of the public penalty notice, potentially avoiding explicit admissions of liability (though OFSI has mentioned that such an approach could reduce the significance and deterrent effect of its enforcement notices). This process allowing for the negotiation of language in public notices is also parallel to the OFAC approach.
IV. Early Account Scheme for Expedited Investigations
While the suite of proposed changes could prove seismic, OFSI’s most innovative proposal is the Early Account Scheme (EAS), which would allow investigation subjects to effectively investigate themselves and provide OFSI with a comprehensive factual account. A similar scheme was introduced by the Prudential Regulation Authority, part of the Bank of England, in 2024. This option would be particularly attractive for well-resourced organizations with strong compliance functions.
Under the EAS, a company would conduct an internal investigation (or engage a third party to do so) and provide OFSI with a detailed report covering all suspected breaches, relevant materials, and an assessment against OFSI’s case factors. A senior officer would need to attest that the account is complete and fair. OFSI anticipates this process would typically take six months. The EAS will not be available in all cases. For instance, OFSI may not deem that it is appropriate when cases involve circumvention breaches, particularly serious breaches, or when the company has previously been investigated or penalized. Similarly, OFSI considers it would be very unlikely to permit access to the EAS to a company that had failed to report suspected breaches.
The incentive for using the EAS is significant: if the case proceeds to a penalty and settles, the settlement discount would increase from 20% to 40%. However, OFSI would retain discretion to reduce this discount if it determines the account was incomplete or required substantial additional investigation.
OFSI has made clear it would be highly unlikely to introduce the EAS without also introducing the settlement scheme, as the two mechanisms are designed to work together.
V. Streamlined Process for Information and Licensing Breaches
Recognizing that not all breaches are equal, OFSI has proposed a simplified process for certain categories of less serious offences. These more minor breaches would include failures to respond to information requests, non-compliance with license conditions, and late reporting.
Under this proposal, OFSI would publish indicative penalty amounts: £5,000 for standard failures and £10,000 for aggravated failures (such as repeated non-compliance or recklessly providing false information). These cases would follow a shortened timeline, with just 15 business days for representations at each stage rather than the standard 30 days.
OFSI is also considering whether these penalties should be set out in legislation as fixed penalties, which would provide greater legal certainty but reduce OFSI’s flexibility to adjust amounts based on circumstances.
What Happens Next: The Consultation Process
The consultation on OFSI’s paper closed on October 13, 2025. OFSI will now analyze all input received and publish a government response setting out its next steps. Some proposed changes could be implemented relatively quickly through updated OFSI guidance. However, changes to statutory maximum penalties would require secondary legislation (regulations), while changes to the percentage of breach value in the penalty calculation would require primary legislation (an Act of Parliament).
Practical Implications for Businesses
These proposed changes reflect OFSI’s evolution into a more sophisticated and robust enforcement regulator. In order prepare for the likely changes, businesses could consider several actions:
- Review compliance programs. With higher baseline penalties and more stringent disclosure requirements proposed, the cost of compliance failures is likely to increase. This is an opportune moment to conduct gap analyses of sanctions screening, due diligence, and reporting processes. Businesses can also ensure that existing policies specifically cater for UK sanctions risks, as opposed to just U.S. or EU sanctions risks. While the degree of overlap between U.S., EU and UK sanctions remains significant, material differences exist.
- Understand voluntary disclosure requirements. If the proposals are adopted, achieving the full voluntary disclosure discount will require not just prompt reporting but complete cooperation throughout an investigation. Businesses should ensure they have processes in place to identify potential breaches quickly and gather relevant information efficiently.
- Consider settlement and EAS implications. Well-resourced organizations may find the EAS attractive, but it requires the ability to conduct thorough, independent, internal investigations. Smaller businesses may prefer the standard settlement route. Businesses should understand these options and how they might apply to potential cases.
- Prepare for increased enforcement. With 240 active investigations as of April 2025 and a significantly expanded enforcement team, OFSI has made clear that more public enforcement actions are coming. The combination of expanded resources, enhanced tools, and streamlined processes means businesses should expect heightened scrutiny.
The following Gibson Dunn lawyers prepared this update: Irene Polieri, Adam M. Smith, Scott Toussaint, and Josephine Kroneberger*.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding UK enforcement practices and advising on engagement with UK regulators. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s International Trade Advisory & Enforcement practice groups:
United States:
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
Courtney M. Brown – Washington, D.C. (+1 202.955.8685, cmbrown@gibsondunn.com)
Amanda H. Neely – Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Michelle A. Weinbaum – Washington, D.C. (+1 202.955.8274, mweinbaum@gibsondunn.com)
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Karsten Ball – Washington, D.C. (+1 202.777.9341, kball@gibsondunn.com)
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Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
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Zach Kosbie – Washington, D.C. (+1 202.777.9425, zkosbie@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
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Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Erika Suh Holmberg – Washington, D.C. (+1 202.777.9539, eholmberg@gibsondunn.com)
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Lindsay Bernsen Wardlaw – Washington, D.C. (+1 202.777.9475, lwardlaw@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@gibsondunn.com)
Asia:
Kelly Austin – Denver/Hong Kong (+1 303.298.5980, kaustin@gibsondunn.com)
David A. Wolber – Hong Kong (+852 2214 3764, dwolber@gibsondunn.com)
Fang Xue – Beijing (+86 10 6502 8687, fxue@gibsondunn.com)
Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)
Dharak Bhavsar – Hong Kong (+852 2214 3755, dbhavsar@gibsondunn.com)
Hui Fang – Hong Kong (+852 2214 3805, hfang@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)
Europe:
Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com)
Patrick Doris – London (+44 207 071 4276, pdoris@gibsondunn.com)
Michelle M. Kirschner – London (+44 20 7071 4212, mkirschner@gibsondunn.com)
Penny Madden KC – London (+44 20 7071 4226, pmadden@gibsondunn.com)
Irene Polieri – London (+44 20 7071 4199, ipolieri@gibsondunn.com)
Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com)
Nikita Malevanny – Munich (+49 89 189 33 224, nmalevanny@gibsondunn.com)
Melina Kronester – Munich (+49 89 189 33 225, mkronester@gibsondunn.com)
Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)
*Josephine Kroneberger, a trainee solicitor in the London office, is not admitted to practice law.
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
The FCA’s consultation represents a significant step towards modernising the UK’s asset management regulatory framework to accommodate DLT and tokenisation.
The Financial Conduct Authority (FCA) has published Consultation Paper CP25/28, setting out proposals and a roadmap to accelerate the adoption of fund tokenisation in the UK asset management sector. The consultation aims to provide regulatory clarity, operational flexibility, and a future vision for the use of distributed ledger technology (DLT) in authorised funds, with the objective of enhancing operational efficiency, consumer protection, and the UK’s global competitiveness in digital asset management.
This consultation marks a pivotal moment for the UK’s asset management industry, signalling a shift from exploratory pilots to the mainstreaming of tokenisation. The FCA’s approach demonstrates a willingness to balance innovation with robust regulatory oversight, positioning the UK as a potential global leader in digital asset management. By providing a clear regulatory pathway, the FCA is not only responding to industry demand for clarity but also proactively shaping the future landscape of investment products and services.
Key Proposals
- Guidance for Tokenised Funds under the Blueprint Model. The FCA proposes guidance to clarify how authorised fund managers can operate tokenised fund registers using DLT, including both private-permissioned and public blockchain networks. The guidance addresses how managers can meet regulatory obligations for consumer protection and market integrity, including the ability to make unilateral updates to the register, manage smart contracts, and ensure eligibility verification and KYC compliance.
- Introduction of Direct Dealing (D2F) Model. The FCA proposes an optional, alternative dealing model – Direct to Fund (D2F) – allowing unit deals to take place directly between investors and the fund or its depositary, rather than through the authorised fund manager (AFM) as principal. This model is intended to reduce operational overheads, eliminate interim exposure to the AFM, and remove the need for client money safeguards, thereby simplifying fund operations and supporting the transition to tokenised funds.
- Roadmap for Fund Tokenisation. The consultation sets out a staged roadmap for fund tokenisation, including:
- Phase 1: Tokenisation of fund units and registers using DLT (current position).
- Phase 2: Tokenisation of underlying assets, enabling direct holdings of tokenised assets by investors.
- Phase 3: Tokenisation of cash flows, allowing for highly customisable, client-specific investment solutions.
- The roadmap also addresses the use of tokenised money market fund (tMMF) units as collateral, the integration of digital cash instruments and stablecoins for settlement, and the potential for fully on-chain fund operations.
- Supporting Future Tokenisation Models. The FCA explores future regulatory changes to accommodate advanced tokenisation models, such as composable finance, on-chain portfolio management, and the use of smart contracts for embedded compliance. The paper discusses the need for evolving standards in digital identity, investor protection, and market integrity as the industry moves towards more personalised, retail-scale portfolio management.
Taken together, these proposals reflect a forward-thinking regulatory philosophy. The FCA is not only addressing current operational and legal barriers but is also anticipating the next wave of innovation—where tokenisation could fundamentally reshape the relationship between investors, asset managers, and underlying assets. The staged roadmap provides a pragmatic yet ambitious framework, allowing the industry to innovate incrementally while maintaining regulatory guardrails.
Regulatory and Operational Considerations
- The proposals apply to UCITS management companies, UK AIFMs managing authorised funds, and depositaries of authorised funds, with broader relevance to portfolio managers, fintech firms, stablecoin issuers, and custodians.
- The FCA confirms a technology-neutral, outcomes-based approach, allowing the use of both private and public DLT networks, provided regulatory outcomes are met.
- The consultation addresses operational resilience, data privacy, anti-money laundering (AML) responsibilities, and the management of network risks, including contingency planning for DLT outages.
- Amendments to the Collective Investment Schemes sourcebook (COLL) are proposed to facilitate the use of DLT in fund registers and to implement the D2F model, including the introduction of Issues and Cancellations Accounts (IACs) for direct settlement between funds and investors.
From a strategic perspective, the FCA’s technology-neutral stance is particularly noteworthy. By focusing on outcomes rather than prescribing specific technologies, the regulator is enabling a diverse range of market participants to experiment and compete. This approach is likely to foster innovation, attract international players, and support the development of a vibrant digital asset ecosystem in the UK. However, it also places the onus on firms to ensure that their chosen technological solutions are robust, secure, and compliant with regulatory expectations.
Cost-Benefit Analysis
The FCA estimates that the adoption of the D2F model could deliver a net present value benefit of £27m–£57m over ten years, primarily through reduced fund administration costs and lower fees for investors. The costs are expected to be minimal and largely limited to familiarisation with the new framework. The proposals are designed to be optional, allowing firms to adopt the new models where commercially appropriate.
While the projected cost savings are significant, the true value of these reforms may lie in their potential to catalyse broader market transformation. By lowering operational barriers and reducing friction in fund administration, the FCA is creating an environment where new entrants and innovative business models can thrive. This could lead to greater competition, more diverse product offerings, and ultimately better outcomes for investors. However, firms will need to carefully assess the operational and technological investments required to realise these benefits, particularly as the industry transitions from pilot projects to full-scale implementation.
Consumer Protection and Market Integrity
The FCA’s proposals are intended to maintain high standards of consumer protection and market integrity, including for vulnerable consumers. The consultation highlights the potential for tokenisation to broaden access to investment products, increase competition, and deliver cost savings to consumers, while also recognising new risks associated with DLT, such as cybersecurity and liquidity management in stress scenarios.
As tokenisation matures, the challenge for regulators and industry participants will be to ensure that innovation does not come at the expense of consumer trust or market stability. The FCA’s focus on operational resilience, data privacy, and AML controls is well-placed, but ongoing vigilance will be required as new risks emerge—particularly as more retail investors engage with tokenised products. The evolution of digital identity standards, smart contract auditing, and contingency planning for DLT outages will be critical to maintaining confidence in the system.
Next Steps
- Comments on Chapters 2–4 are requested by 21 November 2025, and on Chapter 5 by 12 December 2025.
- The FCA will review feedback and publish final regulatory requirements in a Policy Statement, expected in the first half of 2026.
- The FCA will continue to engage with industry and international regulators to support the development of global standards and best practices for fund tokenisation.
Looking ahead, the FCA’s collaborative approach—working with industry, consumer groups, and international bodies—will be essential to shaping a regulatory framework that is both innovative and resilient. The UK’s ability to influence global standards and attract investment will depend on the successful implementation of these proposals and the industry’s willingness to embrace change.
In conclusion, the FCA’s consultation represents a significant step towards modernising the UK’s asset management regulatory framework to accommodate DLT and tokenisation. The proposals are designed to provide regulatory certainty, operational flexibility, and a clear pathway for innovation, supporting the UK’s ambition to be a global leader in digital asset management while safeguarding consumer interests and market stability.
For asset managers, depositaries, fintechs, and other stakeholders, this is a moment to reflect not only on compliance but on strategic positioning for the future. Those who engage early and help shape the emerging standards will be best placed to capture the opportunities presented by tokenisation. As the regulatory landscape evolves, firms should consider how to leverage DLT to deliver more efficient, transparent, and personalised investment solutions—while remaining vigilant to new risks and responsibilities. The FCA’s consultation is not just a regulatory update; it is an invitation to help define the next era of asset management in the UK and beyond.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. If you wish to discuss any of the matters set out above, please contact the author or any member of Gibson Dunn’s Fintech & Digital Assets or Financial Regulatory teams:
Michelle M. Kirschner – London (+44 20 7071 4212, mkirschner@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
‘Spurs reject bids as private equity and strategic reviews dominate September activity’
- Private equity bidders emerged as the most active from the summer break, with three of the four offers announced in September being made by private equity sponsors.
- Strategic reviews were the flavour of the month, with one-third of September announcements commencing an offer period relating to strategic reviews or formal sale processes (IQE, Spire and Aferian).
- JTC courted interest from Permira and Warburg Pincus, which could continue the bout of competitive situations seen earlier in the summer (Blackstone vs BBOX for Warehouse REIT, Primary Health Properties vs KKR for Assura plc). Either offer could be the fifth billion-pound P2P announced this year, a much-needed boost to the upper-end of the market, chasing down eight such deals from last year.
- Tottenham Hotspur has been the subject of media attention, having received unsolicited offers from three different bidders (PCP International, Firehawk Holdings and a consortium led by Brooklyn Earick). Spurs unequivocally rejected the approaches. Spurs is not LSE listed; it remains subject to the Code since its delisting from AIM as it utilises the matched bargain facility, Asset Match, to allow shareholders to trade its shares.
The September Data
Offers Announced
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Offers by Sector (YTD)
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Bid Premia |
Financial Advisor Fees (% deal value) |
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What’s Happened
Sidara offer for John Wood Group plc (“JWG”)
JWG announced that it had received an unsolicited proposal from Sidara in May 2024, which was eventually followed by a recommended firm offer at the end of August 2025. A lot happened in the intervening 15 months. JWG’s shares are currently suspended, and the final offer price is 30p per share compared to the 230p discussed last year. Notably, in light of JWG’s financial position the Panel has allowed a number of bid conditions which are “highly unusual for a transaction that is subject to the Code”. The Panel has also “exceptionally agreed” that Sidara does not need the consent of the Panel to invoke any of these exceptional conditions, nor will Sidara need to show that the non-performance of such conditions is of “material significance” to it.
Stub Equity
The prevalence of stub equity alternatives – which led the Panel to issue Practice Statement 36 over the summer – continues. The offer by Harwood Private Equity for Frenkel Topping adopts a particularly novel approach, comprising a cash offer with a Contingent Value Right (but also providing an alternative offer comprising a mix of cash, loan notes, ordinary shares and preference shares).
Alabama Bidco’s successful unconditional contractual offer for Anexo included a loan note with a stub equity alternative. However, in conjunction with the takeover offer, Anexo also announced a tender offer to return cash to its shareholders. The Panel agreed that DBAY Advisors and Anexo’s founders should be treated as joint bidders, with the effect that the rules prohibiting special deals with the founder shareholders (which are not open equally to all shareholders) did not apply.
Strategic leaks
Since the FCA issued a warning in March about strategic leaks and unlawful disclosure in the context of live M&A transactions, see Primary Market Bulletin 54, the ratio of possible offer announcements to firm offer announcements has fallen. The statistics are a very crude indicator, but the highlighted risk of a potential market abuse investigation does at least appear to have had some effect.
Looking Ahead
Opportunities:
It was widely reported in September that a hedge fund, Irenic Capital Management, was pushing for a takeover of FTSE 250 fast food group SSP. A deal could value SSP at significantly above its market capitalisation. SSP has steady revenues, the opportunity for expansion, and assets which could be spun out.
According to a report by ION Analytics Foresight Group‘s management team is considering a potential sale of the London-listed infrastructure and renewables investment manager. Foresight Group is currently a constituent of the FTSE 250.
Shares in Hilton Foods, the meat and ready-meals provider, dropped around 20% in recent weeks and are considered to be trading lower than its peer group. There is a trend for consolidation amongst meat and consumer food products businesses amid inflation pressures.
Spire Healthcare, the UK-listed hospital group, appointed Rothschild & Co as its lead financial advisor to explore strategic options including a potential sale. The Financial Times reported that investors including Toscafund, Harwood Capital and Achilles are pushing for Spire to be sold at a price of at least 340p per share, taking the value of a potential deal to over £1 billion.
Predictions for October:
We wait to see if Exponent Private Equity backed Natara’s improved offer is sweet enough for Treatt shareholders. Aroma ingredients specialist Natara announced a recommended cash offer of 260p per share for flavour and fragrance producer Treatt on 8 September. Natara increased its offer on 6 October by 12% to 290p per share valuing Treatt at approx. £174m. The uplift follows an announcement by natural ingredients producer Döhler that it is not considering an offer for Treatt, but it has acquired an additional 7% stake bringing its holding in Treatt to just over 10%.
P2P Financing
The outlook for financing P2P transactions in the European markets is more promising. The bond market is open for business and demand in both the syndicated and private credit loan markets exceeds the supply of M&A. This was reflected in the only P2P financing deal which came to market in September, a £1.5 billion equivalent loan (borrowed in Euros and Dollars) to finance KKR’s acquisition of Spectris plc.
Demand was sufficiently high that the commitment deadline for the €975 million Euro portion was accelerated and final pricing of Euribor +325 basis points at par, was inside initial price talk of Euribor + 350 basis points with an Original Issue Discount of 99.5-99.75. Price guidance on the $900 million dollar portion was lowered to SOFR + 275-300 basis points, from SOFR +325. The deal, which had been heavily pre-marketed, is likely to have been assisted by the size of the equity cheque written by KKR, which was reported to be £3.6 billion.
The Spectris loan was underwritten by Credit Agricole, JP Morgan, Jefferies and KKR’s own credit fund. The Term Sheet disclosed by KKR provides extensive flexibility under the covenants for Spectris to incur additional debt and make payments to its shareholders provided certain leverage thresholds are met, and generous ‘freebie’ baskets even if they are not.
A key area of focus for lenders is blocking potential routes for borrowers to carry out so-called “Liability Management Exercises”, which have included the removal of key assets from borrower groups or the addition of priority debt to the structure without the consent of existing lenders. It has been reported that a J. Crew blocker and a Chewy blocker, both designed to prevent the leakage of asset collateral, were added to the Spectris documents during syndication. However, the overall market environment continues to favour borrower-friendly financing terms.
Equity Capital Markets
UK IPO activity burst back to life in September and October. On 8 September, The Beauty Tech Group announced its expected intention to float (EITF) on the main market of the LSE with the IPO completing in early October. Princes Group and Shawbrook Group announced their EITFs on 3 and 6 October, respectively. More on these deals will be included in our October update. Other recent main market transactions included the large cap direct listings of Metlen and Fermi.
The Beauty Tech Group plc (TBTG), a UK-headquartered business focused on the at-home beauty technology market, announced its ITF on 15 September, pursuing a partially underwritten institutional offer alongside an intermediaries offer coordinated by RetailBook, and a listing in the equity shares (commercial companies) (ESCC) category. The IPO comprised a primary and secondary offering, targeting a free float of c. 35.5%. Net primary proceeds of c. £28.3m are intended to repay c. £22.5m of bank debt and fund transaction costs. Admission occurred on 8 October, with an offer price of 271p per share, at the middle of the 251p to 291p price range. The market capitalisation (based on the offer price) was c. £300m. Net secondary proceeds were c. £72.9m.
Metlen Energy & Metals PLC (Metlen), a global industrial and energy company, completed a direct listing (introduction) on 4 August in the ESCC category following its voluntary share exchange offer for Metlen Energy & Metals S.A. (Metlen SA). The indicative market capitalisation on admission was c. €6.7bn (c. £5.7bn) based on the ATHEX market cap of Metlen S.A. on 26 June 2025. Although Metlen intends to comply with the UK Corporate Governance Code from Admission, there will be an initial period where the roles of executive chair and CEO will be combined. Metlen entered into a relationship agreement with the executive chair and CEO, who is expected to hold c. 21.6% post-admission. A secondary listing on ATHEX also took place.
Fermi Inc., a data centre real estate investment trust co-founded by former US energy secretary Rick Perry, announced in late September its intention to pursue a secondary listing on the LSE’s main market alongside its primary Nasdaq listing. The US all primary IPO priced at $21 and completed on 1 October, with LSE admission becoming effective on 2 October. Fermi’s market capitalisation on admission was c. $12.45bn (c. £9.2bn), with the free float expected to exceed 10%. As a secondary listing, Fermi will not be eligible for inclusion in FTSE UK indices. Net primary proceeds of the IPO (c. $635.7m / c. £469.7m) are intended for general corporate purposes and potential future acquisitions / investments in technology, solutions and businesses that complement its business.
Key Contacts:
| Will McDonald Partner, Corporate |
Chris Haynes Partner, Corporate |
David Irvine Partner, Finance |
Kavita Davis Partner, Finance |
| James Addison Of Counsel, Corporate |
Thomas Barker Of Counsel, Corporate |
Sarah Leiper-Jennings Of Counsel, Corporate |
Pete Usher Associate, Corporate |
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
This update highlights the recently enacted French Representative Action with its significant changes to the French class action regime. We also discuss the ramifications of a new climate change class action in the Netherlands for further climate litigation around the world and provide an update on third-party funding in the UK.
I. New French Rules on Representative Actions
In April 2025, France enacted a landmark law aligning its class action regime with the European Directive for Representative Actions. All class actions initiated from May 2, 2025 are subject to the new procedural rules. The reform significantly expands the scope of lawsuits that can be filed as representative actions in France:
- Subject matter: Claims resulting from any form of contractual breach or any tort arising from professional activities are permissible. This includes breaches committed by both public and private entities, even those managing public services. Claims are not limited to consumers. Companies and other legal entities can advance their claims, too, enabling business-to-business (B2B) class actions.
- Relief: Plaintiffs can seek all forms of relief, whether for compensation or injunctive measures to halt ongoing breaches.
- Standing: Going beyond the requirements of the underlying EU directive, the French regime does not limit standing to qualified consumer protection agencies. European trade unions, non-profit associations, and the public prosecutor can also file new actions.
- Interim measures: Judges are empowered to order urgent provisional measures to protect a future judgment.
- No prior formal notice: Previously, a qualified entity looking to file a class action in France needed to formally notify the respondent of its intent to sue. This requirement is now abolished. Under the EU Directive, however, qualified consumer protection agencies remain obliged to inform consumers that they intend to file a new class action.
Two further changes are particularly noteworthy as they currently set France apart from all other European jurisdictions:
- Plaintiffs can choose to bring their class action directly against the respondent’s insurer, if a respondent is insured for the alleged liability and French courts have jurisdiction over the respondent’s insurance company. When sued, the insurer may not pay the insurance sum to the respondent or anyone else until the plaintiffs have been compensated for the financial consequences of the underlying tort. This provision offers plaintiffs a shortcut to full compensation.
- Another significant new feature is the introduction of a civil fine in cases of deliberate misconduct. At the request of the public prosecutor a judge may issue a specially reasoned decision imposing the fine. The fine cannot be covered by insurance and, depending on the seriousness of the misconduct, may reach up to twice the annual profit gained for individuals and up to five times the annual profit for legal entities. It shall be paid into a fund dedicated to financing class actions. This is the first element in EU class actions that is comparable to punitive damages in the US. Like in the US, imposed civil fines might become subject to constitutional challenges.
II. Netherlands Climate Change Class Action
The Dutch environmental NGO “Milieudefensie” has filed a class action against Dutch bank ING in Amsterdam, claiming breach of duty by ING by not aligning its lending portfolio with emission reduction standards. The new claim comes on the heels of the NGO’s ongoing case against Shell in which the District Court of the Hague had initially ordered Shell to cut emissions by 45% by 2030. This decision was overturned in 2024 by the Appellate Court of the Hague and the case is currently pending before the Dutch Supreme Court.
In its class action against ING, Milieudefensie asks the court to order ING to stop financing new fossil fuel projects. The complaint likely draws on the decision by the Appellate Court of the Hague in the Shell case which stated that investments in new fossil fuel projects may be at odds with the general climate obligations of private actors under Dutch civil law. Based on this logic, Milieudefensie also announced a new lawsuit against Shell with the goal of stopping Shell’s exploration of new oil and gas fields.
Because Milieudefensie is the Dutch branch of “Friends of the Earth International”, a network of international grassroots environmental organizations, we expect that the legal arguments in the new complaint against ING will draw attention from environmental groups around the world and could spark similar climate litigation against other respondents in the future.
III. UK Third-Party Funding Update
The UK’s legal landscape for third-party funding in respect of class actions has remained under the spotlight recently as a result of the continued uncertainty following the Supreme Court’s 2023 judgment in PACCAR, which held that litigation funding agreements which remunerated funders by reference to a share of the damages ultimately recovered were “damages-based agreements” and therefore unenforceable in opt-out class actions in the Competition Appeal Tribunal (the “CAT”):
- In April 2025, the Court of Appeal handed down its judgment in Justin Gutmann v Apple Inc. & Ors [2025] EWCA Civ 459 and confirmed that funding arrangements in opt-out class actions which allow for payments from any undistributed damages to funders, solicitors and counsel ahead of the class are permissible in principle. However, the judgment also makes clear that the CAT retains the ultimate discretion when determining the amount and order of any such payments.
- The Civil Justice Council’s eagerly anticipated final report on its review of litigation funding was published on 2 June 2025. The report recommends that, amongst other things, legislation should be introduced as soon as possible to overturn the effect of the PACCAR judgment (on a retrospective and prospective basis). This has been welcomed by funders and class representatives.
- In July 2025, the Court of Appeal handed down its judgment in Sony Interactive v Alex Neill ([2025] EWCA Civ 841) and confirmed that litigation funding agreements that had been amended by a number of class representatives in ongoing class actions in the CAT to seek to side-step the impact of PACCAR were not damages-based agreements. As such, funding arrangements which calculate a funder’s return by reference to multiples of the amounts borrowed are permissible for opt-out class actions even if a funder’s level of recovery is ultimately capped by the level of damages recovered.
- Finally, in relation to the collective settlement order approved by the CAT in the Merricks class action (see our previous client alert here), the funder, Innsworth Capital Limited, is now seeking judicial review in relation to the distribution plan approved by the CAT due to its unhappiness with the low level of return that it was awarded (£68 million versus the contractually “agreed minimum floor” of a return of £179 million). The outcome could influence future funding practices and levels of investor confidence in UK class actions.
Gibson Dunn attorneys are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Class Actions, Litigation, or Appellate and Constitutional Law practice groups, or any of the following lawyers:
Frankfurt:
Alexander Horn (+49 69 247 411 537, ahorn@gibsondunn.com)
Munich:
Markus Rieder (+49 89 189 33 260, mrieder@gibsondunn.com)
Friedrich A. Wagner (+49 89 189 33 262, fwagner@gibsondunn.com)
Paris:
Eric Bouffard (+33 1 56 43 13 00), ebouffard@gibsondunn.com)
Brussels:
Yannis Ioannidis (+32 2 554 72 08, yioannidis@gibsondunn.com)
London:
Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com)
Dan Warner (+44 20 7071 4213, dwarner@gibsondunn.com)
Doug Watson (+44 20 7071 4217, dwatson@gibsondunn.com)
United States:
Theodore J. Boutrous, Jr. – Los Angeles (+1 213.229.7000, tboutrous@gibsondunn.com)
Christopher Chorba – Co-Chair, Class Actions Group, Los Angeles (+1 213.229.7396, cchorba@gibsondunn.com)
Theane Evangelis – Co-Chair, Litigation Group, Los Angeles (+1 213.229.7726, tevangelis@gibsondunn.com)
Lauren R. Goldman – Co-Chair, Technology Litigation Group, New York (+1 212.351.2375, lgoldman@gibsondunn.com)
Kahn A. Scolnick – Co-Chair, Class Actions Group, Los Angeles (+1 213.229.7656, kscolnick@gibsondunn.com)
Bradley J. Hamburger – Los Angeles (+1 213.229.7658, bhamburger@gibsondunn.com)
Michael Holecek – Los Angeles (+1 213.229.7018, mholecek@gibsondunn.com)
Lauren M. Blas – Los Angeles (+1 213.229.7503, lblas@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
The Committee, through its six-month inquiry—which included taking evidence from business and industry groups—considered the UK’s current legal and voluntary framework in relation to forced labour in international supply chains, and recommends new legislation, including mandatory human rights due diligence and import bans.
On 24 July 2025, the Joint Committee on Human Rights (Committee) published a report exploring forced labour in international supply chains of goods which enter into or are sold on the UK market (Report).[1] The Committee, through its six-month inquiry—which included taking evidence from business and industry groups—considered the UK’s current legal and voluntary framework in relation to forced labour in international supply chains. The Report compares the UK’s regulatory approach to forced labour with some of its main trading partners, including the European Union (EU) and the United States (US), as well as its policy position on the inclusion of human rights-related-language in free trade agreements (FTAs)—a number of which have recently been concluded or are currently being negotiated.
The Committee concluded by finding “[t]he evidence we heard demonstrates that goods produced by forced labour are being sold in the UK”.[2] It observed that certain sectors are particularly high risk—including the green energy sector. In light of the Committee’s findings, the Report makes recommendations for the UK Government, including the introduction of mandatory human rights due diligence (mHRDD) and import bans, to be actioned within one year of the Report’s publication. This would (in the Committee’s view) “level the playing field and be welcomed by many responsible businesses”.[3]
According to the Report, new legislation should establish:
- that it is unlawful to import or sell goods linked to forced labour in the UK;
- new mHRDD obligations for businesses;
- a right for those who have suffered forced labour to bring a claim for civil liability against those responsible;
- the regulatory arrangements for imported goods, sale of goods, and ensuring business compliance with the new due diligence duties; and
- how such regulations will be enforced and how those responsible for enforcement will be resourced.[4]
Whether the Government will follow such recommendations remains to be seen, and a Government response is expected later this month. Policymakers will no doubt have in mind the evolving landscape in Europe, where the European Corporate Sustainability Due Diligence Directive (CSDDD) (amongst other ESG regulations) is under increasing scrutiny as part of a proposed Omnibus package (previously reported on here).
We address some of the key findings of the Report in more detail below.
Forced Labour in Supply Chains
“Forced labour” is defined by the International Labour Organisation (ILO) as “all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily”.[5] The ILO categorises forced labour as a form of modern slavery. The Report notes that, as of 2021, there were approximately 27.6 million people subject to forced labour globally, and that this number is increasing.
International Law on Forced Labour
The Report observes that the UK has ratified a number of international treaties with relevance to forced labour, the most important of which are: (i) the European Convention on Human Rights (ECHR) (Article 4 prohibits “slavery and forced labour”); (ii) the International Covenant on Civil and Political Rights (ICCPR) (Article 8 prohibits slavery and servitude); and (iii) the ILO Conventions. As noted by the Committee, these international agreements create legal obligations for the UK as a matter of international law, although these usually only extend to the UK’s territorial jurisdiction. With the exception of the ECHR, there are no courts which can be used by individuals to directly enforce their rights under these treaties, either internationally or in the UK.
The Report further notes that, even in the case of the ECHR, its applicability to forced labour in the UK’s supply chains is limited in the context of international supply chains—Article 4 has been relevant principally in cases of forced labour, modern slavery and human trafficking which have taken place in the UK itself rather than in the UK’s supply chains abroad.
The Report observes the UK’s support of voluntary international initiatives such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct—but that these are “advisory and unenforceable in the UK”.
Existing UK Legislation on Forced Labour
The Report notes that the UK has a “patchwork” of domestic legislation relevant to forced labour and supply chains.[6] Key amongst these is the Modern Slavery Act 2015 (MSA 2015), which was “world-leading” when it was passed.[7] Section 54 of the MSA 2015 introduced the UK’s first corporate reporting regulation for in-scope companies, requiring preparation and publication of an annual slavery and human trafficking statement (Section 54).[8] The Committee concluded, however, that such statements are “not effectively motivating companies to address forced labour in their supply chains”.[9]
The Report notes that other statutes in the “patchwork” include the Foreign Prison-Made Goods Act 1897, the Proceeds of Crime Act 2002, the Procurement Act 2023 and—to a lesser extent—the Human Rights Act 1998.[10] Sector-specific legislation is also in place in the UK. For example, under the Great British Energy Act 2025, one of Great British Energy’s (GBE) objectives is facilitating, encouraging and participating in “measures for ensuring that slavery and human trafficking is not taking place in [GBE’s] business or supply chains”.[11]
Overall, however, the legislation is, in the Committee’s view, “currently inadequate to address forced labour in UK supply chains”.[12] According to the Committee, legislation should, therefore, be strengthened.
Import Bans
The Report observes that the UK does not currently have any comprehensive import ban on goods produced by forced labour—which can send a strong message that forced labour in supply chains will not be tolerated. The Report explains that such bans can be an appropriate response to state-imposed force labour, where conventional due diligence approaches may be inappropriate.
The Report discusses the Uyghur Forced Labour Prevention Act 2021 (UFLPA) in the US, which established a rebuttable presumption that all goods “mined, produced, or manufactured wholly or in part in the [Xinjiang region in China], or by an entity on the UFLPA Entity List” are presumed to be linked to forced labour unless and until it is proved otherwise.[13] The Report also noted the US’ legislation prohibiting any goods produced by North Korean citizens being imported since 2017.
The Report notes that the EU has introduced its own forced labour legislation, through the Forced Labour Regulation 2024, which is expected to apply from 14 December 2027 (Regulation).[14] This Regulation prohibits “the placing and making available on the Union market of products made with forced labour or exporting domestically produced or imported products made with forced labour”.[15] Article 37 requires Member States to lay down rules on penalties which are “effective, proportionate and dissuasive”, and for compliance to be monitored by a competent authority.[16] In comparison to the UFLPA, the Regulation applies to imported and exported goods produced by forced labour globally (including in Member States). As such, it is broader in scope that the UFLPA.
Given the import bans being introduced in competitor markets such as the EU and US, the Report declared that there is a risk that the UK could become a more attractive destination for goods produced by forced labour.
Other Enforcement Mechanisms in the UK
The Report explains that the UK has a number of other domestic measures which could be better utilised to tackle forced labour in UK supply chains—in particular, the Proceeds of Crime Act 2002 (POCA). The Committee observed, however, that the POCA has, to date, been “underutilised by law enforcement agencies to seize goods linked to forced labour”.[17] In particular, the Report points to Part 5 of the POCA, which empowers agencies to seize assets linked to forced labour through civil recovery (without requiring a conviction); and Part 7 of the POCA, which requires businesses to report suspicious transactions and assist with prosecution efforts in relation to forced labour (i.e., helping to disrupt the financial drivers of forced labour).[18] The Report recommends overcoming barriers to enforcement so that agencies can use their powers under POCA to address the risk of forced-labour goods being sold in the UK.
Free Trade Agreements (FTAs)
The Report also considered the UK’s policy of including human rights language in FTAs. By way of context, it is increasingly common for provisions to be included in FTAs which display the parties’ values. Typically, such clauses commit the parties to upholding or improving rights as part of the FTA. Clauses might comprise commitments to uphold human rights in general, or be more focused commitments to uphold specific rights, such as labour rights. These clauses can create legal obligations when they are operative terms (rather than just political statements), meaning that the parties can (where the FTA permits) use a breach of the provision to initiate dispute resolution proceedings, and to potentially suspend or terminate the agreement.
Ensuring that clauses on human rights are included in FTAs can demonstrate the UK’s values and principles towards forced labour. According to the Committee, the Government should make it an explicit policy to include forced labour provisions in future trade deals. In this regard, the EU’s systemic approach to including human rights clauses in its FTAs “provides an example” for the UK.[19]
The authors note that concluding FTAs is a priority of the current Government. The UK has recently concluded an FTA with the US and there are on-going FTA negotiations between the UK and the Gulf Cooperation Council, which includes Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain. Thus, we may soon see whether the UK Government will take the Committee’s FTA recommendations on board.
Forced Labour Litigation
As regards litigation, the Report observes that, in the UK, some cases are being brought by survivors of forced labour, most commonly under tort law. The Committee considers that these cases can be protracted, complex, and expensive. Consequently, in the Committee’s view, providing a dedicated route for civil claims to be brought against companies would benefit survivors, as well as place the burden on companies to demonstrate that they have taken measures to prevent forced labour in their supply chains (i.e., establish a “duty to prevent”).
Observations
The Report’s overarching recommendation is for the UK Government to strengthen existing legislation and its enforcement, as well as create new laws to establish corporate responsibility (including mHRDD) and an import ban on goods linked to forced labour. The Report also recommends a “duty to prevent” to establish civil liability for companies who do not take adequate steps to prevent forced labour in their supply chains. As noted, it remains to be seen to what extent the UK Government will take account of the Committee’s recommendations or seek to introduce new legislation, although the Government is in fact already considering reforms to the MSA 2015 following a recommendation from a House of Lords Committee in October 2024.[20] In the event that the Committee’s recommendations were adopted, even in part, UK companies could face a significantly enhanced burden to proactively tackle forced labour in their supply chains.
[1] See ‘Forced Labour in UK Supply Chains’, Joint Committee on Human Rights, 24 July 2025, available here (the Report).
[2] Report, PDF p. 13, 82.
[3] Report, PDF p. 27.
[4] See Report, PDF p. 82.
[5] Report, PDF p. 9.
[6] Report, PDF p. 15.
[7] Report, PDF p. 15.
[8] See Report, PDF pp. 15, 20.
[9] Report, PDF p. 23.
[10] See Report, PDF p. 15.
[11] Report, PDF p. 15.
[12] Report, PDF p. 15.
[13] Report, PDF p. 44.
[14] See Forced Labour Regulation (Regulation (EU) 2024/3015), 27 November 2024 (coming into force on 13 December 2024) (the Regulation).
[15] Regulation, Recital 16.
[16] Regulation, Article 37. See also Recital 66.
[17] Report, PDF p. 47.
[18] See Report, PDF pp. 47-48.
[19] Report, PDF p. 58.
[20] ‘Government response to House of Lords Modern Slavery Act 2015 Committee report, “The Modern Slavery Act 2015: becoming world-leading again”’, UK Home Office, 16 December 2024, available here.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s ESG: Risk, Litigation, & Reporting, Geopolitical Strategy & International Law, International Arbitration, or Transnational Litigation practice groups, or the authors:
Susy Bullock – Co-Chair, ESG and Transnational Litigation Groups,
London (+44 20 7071 4283, sbullock@gibsondunn.com)
Robert Spano – Co-Chair, ESG and Geopolitical Strategy & International Law Groups,
London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)
Stephanie Collins – London (+44 20 7071 4216, scollins@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
The Court of Appeal judgment means that States can be prevented by the doctrine of issue estoppel from relitigating state immunity issues before the English courts if those issues have already been decided in another forum. As such, the judgment provides a potential shortcut through otherwise lengthy and expensive proceedings on questions of state immunity.
- Executive Summary
On 12 February 2025, the UK’s Court of Appeal issued an important ruling in the area of judgment and arbitral award enforcement: Hulley Enterprises Ltd & Ors v The Russian Federation [2025] EWCA 108 (the CA Judgment).
The CA Judgment affirms the High Court’s earlier decision (the HC Judgment)[1] that the doctrine of issue estoppel can apply to arguments on state immunity. The decision is especially important in the field of judgment and award enforcement because, according to the CA Judgment, those seeking to enforce against a State can rely upon prior decisions—including those of foreign courts—in deciding issues that underpin a claim for state immunity. That is subject to establishing (i) the standard common law requirements for an issue estoppel,[2] and (ii) the requirements for recognition of a foreign judgment issued against a foreign State set out in s. 31 of the Civil Jurisdiction and Judgments Act 1982 (the CJJA).[3]
The CA Judgment means States will be prevented from relitigating certain state immunity issues before the English courts so that an English court can base its decision as to the existence of state immunity on an issue estoppel arising from the decision of a foreign court. As such, it provides a potential shortcut through otherwise lengthy and expensive proceedings on questions of state immunity.
- Relevant Background
The claimants in the case (the Hulley Claimants) obtained three materially identical arbitral awards (the Awards) against Russia in 2014. The Awards ordered Russia to pay damages exceeding USD 50 billion (plus interest) for Russia’s violations of the Energy Charter Treaty stemming from Russia’s unlawful expropriation of Yukos Oil Company in which the Hulley Claimants were majority shareholders. Following the issuance of the Awards, a sprawling set of set-aside and enforcement proceedings has unfolded across multiple jurisdictions.
As to the set-aside proceedings: in 2014, Russia applied to set the Awards aside in the courts of the arbitral seat, the Netherlands. The Awards were set aside at first instance by the Hague District Court in 2016 on jurisdictional grounds because it found that there was no binding arbitration agreement between the Hulley Claimants and Russia.[4] However, the Hulley Claimants successfully appealed that decision, and the Awards were re-instated by the Hague Court of Appeal in 2020.[5] Russia then appealed that decision to the Dutch Supreme Court,[6] which, in 2021, upheld most of the Hague Court of Appeal’s findings but remitted one issue to the Amsterdam Court of Appeal for further consideration.[7] According to the CA Judgment, while the Amsterdam Court of Appeal has ruled in the Hulley Claimants’ favour on the outstanding issue, a further appeal to the Dutch Supreme Court remained pending as of the date of the CA Judgment.[8]
Meanwhile, in 2015, before the Hague District Court had set the Awards aside, the Hulley Claimants had applied for recognition and enforcement of the Awards in the UK. Those proceedings were then stayed by consent following the set-aside decision of the Hague District Court in 2016.[9] After the Dutch Supreme Court judgment was handed down in 2021, the stay was lifted partially and solely for the purpose of resolving Russia’s state immunity defence (emanating from jurisdictional issues). Directions were given by Mr Justice Butcher for determination of certain preliminary issues centred around whether Russia was precluded, by reason of an issue estoppel arising out of the Dutch courts’ judgments, from arguing that the arbitral tribunal did not have jurisdiction.
The core of the Dutch courts’ jurisdictional finding was that, contrary to Russia’s submissions, there was a binding arbitration agreement between the Hulley Claimants and Russia. Consequently, in the English proceedings considering these preliminary jurisdictional issues, the Hulley Claimants argued that the Dutch courts’ determination on jurisdiction also resolved the question of whether the arbitration exception under s. 9 of the UK State Immunity Act 1978 (the SIA)[10] applied; Russia counterargued that that question had to be the subject of further consideration de novo by the English courts.[11]
- The High Court Judgment
The preliminary jurisdictional issues were the subject of a two-day hearing before Mrs Justice Cockerill DBE on 4–5 October 2023, and the HC Judgment was handed down on 1 November 2023.
Cockerill J ruled in favour of the Hulley Claimants in reliance of the Dutch courts’ jurisdictional determinations. She held that the SIA is subject to procedural and substantive common law rules, including issue estoppel, and there was no principle of law that issue estoppel could not arise in the context of public international law (such as in relation to the interpretation of an international treaty).[12] She also held that, in order for an issue estoppel to arise from a foreign judgment issued against a foreign State, the requirements for recognition of such judgments, contained in s. 31 of the CJJA, must also be satisfied.[13]
Applying those principles, Cockerill J found that the Dutch Supreme Court’s 2021 decision—dismissing Russia’s challenge to the Awards and finding a binding agreement to arbitrate—created an issue estoppel. Russia was therefore estopped from re-arguing before the English courts the question of whether it had agreed to submit the dispute to arbitration. Consequently, Cockerill J dismissed Russia’s challenge to the jurisdiction of the English courts on the grounds of state immunity.
- The Court of Appeal Judgment
Russia appealed the HC Judgment to the Court of Appeal on five grounds,[14] which were distilled down to a single primary issue: when a foreign court has decided that a State has agreed in writing to submit a dispute to arbitration, and the usual conditions for the application of issue estoppel are satisfied, can: (a) the English court treat that decision as giving rise to an issue estoppel, or (b) must it determine the issue for itself (i.e., de novo) without regard to the decision of the foreign court?
The appeal was heard on 15 January 2025 and the CA Judgment was handed down on 12 February 2025. Lord Males, Lord Lewison, and Lord Zacaroli unanimously dismissed Russia’s appeal, with Lord Males delivering the lead judgment.
The Court of Appeal noted that, while the SIA sets out comprehensively the exceptions to state immunity (in ss. 2 to 11 of the SIA), it does not prescribe how the English court should decide whether any of the exceptions applies in any given case.[15] That question must be decided by applying the ordinary principles of English law—both substantive and procedural—and those principles include the principle of issue estoppel.[16]
Thus, when Cockerill J had decided to give effect to an issue estoppel arising from the Dutch Supreme Court’s 2021 judgment, she had not (as Russia had maintained) declined to determine whether Russia had agreed to submit the underlying dispute to arbitration. Instead, the Judge had determined that Russia had so agreed, applying the substantive principle of issue estoppel. In short: the relevant question had been determined by the previous decision of a court of competent jurisdiction (i.e., the Dutch Supreme Court in 2021), which the Court of Appeal confirmed to be conclusive on the issue in question.[17]
The Court of Appeal also rejected Russia’s arguments that issues of state immunity and/or treaty interpretation constituted “special circumstances” militating against the application of issue estoppel in any event. In doing so, the Court of Appeal noted that to give effect to the issue estoppel arising from such a judgment would be in the interests of justice as it would: (i) avoid putting the Hulley Claimants to the trouble and expense of litigating the relevant issue again, and (ii) be in accordance with the important public policy that arbitral awards, even against sovereign States, “should be honoured without delay and without the kind of trench warfare seen in the present case”.[18]
- Comment
The CA Judgment is significant. It confirms that determinations of foreign courts—in particular, of the courts of the arbitral seat—can give rise to an issue estoppel when English courts are deciding the same issues within the context of a sovereign immunity defence. In practice, it is often the case that the set-aside proceedings at the seat of the arbitration will settle the question of whether the tribunal in question had jurisdiction (i.e., effectively the very same question that arises under s. 9 of the SIA as to whether the arbitration exception applies). The CA Judgment, thus, paves the way for award creditors to rely upon such final determinations of foreign courts to cut short a State’s assertion of adjudicative immunity in enforcement proceedings before the English courts.
Accordingly, the CA Judgment means that: (i) the timeline for obtaining an enforceable recognition and enforcement order against a State (entitling the award creditor to start the execution process against the State’s assets) can be much shorter, and (ii) the additional costs and expenses of re-running complex and already-decided jurisdictional arguments before the English courts can be avoided.
On the whole, the CA Judgment is positive news for parties looking to enforce awards against foreign States in the UK and re-affirms the UK’s pro-enforcement stance in accordance with other recent decisions.[19]
We note that the CA Judgment may be subject to a further appeal to the UK Supreme Court.
[1] Hulley Enterprises Ltd & Ors v The Russian Federation [2023] EWHC 2704 (Comm).
[2] Being that (i) the judgment (which is alleged to form the basis of the issue estoppel) must have been given by a foreign court of competent jurisdiction; (ii) the judgment (which is alleged to form the basis of the issue estoppel) must be final and conclusive and on the merits; (iii) there must be identity of parties; (iv) there must be identity of subject matter (i.e., the issue decided by the foreign court must be the same as the one arising in the English proceedings); and (v) “special circumstances”, militating against the application of issue estoppel, must not exist (see CA Judgment, paras. 36, 41).
[3] Being that (i) the judgment (which is alleged to form the basis of the issue estoppel) would be recognised and enforced if it had not been given against a State; and (ii) that the foreign court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the UK in accordance with ss. 2–11 of the State Immunity Act 1978 (see CA Judgment, paras. 23, 72–76).
[4] CA Judgment, para. 8.
[5] CA Judgment, para. 9.
[6] Raising challenges as to the conduct of the arbitration alongside its jurisdictional objections.
[7] CA Judgment, para. 11. The one issue that had been remitted to the Amsterdam Court of Appeal was whether the Awards were vitiated by fraud as a result of the Hulley Claimants having (allegedly) effectively bribed a witness to give evidence in their favour and failed to disclose key documents.
[8] CA Judgment, para. 15.
[9] CA Judgment, paras. 7–8.
[10] Section 9(1) of the SIA provides that “[w]here a State has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration”.
[11] CA Judgment, para. 12.
[12] HC Judgment, paras. 19–40, 53–55.
[13] HC Judgment, paras. 41–48.
[14] The five grounds of appeal advanced by Russia were: (1) issue estoppel is not applicable in respect of a foreign judgment against a state, not least on an issue of state immunity; (2) there is no scope for issue estoppel to apply when determining whether state immunity is available under the SIA; (3) s. 31 of the CJJA is not available as an “overlay” for a common law issue estoppel determination; (4) special circumstances militate against the application of issue estoppel in any event because of (i) the extant fraud challenge wherein the Awards are liable to be set aside; (ii) the existence of a potential reference to, and determination by, the Court of Justice of the European Union that there was no jurisdictional basis for the Awards; and (iii) the primacy which ought to be given to the exceptional nature of state immunity; and (5) the requirement for an English court to identify the true and proper construction of a treaty itself militates against the application of issue estoppel on such a matter (see CA Judgment, para. 49).
[15] CA Judgment, paras. 3, 57.
[16] CA Judgment, paras. 3, 57.
[17] CA Judgment, para. 56.
[18] CA Judgment, paras. 77–84.
[19] See further our client alerts on the decisions in Infrastructure Services Luxembourg SARL & Anor v Kingdom of Spain and Border Timbers Ltd & Anor v Republic of Zimbabwe [2024] EWCA Civ 1257 (here); Infrastructure Services Luxembourg SARL & Anor v Kingdom of Spain [2023] EWHC 1226 (Comm) (here); and Micula & Ors v Romania [2020] UKSC 5 (here).
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s International Arbitration, Judgment and Arbitral Award Enforcement, or Transnational Litigation practice groups, or the authors in London:
Piers Plumptre (+44 20 7071 4271, pplumptre@gibsondunn.com)
Ceyda Knoebel (+44 20 7071 4243, cknoebel@gibsondunn.com)
Theo Tyrrell (+44 20 7071 4016, ttyrrell@gibsondunn.com)
Dimitar Arabov ( +44 20 7071 4063, darabov@gibsondunn.com)
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
In this update, we reflect on the major developments within the UK employment landscape during the course of 2024 and look ahead to what is to come in 2025.
Provided below is a brief overview of developments and cases which we believe will be of interest, with more detailed information on each topic available by clicking on the links.
1. Preventing sexual harassment (view details)
We consider the recently introduced legal duty requiring employers to take reasonable steps to prevent sexual harassment in the workplace – which extends to sexual harassment by clients, customers and other third parties – as well as the practical steps employers can take to ensure compliance.
2. Spotlight on dismissal and re-engagement (view details)
We report on recent legal developments regarding the practice of ‘firing and rehiring’ employees in order to impose unilateral changes to employees’ contractual terms of employment.
3. Case updates (view details)
We consider three significant cases from 2024 dealing with the determination of employment status, the process to be followed in relation to small-scale lay-offs and a recent decision on the enforceability of post-employment restrictive covenants in investment agreements.
4. Employment Rights Bill update (view details)
We provide an update on two amendments which the Labour Government has proposed to the Employment Rights Bill (the “Bill”).
5. What to expect in 2025 (view details)
We review the potential developments and cases which we expect will shape UK employment law during the course of 2025.
Appendix
1. Preventing sexual harassment
Since 26 October 2024, the Worker Protection (Amendment of Equality Act 2010) Act 2023 has required employers to take “reasonable steps” to prevent sexual harassment in the workplace. This new duty creates a positive and anticipatory legal obligation on employers to assess the risks and take action to prevent sexual harassment from taking place (and, where sexual harassment has taken place already, from taking place again).
The consequences for employers who do not take “reasonable steps” to prevent sexual harassment in the workplace can be severe: the Equality and Human Rights Commission now has the power to take enforcement action against such employers, while the Employment Tribunal can uplift compensation for sexual harassment by a maximum of 25% where employers are found to have breached this duty.
The test of whether employers have taken “reasonable steps” is objective, depending on the nature of the employer and the facts and circumstances of each situation. How this duty comes to be interpreted by the courts and tribunals remains to be seen and whilst what amounts to “reasonable steps” will vary from case to case, based on guidance published by the Equality and Human Rights Commission (which can be accessed here) and detailed advice provided by the Advisory, Conciliation and Arbitration Service (“ACAS”) (which can be found here) the following steps should be taken:
a. Survey attitudes
Employers should conduct anonymous organisational reviews to measure employees’ understanding and awareness of sexual harassment, as well as employees’ perceptions of how the employer will respond to reported incidents of sexual harassment. Such reviews should be conducted on a regular basis, with the findings used to identify where action is needed and to develop training and policies.
b. Develop policies
Employers should develop detailed sexual harassment policies which include: (i) a clear definition and examples of sexual harassment; (ii) an explanation of to whom and where the policies apply; (iii) a description of the reporting channels available; (iv) an overview of the complaint procedures and the possible sanctions for committing sexual harassment; and (v) a statement of zero tolerance for victimisation. Employers should commit to monitor the effectiveness of sexual harassment policies and to implement changes to them as and when required.
c. Raise awareness of policies
Employers should communicate sexual harassment policies to all staff, highlighting the reporting channels available. This may include advising new employees of sexual harassment policies during induction procedures and sending annual reminders to all staff. Sexual harassment policies may also be referenced in (even if not incorporated into) contracts of employment and/or other terms and conditions of work.
d. Conduct risk assessments
Employers should make assessments of the risks relating to sexual harassment in the course of employment, with particular emphasis on the workplace culture and the working environment. In order to address the risks identified, employers should take mitigating actions and communicate openly with employees about any such steps taken. It is critical for employers to regularly conduct risk assessments to ensure compliance with the new duty.
e. Provide training
Employers should provide training to all staff on sexual harassment and victimisation. While the training provided should be tailored based on the nature of the employer and the working environment, the training should cover as a minimum: (i) how to recognise sexual harassment; (ii) the action required if employees experience or witness sexual harassment; and (iii) how to handle sexual harassment complaints. It is recommended that employers also maintain records of who has received sexual harassment training and provide refresher training on a regular basis.
f. Consider third parties
Employers should assess the risks of sexual harassment arising from any third parties with whom staff will come into contact, including clients, customers, and contractors. In order to reduce this risk, employers should encourage staff to report any sexual harassment by third parties. Employers should also consider including express terms in standard contracts with third parties requiring them to adhere to any sexual harassment policies in place.
g. Formalise reporting channels
Employers should offer multiple reporting channels for those who wish to raise sexual harassment complaints. Wherever possible, employers should offer both anonymous and named reporting routes and give anonymous complainants the option to make named reports at later stages if they so wish. Employers should consider providing external online or telephone reporting tools for those who wish to make anonymous complaints.
h. Deal with complaints
Employers should make clear that sexual harassment complaints can be made at any time: there should be no time limit within which complaints must be made. Employers should ensure any complaints raised are investigated fairly and thoroughly. Consideration should be given to the wishes of the complainant and care taken to respect the confidentiality of all parties. The outcomes of any formal complaints of sexual harassment should be as transparent as possible to encourage future complainants to come forward.
i. Prevent victimisation
Employers should consider the risks relating to victimisation when conducting risk assessments. It may be necessary for employers to take measures to limit the contact between complainants and alleged harassers to protect complainants and to minimise any risks of victimisation. Employers should give careful consideration to all viable alternatives to mitigate any such risks before suspending the alleged harasser.
j. Evaluate steps taken
Employers should conduct evaluations of the effectiveness of policies to prevent sexual harassment in the workplace. One recommendation is that employers evaluate sexual harassment policies through anonymised surveys. Any such surveys should ask staff to describe whether they have been subjected to or witnessed behaviours which would constitute sexual harassment, and, if so, whether they reported these behaviours. Employers should compare the data received from these surveys against the number of sexual harassment complaints formally raised. This will allow employers to obtain as clear a picture of sexual harassment in the workplace as possible and to put in place further measures to encourage reporting if needed.
2. Dismissal and re-engagement
a. Code of Practice
In July 2024, the Labour Government published a new Statutory Code of Practice on Dismissal and Re-engagement (the “Code”) which sets out employers’ responsibilities when seeking to change employees’ contractual terms using the controversial method of ‘fire and rehire’ (where the employee is dismissed and offered re-engagement on less favourable terms).
A failure to follow the Code does not itself make an employer liable to proceedings, however, any failure to comply with the Code must be taken into account by the relevant court, tribunal or committee when assessing the fairness of an employer’s conduct and, in particular, when assessing compensation. From 20 January 2025, the Employment Tribunal will also have the power to vary any awards made by up to 25% for any unreasonable failure to comply with the Code.
A brief overview of the major provisions of the Code is provided below:
- employers proposing changes to employees’ contractual terms and conditions must be open and transparent with the relevant employees and should consult with the employees “for as long as reasonably possible in good faith” to try to reach agreement concerning any changes;
- before raising the prospect of dismissal and re-engagement with employees, the Code suggests that employers should consult ACAS for impartial advice on their rights and obligations;
- the Code emphasises that employers should not use the threat of dismissal as a “negotiating tactic” to pressure employees if they are not genuinely considering dismissal as a means of achieving the intended objectives;
- in the event that employers opt for dismissal and re-engagement:
- the Code recommends employers give employees “as much notice as reasonably practicable” of the dismissal and consider extending the employees’ contractual notice periods to enable them to accommodate the changes; and
- the Code suggests employers seek feedback from employees and commit to reviewing the changes at a fixed point in the future; and
- importantly, the Code does not apply to the dismissal and re-engagement of employees arising out of a genuine redundancy (lay-off) situation.
b. Employment Rights Bill
In parallel to the publication of the Code, the Labour Government has committed to fully ending the practice of ‘fire and rehire’ during the lifetime of this Parliament. Under the Employment Rights Bill, the dismissal and re-engagement of employees will be rendered unfair dismissals, apart from in certain limited circumstances. Employers will continue to be able to engage in this practice (subject to further safeguards) if: (i) the variation to the terms of employment could not reasonably have been avoided; or (ii) reducing or eliminating financial difficulties which are impacting the employer’s ability to carry on the business as a going concern are the reason for the variation. These carve outs are intended to ensure that businesses can restructure to remain viable where business or workforce demands necessitate it.
c. Supreme Court Injunction
Meanwhile, the Supreme Court has reinstated an injunction preventing an employer from terminating employment contracts as part of a ‘fire and rehire’ operation to unilaterally remove a permanent enhanced “retained” pay feature that had formed part of the employees’ contractual entitlements following previous negotiations with the employees’ union.
In Tesco Stores Limited v Union of Shop, Distributive and Allied Workers, the High Court had originally granted the injunction on the basis that there was an implied term within the employees’ contracts that precluded termination of employment as a method to remove the employees’ entitlement to retained pay. The Court of Appeal overturned this decision; however, the Supreme Court reinstated the injunction, holding that the intention of the parties when negotiating the enhanced pay provision could not have been for Tesco to retain an unrestricted unilateral right to terminate the employees’ contracts in order to deprive them of this right.
While the facts underpinning the Supreme Court decision were highly unusual, the case highlights the importance of clarity of drafting when seeking to crystallise the outcome of rights negotiated with unions, as well as the vulnerability of ‘fire and rehire’ practices to legal challenge. If employers are seeking to use this process to change employees’ terms of employment, employers should give careful consideration to the specific circumstances and history of the arrangements they are proposing to change.
a. Determining employment status
Whether an employment relationship exists is guided by the three tests from Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance which are, in summary, that for an employment relationship to exist: (i) the individual agrees to a perform a service for a company in exchange for remuneration (“mutuality of obligation”); (ii) the individual is subject to a degree of control, such as to how, when and where work is done (“control”); and (iii) the contractual provisions and relationship between the parties as a whole are consistent with an employment relationship.
HMRC v Professional Game Match Officials Ltd was a case brought by HMRC which asserted that part-time football referees were employees and therefore national insurance and income tax should have been deducted from payments made to them. The Supreme Court found that mutuality of obligation and control were present in individual match day contracts for these referees. In its decision, the Supreme Court held that mutuality of obligation need not exist for the entirety of the contractual relationship and can subsist only for the period while the work is carried out, and that control is fact specific and can be sufficient even where it is over only incidental matters. With that guidance now issued, the Supreme Court has submitted the case back to the First-tier Tribunal (“FTT”) to determine whether the contracts amounted to contracts of employment considering the third test described above.
What this means for employers
This case serves as a useful reminder of the elements required to establish an employment relationship and highlights the risk of reclassification of self-employed contractors even where on first glance the circumstances for reclassification may seem unlikely. The Supreme Court has also given some guidance on the extent to which mutuality of obligation and control are required for such reclassification and we will look with interest at the next judgment in this case once the FTT has reconsidered it.
b. Redundancies
In the UK, whether a dismissal for redundancy (i.e., a lay-off) is considered ‘fair’ depends on whether an employer has reasonably treated redundancy as a sufficient reason for dismissing the employee. Case law has determined that an employer will usually not have acted reasonably in a redundancy dismissal situation unless they have consulted with the relevant employees when the proposals for redundancies are still at a formative stage. In addition, where an employer is proposing to make 20 or more employees redundant at one establishment within 90 days, it must engage in collective consultation with affected employees in accordance with the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”).
Whilst the requirement for collective consultation has only been legally required under TULRCA for what are considered ‘large-scale’ redundancies, some have argued that, as a matter of good industrial relations practice, the general workforce should also be consulted in the case of ‘small-scale’ redundancy exercises falling below the threshold in TULRCA. In the case of De Bank Haycocks v ADP RPO UK Ltd, Mr. De Bank Haycocks claimed he had been unfairly selected for redundancy. Upon initially having his claim dismissed at the Employment Tribunal stage, his claim was upheld by the Employment Appeal Tribunal which found that there had been a lack of meaningful consultation at the formative stage of the redundancy process due the lack of a general workforce consultation by ADP RPO UK Ltd (“ADP”) which it determined was a requirement of good industrial relations practice in all redundancy situations.
ADP appealed this decision to the Court of Appeal, who allowed the appeal, confirming that where there is no requirement for general workforce consultation in the case of ‘small-scale’ redundancy exercises below the thresholds in TULRCA. Provided that there is adequate consultation at an individual level, this will suffice.
What this means for employers
This case should bring some comfort to employers engaging in small-scale or individual redundancies that general workforce consultation is not required for a fair redundancy process. However, it also emphasises the importance of allowing individual employees to express their views on issues that might affect the employer’s decision, such as the rationale, selection pools and criteria for redundancies, at a formative stage of the redundancy process where their views could impact outcomes.
c. Post-employment restrictive covenants
In the UK, the use of post-termination restrictive covenants is enforceable only if they protect a legitimate business interest and do so in a reasonable manner. This means the duration and scope of any restrictive covenants should not exceed what is necessary to protect the legitimate interests of the employer.
Literacy Capital Plc v Webb concerned a founding director of the business Mountain, who entered into an investment agreement as a loan note holder with Mountain after resigning from her previous position. The investment agreement contained restrictive covenants. After Mountain applied to the High Court to enforce the restrictive covenants against the former director, the High Court found that the restrictive covenants in the investment agreement arose as a result of the defendant’s status as a former director and as an employee of the relevant company. In such circumstances, the High Court undertook a restraint of trade analysis to determine the validity of the provisions. The High Court found that the covenants were unenforceable as they were: (i) too long (ten years in duration as opposed to the conventional one or two years); (ii) too wide in geographical scope (extending to the entirety of the UK and Channel Islands when the company’s business only covered two English counties); and (iii) restricted too broad a range of business activities, extending far beyond the operating core of the company.
What this means for employers
This case highlights the importance of ensuring the reasonableness of both duration and scope when drafting restrictive covenants. In particular, employers should be cautious about tying duration to events that may cause the restrictive covenants to become too protracted (such as, in this case, the redemption of loan notes). It also serves as a timely reminder that even if restrictive covenants form part of a commercial agreement, a court may apply a restraint of trade analysis if it is of the view that the restrictive covenants are connected to an individual’s status as an employee.
4. Employment Rights Bill update
In our last publication “A New Deal for Working People”? – Labour Government Introduces Employment Rights Bill in the UK on 16 October 2024, we outlined the steps the Labour Government has taken and intends to take under the Employment Rights Bill. An Amendment Paper was published on 27 November 2024, setting out various amendments to the Bill proposed by both the Labour Government and other Members of Parliament. We have provided a brief overview of two of the amendments proposed by the Labour Government which we believe will be of interest to our clients. The Bill is currently being scrutinised by the Public Bill Committee, which is expected to report to Parliament on 21 January 2025.
a. Unfair Dismissal during Initial Period of Employment
The Labour Government has previously promised that, while the Bill makes unfair dismissal a “Day One” right, there would be a “lighter touch” process for dismissals that occur during an initial period of employment. The Labour Government has now proposed an amendment that would allow the Secretary of State to specify a cap on the compensatory award for employees who successfully claim unfair dismissal during the initial period of employment. A cap could provide employers with further comfort around the quantum of any potential liabilities incurred when making dismissals during the initial period of employment.
b. Employment Tribunal Time Limits
The time limit for bringing many types of UK employment claims in an employment tribunal currently expires three months from the date the claim arises, subject to an extension of up to six weeks for pre-claim conciliation. The Labour Government have proposed in the Amendment Paper that this time limit is to be increased to six months. This amendment should come as no surprise as it was previewed in the extensive reforms the Labour Government proposed in the lead up to the UK General Election. We explored this proposal in our publication What Employers Can Expect in the UK under the New Labour Government on 8 July 2024.
Further to the amendments to the Employment Rights Bill outlined above, we expect the Labour Government to continue its comprehensive reviews of the various longer-term measures which were set out in its original “Plan to Make Work Pay” prior to the 2024 General Election. We explored these commitments in our publication “A New Deal for Working People”? – Labour Government Introduces Employment Rights Bill in the UK on 16 October 2024. The longer-term measures on which the Labour Government has committed to consult include:
- employment status – the Labour Government has committed to consult with businesses on its proposals to strengthen protections for the self-employed and to simplify the existing employment status framework by shifting towards a single status of ‘worker’;
- parental and carers’ leave – the Labour Government will conduct wide-ranging reviews on the impact of potential reforms to the parental and carers’ leave systems; and
- collective grievances – the Labour Government has committed to consult with ACAS on its proposals to enable employees to raise collective grievances about conduct in the workplace.
Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Labor and Employment practice group, or the following authors in London:
James A. Cox (+44 20 7071 4250, jcox@gibsondunn.com)
Georgia Derbyshire (+44 20 7071 4013, gderbyshire@gibsondunn.com)
Heather Gibbons (+44 20 7071 4127, hgibbons@gibsondunn.com)
Olivia Sadler (+44 20 7071 4950, osadler@gibsondunn.com)
Finley Willits (+44 20 7071 4067, fwillits@gibsondunn.com)
*Josephine Kroneberger, a trainee solicitor in the London office, is not admitted to practice law.
© 2025 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
Few European Data Protection Board (EDPB) opinions have been awaited as eagerly as the EDPB’s opinion on AI models (Opinion)[1]. The build-up to publication of the Opinion raised levels of expectation that were almost impossible for the EDPB to meet.
The EDPB finally delivered the Opinion just in time for Christmas, and it is almost as notable for what it does not cover as for what it does. A number of important issues concerning AI models are not addressed at all, and much of what the Opinion does cover is drafted in heavily qualified language that leaves substantial room for interpretation and will not be straightforward to apply in practice.
However, two points in particular stand out and should in our view be welcomed by those developing and deploying AI models. The first is that the EDPB has avoided taking a hard line that training AI models with personal data means that those models can never be considered anonymous. Instead it stresses the need for a case-by-case assessment based on the likelihood of personal data being extracted from the model and the likelihood of obtaining personal data from queries. However, the threshold set by the EDPB for a model to be considered anonymous is a high one, and controllers are likely to have substantial difficulties in practice with giving effect to data subjects’ rights in relation to models that are not considered anonymous.
The second is that the EDPB has not ruled out the possibility of controllers relying on legitimate interests for developing and deploying AI models, including training AI models on personal data scraped from publicly-accessible websites. Again, the EDPB stresses the requirement for a case-by-case assessment, and identifies factors that should be taken into account by controllers, including in relation to web-scraping. As with the issue of anonymity, the EDPB sets a high bar, and the Opinion is light on detail as to how the EDPB’s recommendations can be applied in practice.
It may be tempting to criticise the EDPB for taking such a cautious approach – after all, it leaves some of the most pressing questions unanswered, and creates the potential for significant fragmentation in approach at member state level. However, some of the limitations in the Opinion result from the way in which the issues were brought before the EDPB; it was always going to be difficult for the EDPB to give concrete answers to some of the questions put to it, and, given the rapid pace of technological development in the AI field, the EDPB would have been unwise to try.
Key Takeaways
- The EDPB’s view is that training AI models with personal data does not necessarily prevent those models being anonymous. Whether they are actually anonymous depends on the likelihood of extraction of personal data, either through direct extraction from the model or from the model’s outputs.
- The EDPB has set a high bar for anonymity, and developers will need to be able to demonstrate the design and functioning of their models, including by maintaining comprehensive documentation. The EDPB’s position that AI models may not be anonymous is likely to give rise to serious issues, particularly in relation to the exercise of data subjects’ rights.
- The EDPB has not ruled out controllers relying on legitimate interests for developing or deploying AI models, including in relation to training models using personal data scraped from public websites. Again, the EDPB has set a high bar, and its position on necessity is likely to create significant practical difficulties for those training LLMs and similar foundation models.
- Supervisory authorities may be able to impose corrective measures in relation to the deployment of AI models that are not anonymous, where those models have been developed through unlawful processing of personal data. This applies even where one party develops the model and another deploys it. Those acquiring AI models will need to carry out careful due diligence on the development phase, and will need to consider appropriate contractual protection.
Background to the Opinion
The Opinion arose from a request from the Irish Data Protection Commission (IDPC) for an opinion in relation to AI models and the processing of personal data. That background is important, because the EDPB can be criticised only so far for the limited scope of the Opinion; an opinion under Article 64(2) GDPR should not be confused with guidelines or recommendations issued by the EDPB on its own initiative under Article 70(1) GDPR. An opinion under Article 64(2) is directed to the questions put to the EDPB, so its scope is, to a degree, dictated by the scope of those questions. Nevertheless, given the keen interest in the Opinion and the broader significance of the issues discussed, this raises important questions about when the EDPB should be issuing guidelines or recommendations on its own initiative rather than relying on individual supervisory authorities to frame the questions it considers, as well as about the transparency of the Article 64(2) process. In its 2024-2025 Work Programme, the EDPB has planned to issue guidelines on anonymisation, pseudonymisation and data scraping in the context of generative AI.
The Opinion addresses three main issues. First, when can an AI model trained on personal data be considered anonymous? Secondly, can controllers rely on legitimate interests as a lawful basis under GDPR for processing personal data in the development and deployment of an AI model? Thirdly, what are the consequences of unlawful processing of personal data during the development of an AI model?
Scope of the Opinion
The Opinion is concerned only with AI models that are trained with personal data.[2] That reflects the definition of AI models used by the IDPC in its request[3], but it does mean that the Opinion does not address AI models that may process personal data but that were not themselves trained with personal data.
The Opinion also does not cover certain issues that may arise under the GDPR when using AI models, including the processing of special category data, automated decision-making, purpose limitation, data protection impact assessments and data protection by design and by default.[4] These are important considerations that are already being addressed in other jurisdictions (such as in California, with the draft automated decisionmaking technology (ADMT) regulations recently advanced to formal rulemaking by the California Privacy Protection Agency), and may need to be addressed by the EDPB in order to avoid supervisory authorities taking diverging approaches. Therefore, on these issues supervisory authorities should proceed cautiously and be open to considered dialogue with controllers on developing best practices.
When can AI models be considered anonymous?
The first question addressed by the EDPB is when an AI model that is trained with personal data can be considered anonymous.
Here, the EDPB considers three categories of AI models. The first category is AI models that are specifically designed to provide personal data about individuals whose personal data was used to train the model. The EDPB dispenses with these quickly – these models inherently involve the processing of personal data, and cannot be considered anonymous.[5] Examples given by the EDPB are AI models fine-tuned on an individual’s voice in order to mimic that individual’s voice, and models designed to reply with personal data from the training data set when prompted for information about a specific individual. It remains to be seen how broadly supervisory authorities interpret this category of AI models; certainly, many of the current generation of generative AI models (such as some large language models (LLMs)) are capable of outputting personal data from the data used to train them when prompted to do so (e.g. “tell me all about <celebrity>”), even if they are not designed uniquely for that purpose.
As to AI models that are not designed to provide personal data about individuals whose personal data was used to train the model, the critical question posed by the EDPB is whether information relating to those individuals can be obtained from the model with means reasonably likely to be used.[6] If so, the model cannot be considered anonymous. If not, the model can be considered anonymous and is outside the scope of the GDPR.
Here, the EDPB notes that the exploitation of vulnerabilities in AI models may result in leakage of personal data, and also identifies the possibility of accidental leakage of personal data through interaction with the model. Whilst the EDPB does not say so expressly, the EDPB evidently considers that means reasonably likely to be used may include means that would be unlawful under the GDPR and other EU and member state law. This is an interesting expansion of the approach taken by the CJEU in Breyer[7], which focused on whether a provider had legal means which enable it to identify the data subject.
On the basis that personal data may in certain cases be obtained from AI models trained with personal data, the EDPB concludes that AI models trained on personal data cannot be considered anonymous in all circumstances, and that a case-by-case assessment is required (one of many case-by-case assessments that the EDPB encourages in the Opinion).[8]
As to what that assessment should involve, the EDPB encourages supervisory authorities to focus on two areas: whether personal data relating to the training data can be extracted from the model itself and whether output produced when querying the model relates to data subjects whose personal data was included in the training data set.[9] In each case, the question is whether the personal data can be obtained with reasonable means, and in order for the model to be considered anonymous the likelihood of obtaining the data through those means must be ‘insignificant’.[10] The EDPB stresses that a “thorough evaluation” of the risks of identification is likely to be required.
Helpfully, the EDPB identifies measures that might reduce the risk of identification, as well as factors that supervisory authorities should take into account in evaluating the residual risk of identification, including the design of the AI model itself, the selection of data sources used for training the model, the design of the training process itself and measures designed to limit personal data included in model outputs (e.g. output filters).
One point that stands out in particular is the need for comprehensive documentation. Providers who wish to make claims that their models are anonymous should be prepared to produce documentation to support that position, including documentation on the specific measures used at each stage of the model lifecycle to reduce the risk of identification.
It is worth noting that the EDPB appears to diverge from the approach taken by a number of supervisory authorities, notably the Hamburg DPA in its discussion paper on LLMs[11], which have expressed the view that LLMs themselves do not contain personal data, although their outputs may do so. This may be because the Opinion is not limited to LLMs specifically and therefore does not assume that data is necessarily stored within the model in tokenised form. However, the EDPB’s reference to whether personal data can be extracted from the output of a model as a factor in determining whether the model is anonymous suggests that the EDPB’s view is at odds with that of the Hamburg DPA and likeminded supervisory authorities. This is likely to give rise to serious issues in practice, and in particular whether and how controllers can give effect to data subjects’ rights under Chapter III of the GDPR in relation to AI models that are not considered anonymous on the EDPB’s view.
When can legitimate interests be relied on in developing and deploying AI models?
The second question addressed by the EDPB is whether, and in which circumstances, controllers can rely on the legitimate interests basis[12] for developing or deploying AI models.
Perhaps the most important point to take away is that the EDPB does not rule out controllers relying on legitimate interests, either in general or in any specific case. In particular, the EDPB does not rule out the possibility of relying on legitimate interests for training AI models with data derived from web-scraping. However, as with the question on anonymity of AI models, the Opinion does not give concrete examples of cases where controllers can rely on the legitimate interests basis. Instead, the EDPB stresses the requirement for a case-by-case assessment, adopting the three-step test in Article 6(1)(f) GDPR (i.e. identifying a legitimate interest pursued by the controller or a third party; establishing necessity of the processing for pursuit of that interest; and balancing the legitimate interest against the interests, rights and freedoms of the data subjects). Much of the EDPB’s analysis here draws on its prior work on legitimate interests, including its guidelines from earlier this year[13].
One interesting point to note in the context of lawfulness is that the EDPB gives violation of intellectual property rights as an example of a factor that may be relevant when evaluating whether the controller can rely on legitimate interests. This echoes a similar point made by the ICO in its first call for evidence on generative AI[14] and in its outcomes report[15], in the context of the lawfulness principle. This is questionable. It is true that (as the EDPB notes) the CJEU has clarified that the interest pursued by the controller must not be contrary to law[16], but that is not to say that any violation of intellectual property rights in pursuing that interest renders the processing unlawful within the framework of GDPR. It should be noted here that the owners of the intellectual property rights may well not (and often will not) be the data subjects. Does training an AI model with personal data in breach (even inadvertent breach) of a licence for that data render the processing unlawful? What about the use of third party software to train an AI model in breach (even inadvertent breach) of a licence for that software? Such an approach would represent a remarkable expansion of EU data protection law into areas that have nothing to do with the protection of personal data, and in which data protection law does not belong.
In relation to the necessity limb, the EDPB’s assessment sets a high bar, although this is broadly consistent with the EDPB’s prior guidelines on legitimate interests. One potential difficulty for those developing AI models is the EDPB’s position that, “if the pursuit of the purpose is also possible through an AI model that does not entail processing of personal data, then processing personal data should be considered as not necessary”.[17] A number of AI models, including LLMs, require an extremely large training corpus, and for practical purposes this necessitates training those models using data scraped from publicly available websites. This will, in many cases, necessarily include personal data. If those training LLMs and similar foundation models are required to demonstrate to supervisory authorities, every single time and on a case-by-case basis, that it was not feasible to train the model without processing personal data, this will act as a significant impediment to current model training activities. It would have been helpful if the EDPB had done more to recognise the practical reality facing those training foundation models, when considering the necessity limb. How supervisory authorities now apply the necessity limb in practice will be of critical importance.
Much of this section of the Opinion is given over to the balancing test, and two points in particular: data subjects’ reasonable expectations and mitigating measures that may be employed by controllers. In relation to reasonable expectations, the EDPB repeats a point made in its own prior guidance that the fulfilment of transparency requirements under GDPR is not sufficient in itself to consider that data subjects reasonably expect the processing in question. This continual downplaying of the significance of data protection notices is unhelpful; after all, what is the point of the transparency requirements if not to inform data subjects’ expectations as to how their personal data will be processed? The EDPB also repeats a point made in its prior guidelines on legitimate interests, that mitigating measures should not be confused with measures that the controller is legally required to adopt anyway, an unhelpful and unnecessary distinction that is difficult to apply in practice.
In relation to web-scraping specifically, those looking for a categorical statement from the EDPB as to whether and when this is in line with data subjects’ reasonable expectations may be disappointed: the EDPB does not express a firm view either way, but does explain that the steps taken to inform data subjects should be considered. The EDPB does not elaborate on this, which is a pity given that in many cases of web-scraping informing data subjects about the use of their data to train AI models (beyond making a notice generally available to the public) is practically impossible.
In relation to mitigating measures, the EDPB gives examples of measures that facilitate the exercise of individuals’ rights (including rights of objection and erasure) and enhanced transparency measures. The former in particular are likely to be extremely challenging to implement in practice, especially in relation to personal data derived from web-scraping, where the controller has no prior relationship with the data subject. The EDPB’s recommendations in relation to web-scraping specifically may be more helpful: in the development phase, the EDPB recommends that controllers consider, for example, excluding content from websites that are likely to present particularly high risk or from websites that have objected to scraping by using mechanisms such as robots.txt or ai.txt. Similarly, in the deployment phase, the EDPB recommends that controllers consider technical measures to prevent the output of personal data (such as through regurgitation of training data) and also measures to facilitate the exercise by individuals of their rights, in particular in relation to erasure of personal data (controllers may see a glimmer of light in the EDPB’s reference to the erasure of personal data from model output data, rather than from the model itself).
What are the implications of unlawful processing of personal data in the development of an AI model?
The final question addressed by the EDPB concerns the impact of unlawful processing of personal data, during the development of an AI model, on the lawfulness of use of the model in the deployment phase.
Here, the EDPB considers three scenarios. In the first scenario, a controller unlawfully processes personal data to develop an AI model, the personal data is retained in the model and it is subsequently processed by the same controller. In this scenario, the EDPB’s position is that the power of the supervisory authority to impose corrective measures on the initial processing would, in principle, affect the subsequent processing. However, whether the development and deployment phases of an AI model are separate processing activities, and the impact of unlawfulness in the development phase on processing in the deployment phase, is to be assessed on a case-by-case basis (that phrase again). In other words, the EDPB stops short of saying that a supervisory authority can require a controller to delete or stop using an AI model that has been unlawfully trained on personal data, but appears not to rule that out.
The second scenario is the same as the first, except that the controller using the model in the deployment phase is different from the controller who developed the model. The EDPB’s view here is the least conclusive of the three scenarios – it stresses the need for (you guessed it) a case-by-case assessment, and in particular the degree of due diligence carried out by the deployer on the original processing carried out by the developer. The EDPB appears here to allow more flexibility than in the first scenario, but does not rule out the possibility of corrective measures relating to the initial processing also affecting the subsequent processing. One point is clear, however: those acquiring AI models will need to carry out careful due diligence on developers of AI models, and will need to document their findings and should be prepared to share them with supervisory authorities. Acquirers of AI models will also need to consider any contractual protection that may be required in the event that a corrective measure relating to the developer’s processing has an impact on the acquirer’s subsequent use of the model.
The third scenario involves unlawful processing in the development phase of an AI model, in circumstances where the model itself is anonymised and personal data is subsequently processed in the deployment phase. Here, the EDPB’s position is that the GDPR does not apply to the operation of the model, and that the unlawfulness in the training stage does not affect the subsequent processing of personal data. It does not matter whether the subsequent processing is carried out by the developer of the AI model or by a third party controller. There is, in other words, no general doctrine of ‘fruit of the poisonous tree’ that would enable a supervisory authority to require a controller to delete or stop using an anonymised AI model, merely because that model has been trained unlawfully with personal data. However – and here we come full circle – the EDPB emphasises the need for supervisory authorities to examine thoroughly a controller’s claim that its model is in fact anonymous.
[1] Opinion 28/204 on certain data protection aspects related to the processing of personal data in the context of AI models, available here.
[2] Opinion, paragraph 26.
[3] Ibid, paragraph 21.
[4] Ibid, paragraph 17.
[5] Ibid, paragraph 29.
[6] Ibid, paragraph 31.
[7] Case C-582/14, Breyer.
[8] Ibid, paragraph 34.
[9] Ibid, paragraph 38.
[10] Ibid, paragraph 43.
[12] Article 6(1)(f) GDPR.
[13] Guidelines 1/2024 on processing personal data based on Article 6(1)(f) GDPR, available at https://www.edpb.europa.eu/our-work-tools/documents/public-consultations/2024/guidelines-12024-processing-personal-data-based_en .
[14] https://ico.org.uk/about-the-ico/what-we-do/our-work-on-artificial-intelligence/generative-ai-first-call-for-evidence/
[15] https://ico.org.uk/about-the-ico/what-we-do/our-work-on-artificial-intelligence/response-to-the-consultation-series-on-generative-ai/
[16] Case C-621/22, Koninklijke Nederlandse Lawn Tennisbond, paragraph 49; Opinion, footnote 54.
[17] Opinion, paragraph 73.
Please contact the Gibson Dunn lawyer with whom you usually work, or any leader or member of the firm’s Artificial Intelligence or Privacy, Cybersecurity & Data Innovation practice groups:
Artificial Intelligence:
Keith Enright – Palo Alto (+1 650.849.5386, kenright@gibsondunn.com)
Cassandra L. Gaedt-Sheckter – Palo Alto (+1 650.849.5203, cgaedt-sheckter@gibsondunn.com)
Vivek Mohan – Palo Alto (+1 650.849.5345, vmohan@gibsondunn.com)
Robert Spano – London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)
Eric D. Vandevelde – Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)
Frances A. Waldmann – Los Angeles (+1 213.229.7914, fwaldmann@gibsondunn.com)
Privacy, Cybersecurity & Data Innovation:
Ahmed Baladi – Paris (+33 1 56 43 13 00, abaladi@gibsondunn.com)
Ashlie Beringer – Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)
Joel Harrison – London (+44 20 7071 4289, jharrison@gibsondunn.com)
Jane C. Horvath – Washington, D.C. (+1 202.955.8505, jhorvath@gibsondunn.com)
Lore Leitner – London (+44 20 7071 4987, lleitner@gibsondunn.com)
Vera Lukic – Paris (+33 1 56 43 13 00, vlukic@gibsondunn.com)
Rosemarie T. Ring – San Francisco (+1 415.393.8247, rring@gibsondunn.com)
© 2024 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
This update details the key changes to the ECT in the modernised text and considers what the next chapter of the ECT might look like—including for ECT arbitration.
After 15 rounds of negotiations, on 3 December 2024, the Energy Charter Conference officially approved the “modernised” version of the Energy Charter Treaty (ECT), marking the end of a multi-year reform process.[1] The modernised ECT is considered to be a “greener” treaty than the original text, expanding protections to technologies likely to play a significant role in the energy transition and explicitly affirming the right of Contracting States to regulate—including in the energy transition, climate change mitigation and adaptation contexts. In the modernised ECT, Contracting States also reaffirm their commitments under the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement 2015.
The achievement of modernisation is, however, set against the backdrop of a spate of Contracting Party withdrawals from the ECT in recent years—including by European Union (EU) Member States, as well as the EU and Euratom. The UK has also recently notified its withdrawal.
This update (i) sets out a brief background to the ECT as well as recent developments, (ii) details the key changes to the ECT in the modernised text, and (iii) considers what the future of the ECT might hold.
Background And Recent Developments
The ECT, established in the early 1990s, provides a multilateral framework for energy cooperation. The ECT contains certain protections for investments made by investors of one Contracting Party in another Contracting Party and includes recourse to international arbitration where a Contracting Party acts in breach of its investment protection obligations.
Since November 2017, the ECT Contracting States have been engaged in discussions to “modernise” the ECT text, including by further aligning it to the climate change goals in the 2015 Paris Agreement. An agreement in principle was reached in June 2022,[2] which largely reflected proposed changes put forward by the EU to align the ECT with its European Green Deal policy agenda and the Paris Agreement commitments.[3]
However, the vote on the amendments—initially scheduled for November 2022—was delayed by the EU and its Member States, which disagreed as to whether to proceed with the modernisation process or withdraw from the ECT entirely. The deadlock was broken when, earlier this year, the European Commission urged EU Member States not to block ECT reform,[4] which was then voted on by the EU Council on 30 May 2024.[5]
As noted above, there have been a spate of withdrawals from EU Member States in recent years. Italy was the first to submit a notification of withdrawal on 31 December 2014 (effective 1 January 2016)—a decision which followed several arbitrations pursued against it relating to changes to renewable energy regulations. Other EU Member States then followed suit—Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Poland, Portugal, Slovenia and Spain—have each since notified the Energy Charter Secretariat of their withdrawal.
The EU and Euratom formally exited the ECT in June 2024, citing its non-compatibility with the EU’s climate goals under the European Green Deal and the Paris Agreement.[6] The UK deposited its withdrawal notification in February 2024 noting, “the failure of [modernisation] efforts to align it with net zero”.[7]
What Are The Main Changes In The Modernised ECT?
The principal amendments in the modernised ECT are set out in the “Amendments to the Energy Charter Treaty” document and the “Modifications and Changes to Annexes to the Energy Charter Treaty” document, both of the 3 December 2024.[8] Below are our key takeaways of the modernised text:
Scope Of Protection
- Extends the definition of “Economic Activity in the Energy Sector”—which is included in the definition of a protected “investment” under the ECT—to cover the capture, utilisation and storage of carbon dioxide (CCUS) in order to decarbonise energy systems.
- Provides an updated list of the “Energy Materials and Products” (referenced in the definition of “Economic Activity in the Energy Sector”), which excludes products such as oils and other similar products, and fuel woods—but includes certain types of hydrogen and synthetic fuels. [9]
- For investments made before 3 September 2025, the EU and its Member States (which are Contracting Parties), phase out investment protection of fossil fuel investments over time, but in any event by 31 December 2040 at the latest.[10]
Investor Protection
- Modifies the definition of “fair and equitable treatment”—the provision most commonly relied on in investor-State arbitration cases pursued under the ECT—into a list format “to increase legal certainty”.
- Introduces a new standalone State “right to regulate” provision “to reaffirm” this right “in the interest of legitimate public policy objectives” such as protection of the environment, including climate change mitigation and adaptation, protection of public health, safety or public morals.
- Consistent with that theme, includes a definition of “indirect expropriation” with a list of factors to be considered. The ECT now provides that unless there are “rare circumstances”, non-discriminatory measures that are adopted to protect legitimate policy objectives—including climate change mitigation and adaptation—will not constitute indirect expropriation.
- Introduces a sustainable development provision in which Contracting Parties reaffirm their respective rights and obligations under multilateral environmental and labour agreements, such as the UNFCCC, the Paris Agreement and fundamental ILO conventions. In this provision, Contracting Parties agree that they “shall encourage” investors to adopt and implement voluntarily guidelines such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.
- There is also a separate provision (“Climate Change and Clean Energy Transition”) in which the Contracting Parties reaffirm their commitments to “effectively implement” commitments and obligations under the UNFCCC and the Paris Agreement, as well as promote and facilitate trade and investment of relevance for climate change mitigation and adaptation—including, inter alia, “by removing obstacles to trade and investment concerning low carbon energy technologies and services such as renewable energy production capacity, and by adopting policy frameworks conducive to this objective”.
Dispute Resolution
- Provides that the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration of 2014 will apply to arbitral proceedings in disputes between Investors and Contracting States.
- Establishes mechanisms for the dismissal of “frivolous” claims; clarifying the limits for valuation of damages suffered by an investor and introducing a costs-follow-the-event presumption.
- Introduces a requirement for disputing parties to disclose third party funding.
- Introduces a provision stating that the investor-state arbitration provision in Article 26 does not apply in intra-EU disputes. This follows legal debate that has been ongoing since the judgments of the Court of Justice of the European Union in Achmea in 2018 and Komstroy in 2021.[11] The 26 EU Member States signed an “ECT Inter Se declaration”[12] and initialled an inter se agreement on 25 June 2024, “regarding the non-applicability of ECT arbitration provisions intra-EU” “giving effect to the Komstroy judgment”.[13]
When Will The Modernised Text Apply?
The amendments to the ECT will apply on a provisional basis from 3 September 2025.[14] However, a Contracting Party may choose to opt out of such provisional application by serving a declaration to this effect before 3 March 2025.
The amendments to the ECT enter into force on the ninetieth day after at least three-fourths of the Contracting States have deposited instruments of ratification, acceptance or approval to the ECT Depositary.[15] The amendments enter into force between the Contracting States that have ratified, accepted or approved them.[16]
The Start Of A New Chapter?
There has been much discussion over recent years about the potential demise of the ECT, with the spate of withdrawals from EU Member States (as well as the EU and Euratom).
At the same time, with the modernised text there may be renewed support behind the treaty. Whilst many EU Member States have exited, some have chosen not to unilaterally withdraw (such as Greece and Sweden), and the European Commission has signalled previously that it may grant special authorisations for EU Member States to become parties to the modernised ECT.[17]
In any event, under the sunset provision of the ECT, despite a withdrawal, Contracting States remain bound by their obligations under the treaty for a further 20 years following such withdrawal. Although EU Member States have reached agreement to disapply the sunset provision within the intra-EU context so that protections cannot be invoked by EU investors against EU Member States, there exists on-going political discussion as to whether inter se disapplication of the sunset provision should be extended outside of that context. Indeed, the EU Council has called on the EU to work with third States (such as the UK, with has notified the Energy Secretariat of its withdrawal) to disapply the sunset clause.[18] It remains to be seen how this will play out—and how a future ECT tribunal would interpret the validity and effect of such an agreement to terminate the sunset provision as a matter of public international law.
There also remain many other non-EU Member State Contracting Parties to the ECT (including Azerbaijan, Japan, Kazakhstan, Türkiye and Ukraine). Investors of these Contracting Parties may want to continue to rely on the ECT’s investment protections when investing in the energy sector of other Contracting States that are party to the ECT. Investors may also consider structuring or restructuring their corporate operations accordingly.
The treaty remains relevant in other contexts beyond investor-State arbitration too, with a recent State-to-State dispute on-going between Azerbaijan and Armenia relating to an alleged breach by Armenia of Azerbaijan’s sovereign rights over its energy resources under Article 27 as a notable example.
Conclusion
The approval of the modernised text concludes a multi-year reform process, one which has generated considerable public attention. No doubt there will be further discussion as to whether this is now a treaty that strikes the right balance between protecting energy investments, energy security and the green transition. Further, legal debate will likely remain for some time (including before ECT tribunals) with respect to the proposed disapplication of the 20-year sunset provision. With non-EU Contracting Parties still party to the ECT too, it is clear that we have not yet seen the end of ECT arbitration.
If you would like to discuss the above further with Gibson Dunn lawyers, please do not hesitate to reach out to the following members of our team.
[1] Press Release, The Energy Charter Conference Adopts Decisions on the Modernisation of the Energy Charter Treaty, 3 December 2024, here.
[2] See Decision of the Energy Charter Conference, Public Communication explaining the main changes contained in the agreement in principle, 24 June 2022, here.
[3] See European Commission, Agreement in principle reached on Modernised Energy Charter Treaty, 24 June 2022, here.
[4] See Proposal for a COUNCIL DECISION on the position to be taken on behalf of the European Union in the Energy Charter Conference, 1 March 2024, https://data.consilium.europa.eu/doc/document/ST-7234-2024-INIT/en/pdf.
[5] See Press release, Energy Charter Treaty: Council gives final green light to EU’s withdrawal, 30 May 2024, https://www.consilium.europa.eu/en/press/press-releases/2024/05/30/energy-charter-treaty-council-gives-final-green-light-to-eu-s-withdrawal/.
[6] See Press Release, Energy Charter Treaty: EU notifies its withdrawal, 27 June 2024, https://www.consilium.europa.eu/en/press/press-releases/2024/06/27/energy-charter-treaty-eu-notifies-its-withdrawal/.
[7] Press release, UK Departs Energy Charter Treaty, 22 February 2024, https://www.gov.uk/government/news/uk-departs-energy-charter-treaty.
[8] See Decision of the Energy Charter Conference, 3 December 2024, here, and Decision of the Energy Charter Conference, Modifications and Changes to Annexes to the Energy Charter Treaty, 3 December 2024, here.
[9] See Decision of the Energy Charter Conference, Modifications and Changes to Annexes to the Energy Charter Treaty, here. (“Modifications and Changes to Annexes”). Note that for investments made on or after 3 September 2025, the EU and its Member States (which are Contracting Parties) have agreed—for hydrogen—that only low carbon and renewable hydrogen will be captured within the definition of “Economic Activity in the Energy Sector”, and only low carbon synthetic fuels. For the UK, it is low carbon hydrogen which meets its “Low Carbon Hydrogen Standard”.
[10] Modifications and Changes to Annexes, Section C(1), cross-referring to Annex EM I 27.01 to 27.15.
[11] See Gibson Dunn Client Alert, Intra-EU Arbitration Under the ECT Is Incompatible with EU Law According to the CJEU in Republic of Moldova v Komstroy, 7 September 2021, https://www.gibsondunn.com/intra-eu-arbitration-under-the-ect-is-incompatible-with-eu-law-according-to-the-cjeu-in-republic-of-moldova-v-komstroy/.
[12] Declaration on the Legal Consequences of the Judgment of the Court of Justice in Komstroy and Common Understanding on the Non-Applicability of Article 26 of the Energy Charter Treaty as a Basis for Intra-EU Arbitration Proceedings, June 26, 2024, https://energy.ec.europa.eu/publications/declaration-legal-consequences-judgment-court-justice-komstroy-and-common-understanding-non_en.
[13] Press release, Energy Charter Treaty: Member States sign declaration and initial Inter Se agreement clarifying non-applicability of ECT arbitration provisions intra-EU, 26 June 2024, https://diplomatie.belgium.be/en/news/energy-charter-treaty-member-states-sign-declaration-and-initial-inter-se-agreement-clarifying-non-applicability-ect-arbitration-provisions-intra-eu.
[14] This also includes the modifications in Section C of Annex NI and the changes and modifications to other Annexes.
[15] As do the modifications in Section C of Annex NI and the changes and modifications to other Annexes. The modifications in Sections A and B of Annex NI enter into force on 3 September 2025.
[16] See Press release, Energy Charter Treaty: Council gives final green light to EU’s withdrawal, 30 May 2024, https://www.consilium.europa.eu/en/press/press-releases/2024/05/30/energy-charter-treaty-council-gives-final-green-light-to-eu-s-withdrawal/.
[17] Non-paper from the European Commission Next steps as regards the EU, Euratom and Member States’ membership in the Energy Charter Treaty, https://www.euractiv.com/wp-content/uploads/sites/2/2023/02/Non-paper_ECT_nextsteps.pdf.
[18] Declaration on the Legal Consequences of the Judgment of the Court Of Justice In Komstroy and Common Understanding on the Non-Applicability of Article 26 of the Energy Charter Treaty as a Basis For Intra-Eu Arbitration Proceedings, here.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s International Arbitration practice group, or the following authors:
Penny Madden KC – London (+44 20 7071 4226, pmadden@gibsondunn.com)
Charline Yim – New York (+1 212.351.2316, cyim@gibsondunn.com)
Ceyda Knoebel – London (+44 20 7071 4243, cknoebel@gibsondunn.com)
Stephanie Collins – London (+44 20 7071 4216, scollins@gibsondunn.com)
© 2024 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
Although there are some commonalities between investigative approaches across all jurisdictions, there are some features peculiar to individual countries.
This session covers the basics of investigating in the UK but then zooms in on UK issues, including:
- The cross-over of UK criminal and regulatory investigations and outcomes; Interaction with UK authorities;
- UK authority powers to investigate and the implications for internal investigations;
- UK approaches to legal professional privilege.
PANELISTS:
Patrick Doris is a partner in Gibson Dunn’s Dispute Resolution Group in London, where he specialises in global white-collar investigations, commercial litigation and complex compliance advisory matters. Patrick’s practice covers a wide range of disputes, including white-collar crime, internal and regulatory investigations, transnational litigation, class actions, contentious antitrust matters and administrative law challenges against governmental decision-making. He handles major cross-border investigations in the fields of bribery and corruption, fraud, sanctions, money laundering, financial sector wrongdoing, antitrust, consumer protection and tax evasion.
Patrick’s recent commercial disputes experience has extended to advising corporations, UK public bodies and sovereign states in claims in courts and tribunals in the UK and around Europe. He has particular expertise in antitrust cases, human rights disputes and collective actions.
Allan Neil is an English qualified partner in the dispute resolution group of Gibson, Dunn & Crutcher’s London office. His recent work involves large-scale multi-jurisdictional disputes and investigations (both regulatory and internal investigations) in the financial institutions sector.
Allan is recognised by The Legal 500 UK 2025 for Commercial Litigation, Banking Litigation: Investment and Retail and Regulatory investigations and corporate crime (advice to corporates), and has been awarded the Client Choice Award 2015 in recognition of his excellence in client service in the area of UK Litigation. Allan was called to the Bar by the Middle Temple in 2001, having been awarded the Queen Mother Scholarship in consecutive years, and named a Blackstone Entrance Exhibitioner.
Christopher Loudon is a Scottish qualified of counsel in the London office of Gibson, Dunn & Crutcher, and practises in the firm’s Dispute Resolution Group. He has broad-based commercial litigation and multi-jurisdictional investigations experience, with a particular focus on the financial services sector.
Since joining Gibson, Dunn & Crutcher, Christopher has worked on disputes before the English, French, Swiss, German, Dutch, Italian, US, BVI and Cayman courts, and in particular on a large number of cases in Luxembourg, including commercial, administrative and criminal matters. He also has considerable investigations experience, both in private practice and while seconded to the in-house Legal function at UBS in London. Most recently, this has included working on two criminal investigations in different jurisdictions arising out of the largest Ponzi scheme ever uncovered, and a high profile cross-border tax investigation. While on secondment at UBS, he was named responsible investigator for a multi-jurisdictional fraud investigation.
Marija Bračković is an associate in the London office of Gibson, Dunn & Crutcher. She is a member of the firm’s Litigation, White Collar Defense and Investigations, Fintech and Digital Assets and Privacy, Cybersecurity and Data Innovation Practice Groups.
Marija has substantial experience in both domestic and international dispute resolution, including litigation and investigations, and regulatory compliance and counselling across sectors, with a focus on fintech and emerging digital regulations. Her practice has an emphasis on high-profile and politically sensitive matters, such as cases relating to bribery, money laundering and allegations of cross-border and international crimes. Marija regularly advises on complex regulatory and compliance issues, including the scope and implementation of the emerging digital regulatory regime across the UK and EU, including the Digital Services Act, Online Safety Act and EU AI Act.
Amy Cooke is an English qualified barrister and associate in the London office of Gibson, Dunn & Crutcher. She practices in the firm’s Dispute Resolution Group and specializes in white collar investigations. Her recent work includes large-scale multi-jurisdictional disputes and investigations in the financial services sector.
Prior to joining Gibson Dunn, Amy was a lawyer at the Serious Fraud Office where she gained extensive experience of complex fraud and bribery investigations and prosecutions involving both corporate entities and high net worth individuals. She also dealt with a number of confiscation and restraint matters.
Amy also has a wide range of advocacy experience from her time at the independent bar, during which she handled a variety of criminal and civil cases.
MCLE CREDIT INFORMATION:
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© 2024 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
The much-anticipated guidance for the new corporate offence of failure to prevent fraud (the “Guidance”) was published on 6 November 2024. This starts the countdown to the offence coming into force on 1 September 2025.[1]
Introducing a “failure to prevent” offence for fraud will have a significant impact on the ability of law enforcement agencies to combat fraud. The SFO said it is “looking forward to using it to penalise large organisations who should be doing better”[2] and the SFO’s Director, Nick Ephgrave, recently told the Financial Times that deferred prosecution agreements (DPAs) “could come back with a vengeance once a new offence that puts the onus on businesses to prevent fraud comes into force.”[3] The Guidance itself mentions the prospect of DPAs.
The Guidance states that the failure to prevent fraud offence should make it easier to hold organisations to account. The Government hopes that the offence will improve fraud prevention procedures and ultimately drive a major shift in corporate culture.[4]
A) Recap of the failure to prevent fraud offence
The offence of failure to prevent fraud was introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA).[5] Under the new offence, an organisation will be criminally liable[6] where a specified fraud offence[7] is committed by a person associated with the organisation (such as an employee or agent) with the intention of benefitting, for example, the organisation or its clients. Senior managers need not have ordered or known about the fraud.
The offence applies to large organisations, which are those meeting at least two of the following conditions: a turnover of more than £36m, more than £18m in total assets, or more than 250 employees.[8] A defence is available where an organisation had reasonable prevention procedures in place, or where it was unreasonable to expect it to have such procedures.
B) What does the Guidance say?
The Guidance offers clarification of certain aspects of the offence in section 199 ECCTA, provides examples of hypothetical scenarios in which the offence may apply and makes recommendations as to how companies should prepare for the new offence coming into force. However, it remains to be seen how the offence will be prosecuted in practice. We have outlined key aspects of the Guidance below.
1. Territoriality
ECCTA states that the failure to prevent fraud offence applies to organisations wherever incorporated or formed.[9] However, a UK nexus is required for the offence to be committed, which means “one of the acts which was part of the underlying fraud took place in the UK or that the gain or loss occurred in the UK.”[10] The Guidance indicates that this means that a fraud which takes place entirely outside the UK could be prosecuted if, for example, there were UK-based victims.
2. Offences committed by associated persons
The concept of a person associated with an organisation will be familiar from the UK Bribery Act. The Guidance confirms that an employee, agent or subsidiary of a large organisation automatically falls within the definition of associated person, and a person who provides services for or on behalf of the organisation is an associated person while they provide those services.[11]
Crucially, the associated person does not need to have been convicted of one of these offences. However, the prosecution must prove to a criminal standard that the person committed the offence before the organisation can be convicted of failure to prevent fraud.[12]
3. Subsidiaries
In respect of subsidiaries, the guidance indicates that:
- a large organisation can be prosecuted where the underlying offence is committed corporately by one of its subsidiaries and where the beneficiary is the parent organisation or its clients to whom the subsidiary provides services for or on behalf of the parent;
- such a parent company can also be prosecuted if an employee of its subsidiary commits a relevant offence that is intended to benefit the parent company;
- a subsidiary of a large organisation can be prosecuted if an employee of the subsidiary commits a relevant offence that is intended to benefit the subsidiary even if the subsidiary itself is not a large organisation.[13]
4. Benefit
The issue of who is intended to benefit from the underlying offence is key to determining whether a company can be held accountable.[14] The benefit can be direct or indirect, actual or intended.[15] The benefit can be to the company, its clients, or a subsidiary of the client.[16] This is broader than the UK Bribery Act, which focuses on intended benefit to the organisation.
5. What do reasonable fraud prevention procedures look like in practice?
The defence of having reasonable fraud prevention measures in place is difficult to define, and the Guidance does not attempt to set out an exhaustive list of steps that companies should take: in fact, it notes expressly that even strict compliance with the Guidance may not be sufficient where a company faces particular risks arising from the nature of its business.
Nevertheless, the Guidance does set out six defining principles which should inform a company’s fraud prevention framework. Some key points are highlighted below:
- Top level commitment
- The Guidance stresses that senior management should take the lead when it comes to fraud prevention: this will include fostering a culture in which staff feel able to report potential cases of fraud, and communicating clearly the company’s policies and codes of practices to staff.
- Where fraud prevention measures are overseen by a Head of Compliance or someone in a similar role, that person should have direct access to the company’s board or CEO, and senior management should ensure that a reasonable and proportionate budget is in place to train staff and implement the company’s fraud prevention plan.
- Risk assessment
- The Guidance makes clear that “it will rarely be considered reasonable not to have even conducted a risk assessment” but it acknowledges that companies may find it most effective to extend existing risk assessments which are already in place.
- The Guidance suggests that companies should consider the different levels of fraud risk presented by different categories of associated person, taking into account their opportunity and motive to commit fraud, as well as the potential for the “rationalisation” of a fraud: in other words, does a company’s culture and/or sector tolerate fraud, and do staff feel able to escalate any potential concerns?
- A risk assessment is not a one-off exercise: the Guidance states that the assessment should be revisited at consistent intervals, perhaps annually or bi-annually, and that a court may consider that reasonable procedures were not in place at the time of any alleged fraud if the risk assessment has not been recently reviewed.
- Proportionate risk-based prevention procedures
- Once the risk assessment has been carried out, a fraud prevention plan should be put in place. This should be proportionate to the risks identified and their potential impact.
- Reasonable fraud prevention procedures should look to reduce the opportunity and motive to commit fraud, put in place consequences for committing fraud and reduce what the Guidance describes as “ethical fading”; in other words, where fraudulent behaviour becomes normalised within a company or industry.
- The Guidance acknowledges that many companies will be regulated, but stresses that processes and procedures already in place to ensure compliance with other regulations will not automatically qualify as reasonable procedures for the purposes of ECCTA.
- One interesting exception identified in the Guidance, presumably inspired by lessons from the Covid-19 pandemic, is where there is an emergency; i.e. where there is “a risk of widespread loss of life or damage to property, or significant financial instability”. The Guidance recognises that an emergency may not be foreseeable, and that it may therefore be reasonable not to have had fraud prevention procedures in place. Nevertheless, the guidance stresses that reasonable procedures should be put in place as quickly as reasonably possible once the emergency has passed.
- Due diligence
- Again, the Guidance acknowledges that many companies will already have due diligence procedures in place, but states that it will not necessarily be sufficient to apply existing procedures.
- The Guidance highlights the need to carry out due diligence on associated persons and in relation to any anticipated mergers or acquisitions. It suggests using appropriate technology to help, including third-party tools, and notes the importance of integrating existing fraud prevention measures following a merger or acquisition.
- Communication and training
- Clear communication of a company’s stance on fraud at all levels of the organisation is important, and the Guidance suggests incorporating this in existing policies.
- Companies should put in place training for staff which is proportionate to the risks involved. That may involve additional training for those in high-risk positions. As with the risk assessment, training should be kept up to date, particularly as new staff join or existing staff change roles, and the effectiveness of the training should be monitored.
- The Guidance also highlights the need for a robust whistleblowing process.
- Monitoring and review
- When it comes to detecting fraud, the Guidance again highlights the use of technology such as data analytics tools, and poses the question (but does not answer it!) as to whether AI could be used to identify potential fraud.
- Companies may need to modify existing systems to identify and investigate fraud committed against the organisation to ensure that fraud designed to benefit the organisation or its clients can also be detected.
- The Guidance stresses the need for independent, fair, legally compliant and properly resourced investigations into any suspected fraud.
- A company will need to keep under review the nature of the risks it faces, given these are likely to change over time: this means fraud prevention measures may need to change too. The Guidance suggests that reviews should happen at regular intervals, such as annually or bi-annually, and that they can be conducted internally or by an external party.
- However, where a company is audited by an external auditor, that audit alone is not sufficient evidence of the existence of reasonable fraud prevention
C) Practical steps to take now
By way of key takeaways, we recommend that clients think about the following next steps:
- Conduct a risk assessment for the organisation as a whole. It is clear that this is the minimum first step towards having reasonable fraud prevention procedures in place and, given the scope of the different definitions in ECCTA, is likely to require revision or development of existing assessments;
- Establish a reasonable and proportionate fraud prevention plan;
- Review existing policies and procedures and ensure that the company’s stance of preventing fraud is clearly communicated to staff;
- Check what training is currently provided to staff and consider where additional training on preventing fraud could be necessary;
- Ensure that robust whistleblowing policies and procedures are in place;
- Where in doubt, seek expert advice.
[1] https://www.gov.uk/government/news/new-failure-to-prevent-fraud-guidance-published
[2] https://globalinvestigationsreview.com/article/senior-sfo-lawyer-failure-prevent-fraud-heralds-exciting-time-the-agency
[3] https://www.ft.com/content/b7540e7a-97fb-481a-8805-92fb54a425f2
[4] Guidance Failure to Prevent Fraud, chapter 1.1. See also our previous client alert published on 12 January 2024: Extraterritorial Impact of New UK Corporate Criminal Liability Laws – Gibson Dunn
[5] ECCTA s.199
[6] ECCTA s.199 and Guidance Failure to Prevent Fraud, chapter 1.1
[7] Including fraud by false representation, fraud by failing to disclose information, fraud by abuse of position, cheating the public revenue, false accounting, false statements by company directors and fraudulent trading: see ECCTA, schedule 13.
[8] ECCTA s.201. The conditions must be met in the financial year of the organisation that precedes the year of the fraud offence.
[9] ECCTA s.199(13)
[10] Guidance Failure to Prevent Fraud chapter 2.5
[11] ECCTA s.199 (7) and (8) and Guidance Failure to Prevent Fraud chapter 2.3
[12] Guidance Failure to Prevent Fraud chapter 2.2
[13] Guidance Failure to Prevent Fraud chapter 2.3.1 and ECCTA s.199
[14] Guidance Failure to Prevent Fraud chapter 2.4
[15] ECCTA s.199 (1) and (2)
[16] Guidance Failure to Prevent Fraud chapter 2.4 and 2.5
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. If you wish to discuss any of the matters set out above, please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of Gibson Dunn’s White Collar Defense and Investigations practice group, or the authors:
Allan Neil – London (+44 20 7071 4296, aneil@gibsondunn.com)
Patrick Doris – London (+44 20 7071 4276, pdoris@gibsondunn.com)
Christopher Loudon – London (+44 20 7071 4249, cloudon@gibsondunn.com)
Maria Bračković – London (+44 20 7071 4143 mbrackovic@gibsondunn.com)
Amy Cooke – London (+44 20 7071 4041, acooke@gibsondunn.com)
Katherine Tomsett – Hong Kong (+65 6507 3673, ktomsett@gibsondunn.com)
© 2024 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
The UK Court of Appeal has confirmed that ICSID Contracting States’ agreement to Art. 54 of the ICSID Convention is to be interpreted as a “written agreement” waiving State immunity and a submission to jurisdiction under the UK’s State Immunity Act 1978. The decision is positive news for parties looking to enforce ICSID awards in the UK; it re-affirms the UK’s pro-enforcement stance in relation to investor-State awards.
1. Executive Summary
On 22 October 2024, the UK Court of Appeal issued an important judgment in relation to arbitral award enforcement in the combined appeals of Infrastructure Services Luxembourg S.À.R.L. v Kingdom of Spain (“Infrastructure Services v Spain”) and Border Timbers Limited v Republic of Zimbabwe (“Border Timbers v Zimbabwe”).[1] The lead judgment was delivered by Lord Phillips, with whom Lord Newey and Sir Julian Flaux Chancellor of the High Court agreed.
The decision is critical to jurisdictional and State immunity issues arising in the context of enforcement of arbitral awards against sovereign States, pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (the “ICSID Convention” and “ICSID”).
In short, the Court of Appeal has confirmed that, whilst the UK’s State Immunity Act 1978 (the “1978 Act”) does apply to ICSID enforcement proceedings, there is an applicable exception to State immunity. The relevant exception arises from s. 2 of the 1978 Act, which provides that a State may waive its immunity by a “prior written agreement” (read together with s. 17(2) of the 1978 Act, which provides that a “prior written agreement” includes references to a “treaty, convention or other international agreement”). The Court of Appeal affirmed that such prior written agreement is found in Art. 54 of the ICSID Convention.[2]
2. Background to the Court of Appeal’s Judgment
a. Infrastructure Services v Spain
The award creditors (the “ISL Claimants”) obtained an ICSID award worth approx. EUR 101 million for Spain’s violations of the Energy Charter Treaty stemming from the regulatory changes Spain introduced to its renewable energy subsidy scheme.
The ISL Claimants commenced enforcement proceedings in the UK pursuant to s. 1(2) of the Arbitration (International Investment Disputes) Act 1966 (the “1966 Act”) and obtained a registration order, which Spain sought to set aside on State immunity grounds. At first instance, Mr Justice Fraser dismissed Spain’s set-aside application and upheld the registration order.[3] A central finding in that decision—the one on appeal—was that Art. 54 of the ICSID Convention constitutes a “prior written agreement” under s. 2(2) of the 1978 Act.[4]
b. Border Timbers v Zimbabwe
The award creditors (the “Border Claimants”) obtained an ICSID award worth approx. USD 124 million arising out of Zimbabwe’s expropriation of the Border Claimants’ land in breach of the bilateral investment treaty between Switzerland and Zimbabwe (1996). Mirroring the Infrastructure Services v Spain case, the Border Claimants obtained a registration order under the 1966 Act, which Zimbabwe applied to set aside on State immunity grounds.
At first instance, Mrs Justice Dias dismissed Zimbabwe’s set-aside application and upheld the registration order but on a different basis to (and expressly disagreeing with) Fraser J in Infrastructure Services v Spain.[5] In Dias J’s view, the bespoke procedure for registration of ICSID awards set out in CPR 62.21 does not require service of any originating process on the respondent, and, as such, the doctrine of State immunity is not engaged at all in relation to such an application.[6] However, Dias J also separately held that Art. 54 of the ICSID Convention does not constitute a “prior written agreement” pursuant to s. 2(2) of the 1978 Act.[7]
Spain and Zimbabwe each obtained permission to appeal. The Court of Appeal decided to hear the appeals jointly in light of the overlapping issues, in particular as regards the “prior written agreement” exception under s. 2 of the 1978 Act. The appeals were heard between 17–20 June 2024 and the Court of Appeal handed down its judgment on 22 October 2024.
3. The Court of Appeal’s Judgment
In the appeal, the parties largely maintained their positions taken at first instance. The Border Claimants also advanced a new argument: that Zimbabwe did not benefit from State immunity because s. 23(3) of the 1978 Act excluded from the scope of s. 1(1) of the 1978 Act “matters that occurred before the date of the coming into force of [the 1978 Act]”, and the ICSID Convention and the 1966 Act were such “matters”.[8]
As such, the Court of Appeal had to resolve the following three questions:[9]
- whether State immunity applies, in principle, to the registration of ICSID awards against a foreign State under the 1966 Act;
- if State immunity does apply, whether Contracting States to the ICSID Convention have nonetheless waived that immunity from enforcement proceedings pursuant to s. 2 of the 1978 Act by ratifying the ICSID Convention (and, specifically, Art. 54 therein); and
- if there is no such waiver by prior written agreement, whether a foreign State is estopped or otherwise prevented from asserting the invalidity of the underlying award, with the result that the arbitration exception in s. 9 of the 1978 Act is necessarily satisfied.
In relation to the first question, the Court of Appeal held that State immunity applies to applications for the registration of ICSID awards under the 1966 Act.[10] Disagreeing with Dias J’s decision, the Court of Appeal concluded that the registration of an ICSID award as a judgment of the Court is not merely a ministerial or administrative act as it requires a judge to be satisfied to the requisite standard as to the proof of authenticity and the “other evidential requirements” of the 1966 Act.[11] The Court of Appeal also rejected the Border Claimants’ new argument described above, holding that the phrase “matters” in s. 23(3) of the 1978 Act cannot be stretched to encompass treaties and legislation (such as the ICSID Convention and the 1966 Act).[12]
The Court of Appeal (disagreeing with Fraser J) also held that the UK Supreme Court’s judgment in Micula v Romania[13] is not a binding authority for the proposition that State immunity does not apply to enforcement proceedings for ICSID awards (as opposed to execution proceedings).[14] That is because Micula did not expressly concern State immunity[15] and the 1978 Act is a complete code with regards to exceptions to State immunity, which does not exclude the “regime” for registration of ICSID awards under the 1966 Act from the scope of State immunity.[16]
As regards the second question, the Court of Appeal followed Fraser J’s reasoning, concluding that Art. 54 of the ICSID Convention amounts to a sufficiently clear and express waiver of State immunity under s. 2 of the 1978 Act.[17] As such, it held that by ratifying the ICSID Convention, Contracting States have waived immunity, and submitted to the courts of the UK, for the purposes of enforcement of ICSID awards, although immunity in respect of execution is preserved by Art. 55 of the ICSID Convention.[18]
In reaching these conclusions, the Court of Appeal extensively referred to (and quoted from) the decision of the High Court of Australia (“HCA”), Australia’s apex court, in the enforcement proceedings brought by the ISL Claimants against Spain there,[19] noting that, “[a]s a general rule it is desirable that international treaties should be interpreted by the courts of all the states uniformly.”[20] Lord Phillips observed that the HCA’s decision was a “highly persuasive opinion” and, also, on the interpretation of Art. 54 of the ICSID Convention, “plainly right”.[21]
The Court of Appeal considered that the language of Art. 54 of the ICSID Convention is clear and unambiguous, flowing from the “straightforward reading of the text”, which is also supported “rather than undermined, by the clear object and purpose of the Convention, as evidenced by the Preamble.”[22]
In response to an argument raised by Zimbabwe, the Court of Appeal also considered briefly (and obiter) the potential impacts of its findings on Art. 54 of the ICSID Convention with respect to Art. III of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”): i.e., whether its conclusions meant that Art. III of the New York Convention also amounts to a waiver of immunity. Although providing limited observations, the Court of Appeal did not answer that question, noting that it had not heard full arguments and was not in a position to decide the issues.[23]
In light of its findings on the second question, the Court of Appeal considered that it was unnecessary to consider the third question.[24] Regardless, the Court did observe (obiter) that “it is difficult to interpret section 9 of the SIA other than as imposing a duty on the court to satisfy itself that the state in question has in fact agreed in writing to submit the dispute in question to arbitration.”[25]
4. Comment
The Court of Appeal’s judgment is significant. It lends further weight to the growing body of international jurisprudence on the effect of Art. 54 of the ICSID Convention. The UK Court of Appeal, like the HCA, has confirmed that Contracting States’ agreement to Art. 54 by ratifying the ICSID Convention is to be interpreted as a written agreement waiving State immunity and a submission to jurisdiction for the purposes of enforcement of an ICSID award. As recognised by the Court of Appeal, this also brings the UK position in line with the law in Australia, New Zealand, France, and Malaysia, as well as multiple decisions in the US.[26]
The decision is positive news for parties looking to enforce ICSID awards in the UK; it re-affirms the UK’s pro-enforcement stance in relation to investor-State awards.
We note that the decision may well be subject to a further appeal to the UK Supreme Court.
[1] Infrastructure Services Luxembourg SARL v Kingdom of Spain and Border Timbers Ltd v Republic of Zimbabwe [2024] EWCA Civ 1257 (Sir Julian Flaux Chancellor of the High Court, Newey LJ, Phillips LJ) (the “Judgment”).
[2] Judgment, para. 103.
[3] Infrastructure Services Luxembourg SARL v Kingdom of Spain [2023] EWHC 1226 (Comm) (Fraser J). See further our client alert on this decision.
[4] Infrastructure Services Luxembourg SARL v Kingdom of Spain [2023] EWHC 1226 (Comm) (Fraser J), para. 95.
[5] Border Timbers Ltd v Republic of Zimbabwe [2024] EWHC 58 (Comm) (Dias J).
[6] Border Timbers Ltd v Republic of Zimbabwe [2024] EWHC 58 (Comm) (Dias J), para. 106.
[7] Border Timbers Ltd v Republic of Zimbabwe [2024] EWHC 58 (Comm) (Dias J), paras. 72–73.
[8] Judgment, para. 11.
[9] Judgment, para. 12.
[10] Judgment, para. 58.
[11] Judgment, paras. 35–39.
[12] Judgment, paras. 40–42.
[13] Micula & Ors v Romania (European Commission intervening) [2020] UKSC 5 (Lady Hale, Lord Reed, Lord Hodge, Lord Lloyd-Jones, Lord Sales SCJJ). See further our client alert on this decision.
[14] Judgment, paras. 51–52.
[15] Romania did not challenge the registration of the ICSID award on state immunity or any other grounds in that case.
[16] Judgment, paras. 43–58.
[17] Judgment, para. 103.
[18] Judgment, paras. 77-79.
[19] Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2023] HCA 11 (Kiefel CJ, Gageler, Gordon, Edelman, Steward, Gleeson and Jagot JJ). See further our client alert on this decision.
[20] Judgment, para. 60, quoting Islam v Secretary of State for the Home Department [1999] 2 AC 629, 657A-B, per Lord Hope.
[21] Judgment, para. 77.
[22] Judgment, para. 80.
[23] Judgment, paras. 99–102.
[24] Judgment, para. 104.
[25] Judgment, para. 105.
[26] Judgment, para. 60.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s International Arbitration, Judgment and Arbitral Award Enforcement, or Transnational Litigation practice groups, or the authors in London:
Doug Watson (+44 20 7071 4217, dwatson@gibsondunn.com)
Piers Plumptre (+44 20 7071 4271, pplumptre@gibsondunn.com)
Ceyda Knoebel (+44 20 7071 4243, cknoebel@gibsondunn.com)
Alexa Romanelli (+44 20 7071 4269, aromanelli@gibsondunn.com)
Theo Tyrrell (+44 20 7071 4016, ttyrrell@gibsondunn.com)
Dimitar Arabov (+44 20 7071 4063, darabov@gibsondunn.com)
© 2024 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
A buyer seeking to rely on an MAE clause in a share purchase agreement to justify termination should proceed with caution, whether in the US or under English law.
In the recent case of BM Brazil & Ors v Sibanye BM Brazil & Anor [2024] EWHC 2566 (Comm) (“Sibanye”), the English Commercial Court considered whether the buyer under two sale and purchase agreements relating to nickel mines in Brazil (the “SPAs”) was entitled to terminate the SPAs on the basis that a material adverse effect (“MAE”) had occurred at one of the mines prior to completion. The Court’s decision was rendered by The Hon. Mr Justice Butcher.
Background
A buyer may seek to include MAE provisions in a share purchase agreement to allow it to terminate the agreement if the target suffers an MAE between the signing and completion of the transaction.
An MAE provision will typically cover events or changes which materially and adversely affect a target’s business, operations, assets, liabilities, condition (whether financial, trading or otherwise) or operating results, but will often be subject to carve-outs relating to changes in interest rates, commodity prices, wars, natural disasters, etc. MAEs are a customary provision in share purchase agreements governed by Delaware law (and other US state law), but less common where English law is the governing law.
In Sibanye, a “geotechnical event” occurred at one of the mines between signing and completion. The buyer claimed this constituted an MAE so as to discharge it from its obligation to complete the transactions and allow it to terminate the SPAs. The seller asserted that the geotechnical event was not an MAE and that the purported termination was therefore wrongful and repudiatory, allowing the seller to terminate the SPAs and bring a claim against the buyer.
Decision
The Court ruled that the geotechnical event was not, and was not reasonably expected to be, an MAE under the SPA. In reaching that decision the Court had to decide on the central issue of whether the geotechnical event was an MAE.
There being no standard meaning of “material adverse effect” or “material adverse change” under English law, the Court confirmed that the proper approach to determining this issue was to apply the ordinary principles of construction of contracts governed by English law. The three main issues of construction or interpretation of the MAE provisions considered by the court in reaching this decision were:
- Whether a ‘revelatory event’ would be an MAE for purposes of the SPAs. The Court considered that matters did not count as material for the purposes of the MAE definition by reason only of their ‘revelatory’ effects.
- The assessment of what ‘would reasonably be expected to be material and adverse’. The Court considered that it was common ground that this analysis required an objective rather than subjective assessment, and that the assessment should be made from the perspective of a reasonable person in the position of the parties at the time when cancellation on the basis of the alleged MAE is notified.
- What is meant by ‘material’. The Court determined that the geotechnical event was not material. On this point, the Court agreed with certain Delaware case law[1] that there is no bright line test for what constitutes materiality that will be applicable to all MAE clauses. In Sibanye, the Court considered that the size of the transaction, the nature of the assets concerned, including that they are susceptible to such matters as geotechnical events, the length of the process of the sale of the mines and the complexity of the SPAs were all relevant factors militating against setting the bar of materiality too low. Although not determinative in establishing materiality in Sibanye, the Court referred to Laster VC’s view in Akorn that a reduction in the equity value of the target of more than 20% was material in that case, and went on to note that a reduction of more than 15% might well be considered material.
Relevance of the United States perspective
In contrast to practice in the US, MAE clauses are not customarily included in share purchase agreements governed by English law (i.e. buyers are required to complete a transaction even in the event an MAE occurs), although this will be dependent on the circumstances, including the location and respective bargaining power of the parties.
As a result, there is a relative dearth of relevant English authority on MAE clauses with a better developed body of case law in the US, notably in Delaware[2]. Interestingly, the Court noted in Sibanye that the “comparative dearth is beginning to be made good” by reference to four English law authorities[3].
While agreeing that US cases are neither binding nor formally persuasive, the Court considered various US authorities which many lawyers in the US consider seminal (including Re IBP, Frontier Oil, Hexion and Akorn)[4] in reaching its decision. Although it did not view those decisions as binding precedent, the Court weaved into its own textual and contextual analysis some of the key thinking from those US cases. Particularly on how to analyse the qualitative, quantitative and durational impact of an event on the equity value of a company.
Notably, the Delaware court has in certain cases[5] granted the seller the remedy of specific performance and ordered the buyer to close the transaction, flowing from the Court’s findings that there has been no MAE excusing the buyer from closing.
Whilst there are multiple grounds for the English Court to refuse an order for the equitable remedy of specific performance, there are instances where the Court has granted orders requiring parties to close on contracts for the sale of shares[6]. However, these cases have not involved the invocation by the buyer of MAE provisions under such contracts.[7] Those cases determined that specific performance could be granted on the basis that damages would not be an adequate remedy. In Gaetano, damages were not considered to be adequate because there was no ready market for the shares and the shareholding was difficult to sell as a result of the target’s poor financial performance.
Therefore, a well-advised buyer negotiating an English law share purchase agreement will seek to exclude, and a well-advised seller will seek to include, specific performance as a remedy – particularly in circumstances where it is likely that there would not be a ready market for the shares.
The Sibanye decision adds to the growing body of English authority on MAE clauses and will reassure parties seeking deal certainty that England and Wales continues to be a strong jurisdictional choice for major M&A transactions on the basis that establishing the occurrence of an MAE is not an easy route to abandon a transaction.
Invoking an MAE clause
A buyer seeking to rely on an MAE clause in a share purchase agreement to justify termination should proceed with caution, whether in the US or under English law. The buyer will need to establish that the MAE has occurred within the meaning of the contract and, as proved to be the case in Sibanye, that can be a challenging task. The exercise is heavily fact-specific and it is hard to know what it might entail at the time of contracting. If the buyer wrongly asserts an MAE, it risks incurring liability to the seller for wrongful termination and/or repudiatory breach of contract.
[1] Akorn Inc v Fresenius Kabi AG (Court of Chancery of Delaware, Memorandum Opinion 1 October 2018, Laster VC) and Snow Phipps Group LLC v KCake Acquisition Inc (Court of Chancery of Delaware, Memorandum Opinion 30 April 2021, McCormick VC).
[2] Cockerill J in Travelport Ltd v WEX Inc [2020] EWHC 2670 (Comm) (at [175]-[176]).
[3] Grupo Hotelero Urvasco v Carey Added Value SL [2013] EWHC 1039; Decura IM Investments LLP v UBS AG [2015] EWHC 171 (Comm); Travelport Ltd v WEX Inc [2020] EWHC 2670 (Comm); and Finsbury Food Group PLC v Axis Corporate Capital UK Ltd [2023] EWHC 1559 (Comm).
[4] Re IBP Inc. Shareholders Litigation Del. Ch., 789 A.2d 14 (2001), the Court of Chancery of Delaware (Strine VC); Frontier Oil Corp. v Holly Corporation (Court of Chancery of Delaware, Memorandum Opinion 29 April 2005, Noble VC); Hexion Spec. Chemicals v Huntsman Corp Del. Ch. 965 A. 2d. 715 (2008); Akorn Inc v Fresenius Kabi AG (Court of Chancery of Delaware, Memorandum Opinion 1 October 2018, Laster VC); and Snow Phipps Group LLC v KCake Acquisition Inc (Court of Chancery of Delaware, Memorandum Opinion 30 April 2021, McCormick VC).
[5] Snow Phipps Group LLC v KCake Acquisition Inc (Court of Chancery of Delaware, Memorandum Opinion 30 April 2021, McCormick VC).
[6] Gaetano Ltd v Obertor Ltd [2009] EWHC 2653 (Ch); and MSAS Global Logistics Ltd v Power Packaging Inc [2003] EWHC 1393 (Ch).
[7] Specific performance was not part of the decision in Sibanye, where the claim was for declaratory relief and damages.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. For further information, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Mergers and Acquisitions, Private Equity, or Transnational Litigation practice groups:
Mergers and Acquisitions:
Robert B. Little – Dallas (+1 214.698.3260, rlittle@gibsondunn.com)
Saee Muzumdar – New York (+1 212.351.3966, smuzumdar@gibsondunn.com)
George Sampas – New York (+1 212.351.6300, gsampas@gibsondunn.com)
Private Equity:
Richard J. Birns – New York (+1 212.351.4032, rbirns@gibsondunn.com)
Wim De Vlieger – London (+44 20 7071 4279, wdevlieger@gibsondunn.com)
Federico Fruhbeck – London (+44 20 7071 4230, ffruhbeck@gibsondunn.com)
Scott Jalowayski – Hong Kong (+852 2214 3727, sjalowayski@gibsondunn.com)
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John M. Pollack – New York (+1 212.351.3903, jpollack@gibsondunn.com)
Will Summers – London (+44 20 7071 4203, wsummers@gibsondunn.com)
Transnational Litigation:
Susy Bullock – London (+44 20 7071 4283, sbullock@gibsondunn.com)
Perlette Michèle Jura – Los Angeles (+1 213-229-7121, pjura@gibsondunn.com)
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Markus Rieder – Munich (+49 89 189 33-260, mrieder@gibsondunn.com)
Andrea E. Smith – New York (+1 212-351-3883, aesmith@gibsondunn.com)
William E. Thomson – Los Angeles (+1 213-229-7891, wthomson@gibsondunn.com)
© 2024 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
An overview of the incoming rules on preventing sexual harassment as well as the steps the Labour government has taken and intends to take under the Employment Rights Bill.
In our last publication “What Employers Can Expect in the UK under the New Labour Government“ on 8 July 2024, we outlined the extensive reforms the newly formed Labour government had proposed to employment law during the General Election campaign and the potential consequences of these anticipated developments for employers. As expected, the Labour government has since published its Employment Rights Bill on 10 October 2024 (the “Bill”), providing a more fulsome insight into how its self-proclaimed “New Deal for Working People” will impact employers.
The publication of the Bill on 10 October 2024 means the Labour government has delivered on its commitment to put legislation before Parliament on its “Plan to Make Work Pay” within 100 days of entering office. Yet, while the Bill provides a broad framework for an eventual overhaul of the employment landscape, the measures outlined in the draft legislation do not require employers to make the immediate and wide-reaching changes to policies and procedures which might have been foreseen based on signals prior to the General Election. In fact, a significant number of original proposals have been omitted from the Bill – including, crucially, the proposed shift to a two-part framework of employment status – with the Labour government pledging to implement its further proposals after concluding extensive reviews and consultations with stakeholders. The consultation process is expected to begin in 2025, which means that the majority of reforms will not take effect until 2026. As such, the real scope and scale of the proposed reforms will not become fully clear until far later in the lifetime of this Parliament.
More pressing for employers will be changes to the law on preventing sexual harassment which were introduced by the previous Conservative government and which come into force on 26 October 2024.
A brief overview of the incoming rules on preventing sexual harassment as well as the steps the Labour government has taken and intends to take under the Employment Rights Bill is provided below, with more detailed information on each topic available by clicking on the links.
1. Incoming New Rules for October 2024 (view details)
We consider the new legal duty coming into force on 26 October 2024 which requires employers to take reasonable steps to prevent sexual harassment in the workplace (which is expected to extend to sexual harassment by clients, customers and other third parties), as well as the practical steps employers can take to ensure compliance.
2. Employment Reform Proposals under the Bill (view details)
We review the proposed reforms to the employment law landscape under the Bill, including:
- Workforce Changes: we summarise the changes proposed to enhance the “Day One” rights available to employees and to protect employees from unfair dismissal. We also summarise the proposals to restrict the controversial practice of dismissing and re-hiring employees as a means of unilaterally changing terms of employment.
- Discrimination, Diversity, Equity and Inclusion: we outline the measures which would impose further obligations upon employers to strengthen whistleblower rights; to address the gender pay gap; to extend the gender pay gap regime to include race and disability; and to support employees going through the menopause.
- Working Arrangements: we consider the changes proposed to employers’ abilities to engage workers on “zero hours” contracts and the potential enhancements to the right to flexible working. We also consider the proposals to negotiate pay arrangements in specific sectors and to strengthen trade unions.
3. Upcoming Employment Reviews (view details)
We outline the further reforms we expect the Labour government to implement following the successful passage of the Bill, based on the commitments made under its “Plan to Make Work Pay”. These further developments include comprehensive reviews of: (i) employment status; (ii) parental and carers’ leave; (iii) the processes and regulations under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (“TUPE”); and the potential new right of employees to collectively raise grievances about workplace conduct with the Advisory, Conciliation and Arbitration Service (“ACAS”).
We will provide further updates as and when the Labour government publishes more details on the implementation of the changes proposed both under the Bill and through the related upcoming consultations. In the meantime, we will continue to work with our clients to navigate the potential developments explored below.
APPENDIX
Workplace Harassment
Our last publication noted that the previous Conservative government had introduced the Worker Protection (Amendment of Equality Act 2010) Act 2023, under which employers would be required to take “reasonable steps” to prevent sexual harassment in the workplace. Since coming to power, the Labour government has reaffirmed its support for this new duty, which is due to come into force on 26 October 2024.
This new duty creates a positive and anticipatory legal obligation on employers. It will require employers to prevent sexual harassment in the workplace, which guidance suggests will cover sexual harassment by clients, customers and other third parties. Under the new rules, the Employment Tribunal will have the power to uplift compensation for harassment by a maximum of 25% where an employer is found to have breached this duty – an uplift which could prove extremely costly for defaulting employers given the levels of compensation which can be awarded for discriminatory harassment.
In its updated technical guidance, the Equality and Human Rights Commission has provided guidelines on the reasonable steps employers can take to identify risks and prevent sexual harassment including: (i) developing effective anti-harassment policies; (ii) adopting a zero-tolerance approach; (iii) conducting risk assessments; (iv) training staff on dealing with potential incidents; and (v) monitoring complaints and outcomes.
We note that the Bill expands this obligation on employers to require them to take “all reasonable steps” to prevent sexual harassment in the workplace. In addition, the Labour government has codified the obligation on employers to prevent sexual harassment by third parties. Following the passage of the Bill, those amendments will therefore raise the compliance bar even higher on employers.
2. Employment Reform Proposals under the Bill
Workforce Changes
Unfair Dismissal
In our last publication, we outlined the Labour government’s intention for a form of unfair dismissal protection to become a “Day One” right for employees. Currently, employees with less than two years of continuous service do not benefit from protection against unfair dismissal, except in certain limited circumstances.
The Labour government has now made protection from unfair dismissal a “Day One” right in the Bill, removing the two-year qualifying period. Helpfully, employers will continue to be able to operate probation periods to assess new hires by providing a (yet to be determined) period during which the Labour government has promised that there will be a “lighter-touch” process for dismissals. A consultation on the length of this initial period is expected in 2025, however, the Labour government has indicated a preference of nine months. The nature and scope of the lighter-touch process for dismissals during the initial period, and safeguards to provide stability and security for businesses and employees, will be addressed as the Bill makes its way through Parliament. As a requirement for the dismissal process during the initial period, the Labour government has suggested the need for a meeting with the employee outlining the employer’s concerns. We stress that the Labour government does not expect the reforms to unfair dismissal to come into effect any sooner than Autumn 2026, until which time the current two-year qualifying period will continue to apply. This extended time period will allow employers to prepare and adapt to the new regime.
Dismissal and Re-Engagement
We had previously summarised the Labour government’s commitment to ending the practice known as “fire and rehire” (where the employee is dismissed and offered re-employment on less favourable terms) as a lawful means of imposing unilateral changes to employees’ contractual terms of employment.
The Bill renders this practice an unfair dismissal, apart from in certain limited circumstances. As the Bill currently reads, employers will continue to be able to engage in this practice (subject to further safeguards) if: (i) the variation to the terms of employment could not reasonably have been avoided, or (ii) reducing or eliminating financial difficulties which are impacting the employer’s ability to carry on the business as a going concern are the reason for the variation. These carve outs are intended to ensure that businesses can restructure to remain viable where business or workforce demands necessitate it.
Day One Rights
In addition to protection against unfair dismissal, the Labour government has acted on its promise to give employees the below basic rights from the first day of employment:
- Parental, paternity and bereavement leave:
- Paternity and parental leave (which are currently subject to a 26-week and a one-year qualifying period respectively) will become “Day One” rights.
- Statutory sick pay:
- Under current rules, an employee is only entitled to statutory sick pay if they earn at least the lower earnings limit (£123 in 2024/25). The Bill removes this lower earnings limit requirement, allowing all employees to be entitled to statutory sick pay. The Labour government intends to consult in the near future on the right level of statutory sick pay for low earners.
- The current 3-day waiting period for statutory sick pay is also removed by the Bill, making the entitlement to statutory sick pay a “Day One” right (as it was temporarily during the COVID-19 Pandemic). Businesses should be aware of the potential financial burden that the introduction of statutory sick pay as a “Day One” right will bring.
Discrimination, Diversity, Equity and Inclusion
Whistleblowing
The Bill also classifies sexual harassment as a protected disclosure, meaning that whistleblowing protections are now extended to disclosures relating to sexual harassment. Protections will be granted where an employee makes such a disclosure because of relevant failures to protect against sexual harassment by an employer and the employee reasonably believes there is a public interest concern to the disclosure. Protections extend to unfair dismissal and being subjected to detriment, as a result of the disclosure.
Equality Action Plans
Regulations will require employers with more than 250 employees to develop, publish and implement action plans on how to address gender pay gaps and support employees going through the menopause. The Labour government has furthermore signalled the current gender equal pay regime will be expanded to cover ethnicity and disability pay gaps, with the widened system to be enforced by a Regulatory Enforcement Unit. These measures will be implemented through the Government’s Equality (Race and Disability Bill), with consultations on this legislation expected in due course and a draft bill to be published during this parliamentary session.
Working Arrangements
Engagement of Casual and/or Low Paid Workers
Before the election, the previous Conservative government had planned to implement a new statutory right to a predictable working pattern to limit the controversial practice of “zero hours” contracts. This right would have come into force last month but has now been superseded by the Labour government’s draft legislation.
Under the Bill, workers on “zero hours” contracts will have the right to a contract that guarantees the number of hours they regularly work based on a twelve-week reference period. Any such terms offered will need to be responsive to changing working patterns. If more hours become regular over time, employers must use subsequent reference periods to amend the workers’ contracts accordingly (and the Labour government has committed to consult with employers and workers to ensure any subsequent reference periods are reasonable and proportionate). The Bill also provides that employers must give workers reasonable notice of any change in shifts or working time, with compensation that is proportionate to the notice given for any shifts cancelled, moved or curtailed.
Sector Pay Arrangements
As anticipated, the Bill empowers the Secretary of State to establish specific pay arrangements in the school support and adult social care sectors, including creating statutory negotiating bodies with powers to broker fair pay, terms and conditions, and training standards within those sectors.
Right to Flexible Working
Expanding on the newly introduced right to request flexible working, the Bill makes flexible working the default for all workers from “Day One”. Where an employer refuses a flexible working application, the Bill requires the employer to state the grounds for refusing the application and to explain the basis on which the decision is considered to be reasonable. The specified grounds on which employers can refuse applications include: (i) cost; (ii) meeting customer demand; (iii) inabilities to reorganise work or recruit additional staff; (iv) detrimental impacts on quality or performance; (v) insufficiencies in the proposed arrangements; and (vi) planned structural changes.
Trade Unions
The Labour government has committed to repealing legislation introduced by its predecessor government aimed at restricting trade union activity, including the Strikes (Minimum Service Levels) Act 2023. With the aim of further strengthening trade union protections, the Bill simplifies the trade union recognition process by removing the requirement for a potential trade union to prove there is likely to be majority support for recognition. It introduces extended rights of access for trade union officials, as well as requiring employers to inform employees of their right to join trade unions.
As we have noted, the Labour government has slowed the pace of its proposed overhaul of the employment landscape to embark on comprehensive reviews of various measures which were contemplated under the original “Plan to Make Work Pay” but which have been omitted from the Bill in part or in full. While the Labour government has indicated these reviews will start from Autumn 2024, we expect this process to take several years given the number of stakeholders who will provide input on the proposals. In any event, a brief overview of the reviews which we believe will be of interest to our clients is provided below.
Employment Status
One of the most significant pledges under the original “Plan to Make Work Pay” was the proposed shift towards a single status of “worker” and a simplified two-part framework of employment status. Given the complicated implications of this proposal, the Labour government has indicated there will be a long review period prior to implementation.
As part of this review, the Labour government will also consult on how to strengthen protections for the self-employed, including through a potential right to written contract.
Parental Leave
Alongside the measures outlined above to make parental leave a “Day One” right, the Labour government intends to hold a full review of the parental leave system to facilitate this reform.
Carers’ Leave
The Labour government plans to assess the potential benefits of introducing paid carers’ leave against the potential impact on small businesses.
TUPE
The Labour government intends to holistically examine the TUPE regulations and strengthen existing rights and protections under TUPE.
Collective Grievances
The Labour government plans to consult with ACAS on enabling employees to raise collective grievances about conduct in the workplace.
Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Labor and Employment practice group, or the following authors in London:
James A. Cox (+44 20 7071 4250, jcox@gibsondunn.com)
Georgia Derbyshire (+44 20 7071 4013, gderbyshire@gibsondunn.com)
Olivia Sadler (+44 20 7071 4950, osadler@gibsondunn.com)
Finley Willits (+44 20 7071 4067, fwillits@gibsondunn.com)
*Josephine Kroneberger, a trainee solicitor in the London office, is not admitted to practice law.
© 2024 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
This briefing note assesses the FCA’s proposed changes and the potential impact for payments and e-money firms.
On 26 September 2024, the Financial Conduct Authority (FCA) published its long-awaited consultation paper on proposed changes to the safeguarding regime for payments and e-money firms in the United Kingdom (CP24/20).
Payment and e-money firms are required to protect funds received in connection with making a payment or issuing e-money (“relevant funds”). The requirements are designed to protect consumers in the event of a firm failure and ensure that consumers receive the maximum value of their funds as quickly as possible.
The current safeguarding requirements are set out in the Payment Services Regulations 2017 (PSRs) and the Electronic Money Regulations 2011 (EMRs) as supplemented by Chapter 10 of the FCA’s Approach Document[1].
Why is the FCA consulting?
The FCA is consulting at this time as a result of the confluence of the following three concerns: increasing significance of the payments and e-money sector in the UK market; identified failings in safeguarding practices at a wide range of relevant firms; and legal uncertainty in the legal framework applied when a relevant firm enters an insolvency process.
The current safeguarding requirements were designed to support competition, innovation and consumer protection in a developing sector. Given the continued growth of the sector in the UK market and the consequential increasing reliance upon e-money accounts by consumers (often vulnerable consumers)[2], the risk of widespread consumer harm in the event of a large firm failure is intensifying.
The FCA has found evidence of significant failings in firms’ practices in relation to safeguarding. The FCA states in CP24/20 that of those firms that became insolvent between 2018 and 2023, there was an average shortfall of 65% in funds owed to clients (this is the difference between funds owed and funds safeguarded). Deficiencies in safeguarding rules were also noted in the Payment Services Regulations Review and Call for Evidence conducted by His Majesty’s Treasury (HMT). This prompted HMT to suggest that responsibility for developing detailed safeguarding requirements could be transferred to the FCA.
Further, two recent court judgments[3] in the UK have left many questions unanswered and significant legal uncertainty in the legal framework which applies when a payment or e-money firm safeguarding funds enters an insolvency process.
What is safeguarding?
Firms which are authorised by the FCA as payment institutions, e-money institutions and credit unions that issue e-money (collectively, “Firms”) are required under the PSRs and the EMRs to protect funds received in connection with executing a payment transaction or in exchange for e-money issued. Firms are required to do this immediately on receiving the funds. The requirements are designed to protect consumers in the event of the firm’s failure by ensuring that consumers receive the maximum value of their funds as quickly as possible.
Firms are able to safeguard relevant funds in two ways: (i) the segregation method; or (ii) the insurance or comparable guarantee method. By far the most popular method is currently the segregation method. The segregation method involves a firm segregating the relevant funds (i.e. keeping them separate from all other funds held) and, if the funds are still held at the end of the business day following the day on which they were received, to deposit the funds in a separate account with a credit institution or the Bank of England or to invest the relevant funds in secure, liquid assets approved by the FCA and place those assets in a separate account with an authorised custodian.
What is the FCA proposing?
The FCA is proposing a two-staged process to strengthen the safeguarding regime, referred to as the “interim-state” and the “end-state”. The reason for the two-stage process is that Parliamentary time is needed in order to pass new legislation for the end-state proposals to take effect. However, in light of the significant concerns identified by the FCA, the FCA is proposing to take some interim measures to strengthen safeguarding practices and increase regulatory oversight and monitoring in the shorter term.
Proposed interim-state rules
The proposed interim-state rules are designed to mitigate in the shorter term the FCA concerns which have been highlighted in CP24/20. Many of the requirements in the interim-state rules are closely related to similar concepts that appear elsewhere within the FCA armoury of rules and guidance. The new rules will be added to the Client Assets and Supervision Sourcebooks of the FCA Handbook. The measures include:
- Improved books and records: Firms will be required to:
- Have adequate policies and procedures to ensure compliance with the safeguarding regime.
- Maintain accurate records and accounts to enable them, at any time and without delay, to distinguish between relevant funds and other funds.
- Perform internal reconciliations at least once each business day to ensure they are safeguarding the correct account of relevant funds and ascertain the reason for any discrepancies and resolve any excess or shortfall.
- Perform external reconciliations and ascertain the reason for any discrepancies and resolve any excess or shortfall.
- Notify the FCA (in writing and without delay) if: (i) their internal records are materially out of date, inaccurate or invalid; (ii) they will be unable to perform a reconciliation; (iii) they cannot resolve a discrepancy arising out of a reconciliation; or (iv) if, at any time during the previous year, there was a material difference between the amount which the Firm should have been but actually was safeguarding.
- Resolution pack: Firms will be required to maintain a resolution pack to improve the ability to retrieve information helpful to the timely return of relevant funds in the event of the Firm’s insolvency.
- Enhanced monitoring and reporting: Firms will be required to:
- Have their compliance with safeguarding requirements audited annually, with the audit report submitted to the FCA.
- Submit a new monthly regulatory return to the FCA in relation to safeguarding practices. The return will require Firms to provide data on (amongst other things) the amount safeguarded.
- Allocate responsibility for oversight of compliance with safeguarding requirements to a specific individual within the Firm.
- Strengthening safeguarding practices:
- Additional safeguards will be imposed where Firms invest relevant funds in secure liquid assets.
- Firms will be required to consider diversification of third parties with which they hold, deposit, insure or guarantee relevant funds that it is required to safeguard and due diligence requirements.
- Additional safeguards and more detailed requirements on how Firms can use insurance or guarantees to safeguard relevant funds.
Proposed end-state rules
In addition to the interim-state rules, the end-state rules will impose two key requirements: (1) a statutory trust over relevant funds and assets, insurance policies and guarantees used for safeguarding; and (2) a requirement that Firms receive relevant funds directly into a designated safeguarding account. The architecture for the new statutory trust regime is strongly grounded in the statutory trust currently used in the FCA’s client assets regime applicable to investment firms.
The table below sets out a summary of the key proposals in both the interim-state and end-state[4]:
| Main proposals | Interim-state proposals | End-state proposals (in addition to interim-state proposals) |
| Improved books and records | Enhanced record keeping and reconciliation requirements
Requirement to maintain resolution pack |
Updated record keeping and reconciliation requirements |
| Enhanced monitoring and reporting | Requirement for Firms to have safeguarding practices audited by an external auditor, with the safeguarding audit submitted to the FCA
Requirement for firms to complete a monthly safeguarding regulatory return |
|
| Strengthening elements of safeguarding practices | Requirements to exercise due skill, care and diligence in selecting and appointing third parties
Requirements to consider the need for diversification Additional requirements on how Firms can safeguard relevant funds by insurance or comparable guarantee |
Relevant funds must be received into a designated safeguarding account at an approved bank, with limited exceptions
Agents and distributors cannot receive relevant funds unless the principal firm safeguards the estimated value of funds held by agents and distributors in a designated safeguarding account Additional requirements when firms only safeguard relevant funds by insurance or comparable guarantee |
| Holding funds, etc. under a statutory trust | Firms will receive and hold the following under a statutory trust:
|
Impact for relevant payment and e-money firms
The proposed changes, especially the interim-state requirements, do not represent a radical shift in the safeguarding requirements applicable to relevant Firms. Many of the requirements already apply and the changes are being introduced in order to support a greater level of compliance with the existing requirements, support more consistency in compliance and enhance regulatory oversight to assist with earlier identification or where risk may be building up. The end-state rules will, if implemented as proposed, result in a “CASS” style regime where relevant funds and assets are held on trust for consumers.
The impact of the interim-state rules on Firms should not be underestimated. It is clear that regulatory expectations relating to safeguarding are increasing. Firms are expected to ensure that their policies and procedures and systems and controls relating to safeguarding are robust. In particular, Firms should not underestimate the reconciliation requirements. While these are not new there are currently a wide range of practices and approaches to reconciliation across the sector. All firms will need to ensure that they review their practices and make enhancements in advance of the interim-state rules coming into force.
In advance of the interim-state rules coming into force, Firms will need to conduct a detailed gap analysis of their current practices relating to safeguarding and will need to uplift their policies and procedures and their systems and controls to ensure compliance with the new rules and regulatory expectations.
When will we know more?
The consultation period closes on 17 December 2024. Thereafter, the FCA will consider the responses received and will publish its response in the form of a policy statement and (presumably) made rules. Most of the interim-state rules will come into force following a six-month transitional period from the publication of final form rules. The FCA is currently targeting the first half of 2025 for this publication. The end-state rules will come into force following a 12-month transitional period from the date of their publication. However, the publication date is (presumably) dependent upon Parliamentary time and therefore the date is currently uncertain.
What should payments and e-money firms do now?
Impacted Firms should assess the extent of the impact of the proposals both in the interim-state and the end-state and consider whether they wish to prepare a response to the consultation.
[1] Payment Services and Electronic Money – Our Approach (November 2021)
[2] The proportion of UK consumers in the UK using an e-money account has grown from 1% in 2017 to 7% in 2022. Approximately 1 in 10 e-money holders use e-money accounts as their primary transactional accounts – Financial Lives Survey
[3] Ipagoo [2022] EWCA Civ 302 and Allied Wallet [2022] EWHC 1877 (Ch)
[4] See Table 1 CP24/20, Section 3.18 page 15
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. If you wish to discuss any of the matters set out above, please contact any member of Gibson Dunn’s Financial Regulatory team, including the authors in London:
Michelle M. Kirschner (+44 20 7071 4212, mkirschner@gibsondunn.com)
Martin Coombes (+44 20 7071 4258, mcoombes@gibsondunn.com)
© 2024 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
Personal Data | Cybersecurity | Data Innovation
Europe
03/14/2023 – European Union Agency for Cybersecurity | Report | Cybersecurity of AI and Standardisation
On 14 March 2023, the European Union Agency for Cybersecurity published a report on Cybersecurity of AI and Standardisation.
The objective of the report is to provide an overview of standards (existing, being drafted, under consideration and planned) related to cybersecurity of artificial intelligence, assess their scope and identify gaps in standardisation.
For further information: ENISA Website
03/14/2023 – European Parliament | Regulation | Data Act
On 14 March 2023, the European Parliament adopted the draft Data Act.
The Data Act aims to boost innovation by removing barriers obstructing access by consumers and businesses to data.
For further information: European Parliament Website
02/28/2023 – European Data Protection Board | Opinion | EU-US Data Privacy Framework
On 28 February 2023, the European Data Protection Board adopted its opinion on the draft adequacy decision regarding the EU-US Data Privacy Framework.
The European Data Protection Board welcomes substantial improvements such as the introduction of requirements embodying the principles of necessity and proportionality for US intelligence gathering of data and the new redress mechanism for EU data subjects. At the same time, it expresses concerns and requests clarifications on several points.
For further information: EDPB Website
02/24/2023 – European Data Protection Board | Guidelines | Transfers, Certification and Dark Patterns
On 24 February 2023, the European Data Protection Board published final version of three guidelines.
Following public consultation, the European Data Protection Board has adopted three sets of guidelines in their final version: the Guidelines on the interplay between the application of Article 3 and the provisions on international transfers as per Chapter V GDPR; the Guidelines on certification as a tool for transfers; and the Guidelines on deceptive design patterns in social media platform interfaces.
For further information: EDPB Website
02/15/2023 – European Commission | Decision | Whistleblowing
On 15 February 2023, the European Commission announced its decision to refer eight Member States to the Court of Justice of the European Union for failing to transpose the Directive (EU) 2019/1937 on the Protection of Persons who Report Breaches of Union Law before 17 December 2021.
The relevant Members States include the Czech Republic, Germany, Estonia, Spain, Italy, Luxembourg, Hungary, and Poland.
For further information: European Commission Website
01/18/2023 – European Data Protection Board | Report | Cookie Banner Taskforce
On 18 January 2023, the European Data Protection Board adopted its final report of the cookie banner task force.
The French Supervisory Authority and its European counterparts adopted the report summarizing the conclusions of the task force in charge of coordinating the answers to the questions on cookie banners raised by the complaints of the None Of Your Business Association. The main points of attention that were discussed concern the modalities of acceptance and refusal to the storage of cookies and the design of banners.
For further information: EDPB Website
01/16/2023 – European Union | Regulation | Digital Operational Resilience Act
The Digital Operational Resilience Act (“DORA”) entered into force on 16 January 2023.
The DORA aims to ensure that financial-sector information and communication technology (“ICT”) systems can withstand security threats and that third-party ICT providers are monitored.
For further information: Official Journal Website
01/12/2023 – Court of Justice of the European Union | Decision | Right of access
On 12 January 2023, the Court of Justice of the European Union ruled that everyone has the right to know to whom their personal data has been disclosed.
The data subject’s right of access to personal data under the GDPR entails, where those data have been or will be disclosed to recipients, an obligation on the part of the controller to provide the data subject with the actual identity of those recipients, unless it is impossible to identify those recipients or the controller demonstrates that the data subject’s requests for access are manifestly unfounded or excessive within the meaning of the GDPR, in which cases the controller may indicate to the data subject only the categories of recipient in question.
For further information: Press Release
Austria
02/01/2023 – Austrian Parliament | National Council | Whistleblowing
On February 1st 2023, the Directive (EU) 2019/1937 on the protection of persons who report breaches of union law (“the Whistleblowing Directive”) was implemented by the Austrian National Council.
For further information: Austrian Parliament Website
Belgium
02/15/2023 – House of Representatives | Legislation | Whistleblowing
On 15 February 2023, the Whistleblowing law for the private sector which partially transposes the Whistleblowing Directive entered into force.
For further information: Whistleblowing Law
Bulgaria
01/27/2023 – Bulgarian National Assembly | Legislation | Whistleblowing
On 27 January 2023, the Bulgarian National Assembly (“CPDP”) adopted the Whistleblower Protection and Public Disclosure Act (“PWIPDA”) transposing the Whistleblowing Directive.
For further information: CPDP Website [BG]
Czech Republic
03/07/2023 – Czech Supervisory Authority | FAQ | Cookies
On 7 March 2023, the Czech Supervisory Authority (“UOOU”) published a FAQ on cookie banners and consent.
For further information: UOOU Website [CZ]
Denmark
02/20/2023 – Danish Supervisory Authority | Decision | Cookie Walls
The Danish Supervisory Authority issued two decisions regarding the use of cookie walls on websites and published general guidelines for the use of such consent solutions.
The Danish Supervisory Authority generally found that a method whereby the website visitor can access the content of a website in exchange for either giving consent to the processing of his personal data or paying an access fee, meets the requirements of the data protection rules for a valid consent.
For further information: Danish DPA Website [DK]
01/20/2023 – Danish Supervisory Authority | Guidelines | Storage and Consent
On 20 January 2023, the Danish Supervisory Authority has prepared guidance dealing with the storage of personal data with the aim of being able to demonstrate compliance with data protection rules on consent.
For further information: Danish DPA Website [DK]
Finland
02/17/2023 – Finnish Supervisory Authority | Sanction | GDPR Violation
On 17 February 2023, the Finnish Supervisory Authority issued an administrative fine of €440,000 against a company for failing to comply with the authority’s order to rectify its practices.
In particular, the authority stated that the company failed to erase inaccurate payment default entries saved into the credit information register due to inadequate practices. The authority stresses that the processing of payment default information has a significant impact on the rights and freedoms of individuals.
For further information: Finnish DPA Website
France
03/28/2023 – French Supervisory Authority | Sanction | Geolocation Data
On 28 March 2023, the French Supervisory Authority (“CNIL”) announced that it imposed a fine of €125,000 on a company of rental scooters because it geolocated its customers almost permanently.
The CNIL noted a failure to comply with several obligations, namely to ensure data minimization, to comply with the obligation to provide a contractual framework for the processing operations carried out by a processor, to inform the user and obtain his or her consent before writing and reading information on his or her personal device.
For further information: CNIL Website
03/15/2023 – French Supervisory Authority | Investigation | Smart Cameras
On 15 March 2023, the French Supervisory Authority (“CNIL”) announced setting “smart” cameras, mobile apps, bank and medical records as priority topics for investigations in 2023.
The CNIL carries out investigations on the basis of complaints received, current events, but also annual priority topics. In 2023, it will focus on the use of “smart” cameras by public actors, the use of the file on personal credit repayment incident, the management of health files and mobile apps.
For further information: CNIL Website
02/09/2023 – French Supervisory Authority | Guidance | Data Governance Act
On 9 February 2023, the French Supervisory Authority (“CNIL”) published a guidance on the economic challenges of implementing the Data Governance Act.
For further information: CNIL Website
01/26/2023 – French Supervisory Authority | Statement | Artificial Intelligence
On 26 January 2023, the French Supervisory Authority (“CNIL”) announced creating an Artificial Intelligence (“AI”) Department and starting to work on learning databases.
The CNIL is creating an AI Department to strengthen its expertise on these systems and its understanding of the risks to privacy while preparing for the implementation of the European regulation on AI. In addition, the CNIL has announced that it will propose initial recommendations on machine learning databases.
For further information: CNIL Website
01/24/2023 – Ministry of Home Affairs | Legislation | Cyberattack Risk Insurance
On 24 January 2023, the French Parliament adopted the LOPMI Act that authorizes the insurability of “cyber-ransoms” paid by victims, subject to the prompt filing of a complaint.
For further information: LOPMI
01/04/2023 – French Supervisory Authority | Sanction | Consent
On 4 January 2023, the French Supervisory Authority (“CNIL”) imposed an administrative €8 million fine on a technology company because it did not collect the consent of French users before depositing and/or writing identifiers used for advertising purposes on their terminals.
The CNIL found that the advertising targeting settings were pre-checked by default. Moreover, the user had to perform a large number of actions in order to deactivate this setting.
The CNIL explained the amount of the fine by the scope of the processing, the number of people concerned in France, the profits the company made from advertising revenues indirectly generated from data collected by these identifiers and the fact that since then, the company has reached compliance.
For further information: CNIL Website
01/17/2023 – French Supervisory Authority | Sanction | Consent
On 17 January 2023, the French Supervisory Authority (“CNIL”) imposed a €3 million fine on a company which publishes video games for smartphones.
The company was using an essentially technical identifier for advertising purposes without the user’s consent.
For further information: CNIL Website
Germany
03/22/2023 – Supervisory Authorities| Opinion | “Pure Subscription Models”
The Conference of the Independent Data Protection Authorities of Germany (DSK) adopted an opinion on so-called “pure subscription models” on websites.
The opinion assesses pure (no-tracking) subscription models and alternative free consent-based tracking models and provides criteria to assess these alternative access instruments on websites.
For further information: DSK Website [DE]
03/15/2023 – Supervisory Authorities| BfDI | Activity Report
The Federal Commissioner for Data Protection and Freedom of Information (BfDI), Ulrich Kelber, has presented the BfDI’s Activity Report for 2022.
For further information: BfDI [DE]
03/15/2023 – Supervisory Authorities| Activity Reports
The Commissioners for Data Protection and Freedom of Information of Baden-Württemberg, Hamburg and Schleswig Holstein have presented their activity reports on the year 2022.
The activity reports cover various data protection and information freedom topics. For example in Schleswig-Holstein data breaches remained frequent while the number of complaints dropped, with video surveillance being the main cause of complaints. The reports emphasize the need to proactively address risks such as artificial intelligence and data sharing.
For further information: ULD Website [DE] and LfDI-BW Website [DE] and HmbBfDI Website [DE]
03/01/2023 – Supervisory Authorities| Opinion | EU-US Privacy Framework
The Hamburg Supervisory Authority (on 1 March 2023) and the German Supervisory Authority (on 28 February 2023) both issued an opinion on the draft adequacy decision on the EU-US Data Privacy.
For further information: Bundestag Website [DE] and BfDI [DE]
02/13/2023 – German Competition Authority | Decision | US Data Transfers
On 13 February 2023 the German Competition Authority (“BKartA”) issued a ruling on data transfers under the GDPR.
In particular, the authority ruled that a company relying on a German subsidiary of a US parent company as a data processor cannot be excluded from a contract bid due to possible violations of the GDPR.
For further information: BKartA Website [DE]
02/09/2023 – ArbG Oldenburg | Decision | Claim for Damages
On 9 February 2023, the Oldenburg Labor Court has ordered a company to pay a former employee damages in the amount of 10,000 euros under Article 82 of the GDPR for failing to comply with an information request under Article 15 (1) of the GDPR without establishing any additional (immaterial) harm.
In the opinion of the court the violation of the GDPR itself already resulted in immaterial harm to be compensated; according to the court, no additional proof of harm was required.
Italy
03/30/2023 – Italian Supervisory Authority | Temporary limitation | AI Chatbot
The Italian Supervisory Authority (“Garante”) imposed an immediate temporary limitation on the processing of Italian users’ data by an US-based company developing and managing an AI chatbot.
The Garante opened a probe over a suspected breach of GDPR. The authority alleged “the absence of any legal basis that justifies the massive collection and storage of personal data in order to ‘train’ the algorithms underlying the operation of the platform”. The authority also accused the company of failing to check the age of its users.
For further information: Garante Website [IT]
03/09/2023 – Council of Ministers | Legislation | Whistleblowing
On 9 March 2023, the Italian Council of Ministers approved the whistleblowing legislative decree.
The Council of Ministers announced, on 9 March 2023, the approval, after final review, of the legislative decree to transpose into Italian law the Whistleblowing Directive.
For further information: Governo Italiano Website [IT]
02/21/2023 – Italian Supervisory Authority | Sanction | Marketing Practices
The Italian Supervisory Authority (“Garante”) announced, on 21 February 2023, that it issued, on 15 December 2022, a €4.9 million fine against an energy company for various non-compliances with the GDPR, including unlawful marketing practices.
For further information: Garante Website [IT]
02/03/2023 – Italian Supervisory Authority | Temporary limitation | AI Chatbot
The Italian Supervisory Authority (“Garante”) issued an order on an AI chatbot noting that tests performed identified risks for minors and vulnerable individuals.
The US-based developer was ordered to terminate processing of data relating to Italian users and to inform the Garante within 20 days on any measures taken to implement its orders.
For further information: Garante Website
Ireland
02/27/2023 – Irish Supervisory Authority | Sanction | Security
On 27 February 2023, the Irish Supervisory Authority (“DPC”) imposed a fine of €750,000 on a banking company for inadequate data security measures.
The inquiry was initiated after the notification to the DPC of a series of 10 data breaches. In this context, the DPC found that the technical and organizational measures in place at the time were not sufficient to ensure the security of the personal data processed.
For further information: #DPC Website
02/23/2023 – Irish Supervisory Authority | Sanction | Security
On 23 February 2023, the Irish Supervisory Authority (“DPC”) imposed a €460,000 fine against a health care provider.
The DPC initiated an enquiry after receiving a personal data breach notification related to a ransomware attack affecting patient data (70,000 people). The DPC considered that the health care provider failed to ensure that the personal data were processed in a manner that ensured appropriate security.
For further information: DPC Website
01/16/2023 – Irish Supervisory Authority | Sanction | CCTV
On 16 January 2023, the Irish Supervisory Authority (“DPC”) imposed a €50,000 fine and a temporary ban on the processing of personal data with CCTV cameras on a company for violations of the GDPR.
For further information: DPC Website
Netherlands
02/22/2023 – Dutch Supervisory Authority | Statement | Camera Settings
The Dutch Supervisory Authority (“AP”) published a statement on changes made by a car manufacturer in the settings of the built-in security cameras of its cars, following an investigation of these cameras by the AP.
For instance, the car may still take camera images, but only when the user activates that function.
For further information: AP Website [NL]
02/18/2023 – House for Whistleblowers | Legislation | Whistleblowing
On 18 February 2023, the House for Whistleblowers announced the entry into force of the Whistleblower Protection Act.
For further information: AP Website [NL]
Norway
03/01/2023 – Norwegian Supervisory Authority | Preliminary conclusion | Analytics Tool
On 1st March 2023, the Norwegian Supervisory Authority (“Datatilsynet”) published its preliminary conclusion on a case related to the use of the analytics tool of a US-based company considering that the use of this tool is not in line with the GDPR.
For further information: Datatilsynet Website [NO]
02/06/2023 – Norwegian Supervisory Authority | Sanction | GDPR Violation
On 6 February 2023, the Norwegian Supervisory Authority (“Datatilsynet”) fined a company operating fitness centers NOK 10 million (approximately €912,940) for various GDPR violations (e.g., lawfulness of processing, transparency and data subjects rights).
For further information: Datatilsynet Website [NO]
Portugal
01/27/2023 – Portuguese Supervisory Authority | Guidelines | Security Measures
The Portuguese Supervisory Authority (“CNPD”) published guidelines on security measures in order to minimize consequences in case of attacks on information systems.
These guidelines aim to inform controllers and processors about their legal obligations, with the increase of cyberattacks on information systems, listing organizational and technical measures that must be considered by organizations.
For further information: Press release [PT]
Romania
03/28/2023 – President of Romania | Legislation | Whistleblowing
The Law No. 67/2023 which amends article 6 (2) of the Law no. 361/2022 on the protection of whistleblowers in the public interest, was published in the Official Gazette on 28 March 2023 and entered into force on 31 March 2023.
For further information: CDEP Website [RO]
Spain
03/16/2023 – Spanish Supervisory Authority | Sanction | Data Minimization
The Spanish Supervisory Authority (“AEPD”) published, on 16 March 2023, its decision in which it imposed a fine of €100,000 on a telecommunications company for violation of the data minimization principle.
For further information: AEPD Website [ES]
03/15/2023 – Spanish Supervisory Authority | Sanction | GDPR Violation
The Spanish Supervisory Authority (“AEPD”) fined a bank €100,000 for violation of the GDPR.
In particular, the bank used the information provided by the claimant and her child to open several accounts in the name of the child without consent and while it was not necessary for the services requested.
For further information: AEPD Website [ES]
03/15/2023 – Spanish Supervisory Authority | Sanction | Data Portability
The Spanish Supervisory Authority (“AEPD”) published, on 15 March 2023, a decision in which it imposed a fine of €136,000 on a telecommunications company for completing a data portability request without ensuring the security of the personal data of the client.
For further information: AEPD Website [ES]
03/13/2023 – Spanish Senate | Legislation | Whistleblowing
The Spanish Law 2/2023 implementing the EU Whistleblower Directive was published in the Official Gazette on 20 February 2023 and entered into force on 13 March 2023.
For further information: BOE Website [ES]
United Kingdom
03/28/2023 – UK Supervisory Authority | Guidance | Direct Marketing
On 28 March 2023, the UK Supervisory Authority (“ICO”) issued guidance to businesses operating in regulated private sectors (e.g., finance, communications or utilities) on direct marketing and regulatory communications.
The guidance aims to help businesses identify when a regulatory communication message might count as direct marketing. If the message is direct marketing, it also covers what businesses need to do to comply with data protection and ePrivacy law.
For further information: ICO Website
03/16/2023 – UK Supervisory Authority | Sanction | GDPR Violations
The UK Supervisory Authority (“ICO”) reached an agreement with a retailer to reduce the monetary penalty notice issued for breaching the GDPR from £1,350,000 to £250,000.
The ICO found that the company was making assumptions about customers’ medical conditions, based on their purchase history, to sell them further health related products. The processing involved special category data and the ICO concluded that the processing had been conducted without a lawful basis. The retailer appealed the decision which led to an agreement to reduce the monetary penalty notice, taking into account that the retailer has stopped the unlawful processing.
For further information: ICO Website
03/15/2023 – UK Supervisory Authority | Guidelines | AI and Data Protection
The UK Supervisory Authority (“ICO”) announced on 15 March 2023 that it had updated its guidance on artificial intelligence (“AI”) and data protection.
The ICO indicates that the changes respond to requests from UK industry to clarify requirements for fairness in AI.
For further information: ICO Website
03/13/2023 – UK Supervisory Authority | Guidance | Data Protection by Default
The UK Supervisory Authority (“ICO”) has produced new guidance to help user experience designers, product managers and software engineers embed data protection into their products and services by default.
The guidance looks at key privacy considerations for each stage of product design, from kick-off to post-launch. It includes both examples of good practice and practical steps that organisations can take to comply with data protection law when designing websites, apps or other technology products and services.
For further information: ICO Website
03/08/2023 – UK Government | Legislation | Cookies
The government re-introduced new laws on 8 March 2023 aiming to cut down paperwork for businesses and reduce unnecessary cookie pops-up.
The Data Protection and Digital Information Bill was first introduced last summer and paused in September 2022 so ministers could engage in a co-design process with business leaders and data experts. According to the government, this was to ensure that the new regime built on the UK’s high standards for data protection and privacy, and seeks to ensure data adequacy while moving away from the “one-size-fits-all” approach of the European Union’s GDPR.
For further information: UK Government Website
02/16/2023 – UK Supervisory Authority | Guidance | Protection of Children
The UK Supervisory Authority (“ICO”) issued a series of recommendations to game developers to ensure the protection of children and compliance with data protection laws.
For further information: ICO Website
This newsletter has been prepared by the EU Privacy team of Gibson Dunn. For further information, you may contact us by email:
- Ahmed Baladi – Partner, Partner, Co-Chair, PCCP Practice, Paris (abaladi@gibsondunn.com)
- Vera Lukic – Partner, Paris (vlukic@gibsondunn.com)
- Kai Gesing – Partner, Munich (kgesing@gibsondunn.com)
- Joel Harrison – Partner, London (jharrison@gibsondunn.com)
- Alison Beal – Partner, London (abeal@gibsondunn.com)
- Thomas Baculard – Associate, Paris (tbaculard@gibsondunn.com)
- Roxane Chrétien – Associate, Paris (rchretie@gibsondunn.com)
- Christoph Jacob – Associate, Munich (cjacob@gibsondunn.com)
- Yannick Oberacker – Associate, Munich (yoberacker@gibsondunn.com)
- Clémence Pugnet – Associate, Paris (cpugnet@gibsondunn.com)
© 2023 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice. Please note, prior results do not guarantee a similar outcome.
The amended guidance sets out a new practice that has been adopted by the Panel Executive in respect of private sale processes initiated by potential target companies which are in scope of the UK public takeovers rules, and the practice note reminds practitioners on the approach to compliance that the Panel Executive takes on disclosures relating to intentions of a bidder with respect to target company’s employees and business.
The Executive organ of the UK regulatory body which oversees public M&A and related transactions, The Panel on Takeovers and Mergers (the “Panel Executive”), recently published an updated version of the Panel Executive’s informal guidance on “Formal sale processes, private sale processes, strategic reviews and public searches for potential offerors” which is set out in Practice Statement 31[1]. The amended guidance, which we explain in further detail in section A, sets out a new practice that has been adopted by the Panel Executive in respect of private sale processes initiated by potential target companies which are in scope of the UK public takeovers rules as set out in the City Code on Takeovers and Mergers (the “Takeover Code”).The Panel Executive considers that the requirement to “out”, i.e. name a potential bidder with which a target company is in talks or from which an approach has been received in the context of a private sale process, may operate in an appropriate manner, and the updated guidance note sets out the circumstances in which the Panel Executive may grant dispensations from the Takeover Code requirements[2] to identify a potential bidder. This is a welcome development by potential bidders of UK target companies.
In another recent development[3], the Panel Executive has issued new Panel Bulletin 7 on “Offeror intention statements” which sets out a reminder to market participants as to how the Takeover Code provisions[4], which require disclosure of a bidder’s intentions with regard to the business, employees and pensions schemes of a target company, operate in practice. Disclosure of these matters for bidders can be particularly challenging in circumstances where a bidder has not been fully able to crystallize its analysis and plans for the target business (pre acquiring full control), and whilst the Panel Executive is cognizant of these challenges, it has provided examples of certain approaches by bidders to addressing these Takeover Code requirements which it considers falls short of compliance with the requirements of the rule, and these are set out in further detail in section B.
Finally, the Panel on Takeovers and Mergers also has updated the document fees and charges that it charges as follows: (i) to reinstate the level of documentary fees for offer documents to the pre-August 2021 levels[5]; (ii) rebalance the fees charged on so-called “Rule 9” waiver circulars to lower the charges for smaller value transactions, increase the charges for larger value transactions and introduce a new top band; and (iii) increase by 25% the fees charged for granting exempt principal trader, exempt fund manager and recognised intermediary status[6].
A. LET’S KEEP THINGS QUIET
- On April 30, 2024, the Panel Executive published an updated version of Practice Statement 31 which sets out new guidance on the Panel’s interpretation and application of its rules relating to the (i) requirement to publicly identify (i.e. name) possible bidders; (ii) requirement to set a “put up or shut up” deadline on possible bidders; (iii) general prohibition on inducement fees in favour of bidders; and (iv) ability of a target company to impose special conditions or restrictions on a bidder wishing to gain access to Target company information, in the context of different types of sales processes or situations involving UK target companies.
- By way of summary explanation of these rules:
- Public identification of bidders
Under the Code:
- When a company (or major shareholder) is seeking a purchaser for 30%+ of the voting rights of the company OR when the company is seeking more than one bidder, a public announcement will be required either: (1) if rumour or speculation arises or there is an untoward movement in the share price of the company[7]; or (2) the number of bidders being approached is more than a “very restricted number” (generally considered to be six)[8].
- A company will enter into an “offer period” (and consequently be publicly listed on the Panel’s website[9] as being in play) when the company announces it is seeking potential bidders or a purchaser is being sought for 30%+ of its voting rights[10].
- Generally, the announcement by the company which commences the offer period must identify the potential bidder that the company is in talks with or from which an approach has been received (and not rejected)[11].
- If the company subsequently chooses to announce the existence of a new potential bidder (and before it is in receipt of a firm intention offer), it must identify (i.e. name) that potential bidder[12].
- “Put up or shut up” deadline imposition on possible bidders
- An identified potential bidder must either announce a firm intention to make an offer (i.e. ‘put up’) or announce that it does not intend to make an offer (i.e. ‘shut up’) by 5.00 pm on the 28th day following the date of the announcement in which it is first identified[13].
- This rule does not apply if another bidder has announced a firm intention to make an offer for the company.
- Prohibition on inducement or ‘break up’ fees
- Since 2011, the Code has included a general prohibition on target companies granting inducement fees and other so-called “offer related” arrangements in favour of a bidder or persons acting in concert with a bidder when the company is in an offer period or when an offer is reasonably contemplated[14].
- Equality of information to all bona fide potential bidders and permissible terms of access
- Target companies are required, if requested, to provide a bidder or bona fide potential bidder with information that it has provided to another bidder or potential bidder[15] – the so called equality of information rule.
- This requirement normally only applies when there is a public announcement of a (potential) bidder to which information has been provided or the requesting bidder has been informed authoritatively of the existence of another potential bidder[16].
- The Target company is only permitted to impose certain limited conditions (generally relating to confidentiality and non-solicit provisions) on the person requesting information access and the conditions cannot be more onerous than those imposed on another (potential) bidder[17].
- The Code and the updated guidance in Practice 31 specifically address the application of the rules summarized in section 2 above, in the context of the following type of sales processes or situations:
- A formal sale process (“FSP”) – being a process by which a UK Code company puts itself up for sale through a process commencing with a public announcement that it is commencing a “formal sale process” and thus effectively initiate a public auction of itself.
- A strategic review process – a situation in which a company has publicly announced that it is undertaking a strategic review of its business, which refers to an offer or bid for the company as a possible outcome.
- A public search for potential buyers or bidders – where a company announces for example that it is seeking “potential offerors” or “seeking purchasers”.
- A private sale process – where a company wishes to initiate discussions on a private basis with more than one potential buyer (but not more than a “very restricted number” of buyers) and chooses not to announce those discussions.
- The Panel introduced the concept of a FSP procedure in 2011 to aid companies desirous of achieving an exit for shareholders (expected in many cases to be used in distress or similar situations) to implement a process to garner bidder interest by offering dispensations from certain onerous Code rules applicable to bidders (the “FSP dispensations”). Specifically, the FSP dispensations allow for relief from: (i) the requirement to identify potential bidders (see 2a above); (ii) the requirement to set a “put up and shut up” deadline on a potential bidder (see 2b above); (iii) the general prohibition on offering an inducement fee to a potential bidder (see 2c above). The Code requires parties to consult with the Executive if a company wishes to seek any of the FSP Dispensations. Practice Statement 31 provides guidance that the Panel Executive will normally grant these FSP Dispensations where it is satisfied that a board is genuinely putting the company up for sale through a formal and public process.
- Practice Statement 31 clarifies that the Panel Executive also would normally grant the dispensation from identifying a potential bidder in the context of strategic reviews (and provided of course that any (potential) bidder that the company is in talks with or from which an approach has been received, has not been specifically identified in any rumour or speculation).
- The key change in updated Practice Statement 31 is confirmation that it is the Panel Executive’s normal practice to grant a dispensation (if requested by a target company) to publicly identify a potential bidder also in the situation where it is satisfied that the company is genuinely initiating a private sale process. Even if the company subsequently chooses to announce that it had commenced a private sale process[18], it will not be required to identify any (potential) bidders it is in talks with or from which an approach has been received. The discretion remains with the company as to whether to rely on the dispensation and/or to identify a potential bidder that it is in talks with.
- This new clarificatory guidance from the Panel Executive is, as noted, a welcome and helpful approach as it gives potential bidders greater comfort about the risk of being prematurely outed or named by a target company which is a key concern for bidders particularly in early stages of considering a potential bid and/or prior to the time when it is fully ready to launch a firm offer announcement. This may in turn encourage greater participation by bidders in these types of processes.
- Of final note, it is important to clarify the status of a Panel Executive Practice Statement[19] such as the Practice Statement 31 discussed above. Whilst Practice Statements are stated to be informal guidance issued by the Executive body of the Takeover Panel (which is distinct from the legislative and adjudicative arm of the Panel), in practice, UK public M&A practitioners will be well aware of the need to pay due and careful attention to the content of these Practice Statements as these provide critical guidance which will be applied and accepted in the majority of live public M&A transactions regulated by the Panel.
WHAT DOES GOOD LOOK LIKE?
- On May 15, 2024, the Panel Executive published Panel Bulletin 7 on “Offeror Intention Statements” which serves as reminder to practitioners and market participants of the operation of specific provisions of the Takeover Code following observations of the Panel Executive. These bulletins do not entail any changes to the interpretation of the Code[20].
- The Code requires bidders to disclose in their offer document[21], amongst other things, its intentions with regard to the business, employees and pension schemes operated by the target company. In particular, the Code requires that the bidder explains:
- its intentions with regard to the future business of the target company and intentions for any R&D functions of the Target
- its intentions with regard to the continued employment of employees and management of the target group including any material change to the Ts&Cs of employment and roles/ functions
- its strategic plans for the target company and the likely repercussions on employment, locations of places of business including the headquarters
- its intentions with regard to contributions to the target company pension schemes, including arrangements to fund any scheme deficit
- its intentions with regard to redeployment of the fixed assets of the target company
- its intentions with regard to the maintenance of any existing trading facilities for the relevant securities of the target, i.e. any plans to delist.
- Whilst some aspects of the above mandated disclosure requirements are readily capable of compliance by a bidder (e.g. intentions with respect to (de)listing or general intentions regarding to the business of the target and its strategic plans for the target – the latter likely being foundational items to developing the financial model and pricing on the bid), the ability and feasibility of developing firm intentions with respect to some of the other disclosure items noted above can be a challenge particularly when a bidder may have had limited access to target due diligence information and/or is in a competitive situation or otherwise where timing is tight (e.g. due to imposition of a ‘put up shut up’ deadline).
- The Panel, however, has in recent years tightened up its approach on these disclosures – denouncing the practice of “boilerplate” disclosures by bidders, requiring further detail on bidder’s intentions with respect to the target’s business, setting out the standards it expects to be applied by bidders when making these disclosures[22], and introducing (in 2014) a new framework to monitor any “post-offer intention statements” made by a bidder[23]. The Panel has emphasised the importance of these statements – not only for target companies when formulating their views on the merit of a potential bid but also for other stakeholder (such as employees and pension scheme beneficiaries, both of whom have locus under the Code to have their views and opinions on a bid disclosed and published by the bidder).
- In Panel Bulletin 7, the Panel Executive has gone on to elaborate on how it approaches compliance with these disclosure requirements. In particular, the Panel Executive has noted that over time, bidders have tried to navigate around the disclosure requirements mandated by Rule 24.2(a) as set out in paragraph 2 above by making arguments such as (i) it has not formulated intentions on employees or locations of business as it is uncertain about expected synergies arising from the acquisition/ combination; (ii) if there is to be any reduction in headcount it expects this not to be material and thus does not consider this merits disclosure; (iii) the bidder has not as yet completed its strategic review and its only post-offer intention in the 12-month period is to conduct such a review; or (iv) the proposed post-offer intention disclosures are aligned with other “boilerplate” or standard disclosures and thus suffices. In this new bulletin, the Panel Executive has stated that “none of these arguments … provides an acceptable basis for formulating statements of intention”. This is a clear warning shot across the bow from the Panel Executive of which the market should take note.
IT’S TIME TO UP THE ANTE
On April 18, 2024, the Panel published a statement setting out new fees and charges that it will be applying from June/July 2024 in relation to takeover transactions, whitewash transactions and approval of certain exempt status potentially available for certain financial institutions[24].
The updated fees and charges bring about the following changes: (i) to reinstate the level of documentary fees for offer documents to the pre-August 2021 levels[25]; (ii) rebalance the fees charged on so-called “Rule 9” waiver circulars[26] to lower the charges for smaller value transactions, increase the charges for larger value transactions, and introduce a new top band of a £50,000 charge for offers with a value of over £250 million; (iii) increase by 25% the fees charged to lower the charges for smaller value transactions and increase a new top band; and (iv) increase by 25% the fees charge for granting exempt principal trader, exempt fund manager and recognised intermediary status[27] to £7,000 per entity.
These revised charges will apply from 1 June 2024 (in the case of (i) and (ii)) or from 1 July 2024 in the case of (iii). In reinstating its fees to pre August 2021 levels, the Panel noted the reduction in its revenues due to lower levels of market activity since that time, and, as noted in our last alert on changes to the scope of the Takeover Code, we may see some further reduction in revenues over time due to the narrowing of the types of companies which will fall within the remit of the Code.
__________
[1] The updated version of Practice Statement 31 (previously entitled “Strategic reviews, formal sale processes and other circumstances in which a company is seeking potential offerors”) was published on 30 April 2024.
[2] These are set out in Rules 2.4(a) and (b) of the Takeover Code and are discussed in further detail in this alert.
[3] Practice Bulletin 7 was published on 15 May 2024.
[4] These are set out in Rules 2.7(c)(viii), Note 1 on Rule 2.7 and Rule 24.2 of the Takeover Code and are discussed in further detail in this alert.
[5] In August 2021, the Panel has reduced charges payable on offer documents by approximately 25%.
[6] These fees were last revised in 2015.
[7] Rule 2.2.(f)(i).
[8] Rule 2.2(f)(ii).
[9] Companies in an offer period are listed on the Panel’s Disclosure Table.
[10] Definition of “offer period”.
[11] Rule 2.4(a).
[12] Rule 2.4(b).
[13] Rule 2.6(a).
[14] Rule 21.2(a).
[15] Rule 21.3(a).
[16] Rule 21.3(b).
[17] Note 1 on Rule 21.3(a).
[18] From that point onwards, the company would be treated as having commenced a public search for possible bidders.
[19] There are currently 17 live Practice Statements being applied by the Panel Executive.
[20] The Panel commenced the practice of issuing Panel Bulletins in 2021 and since then have issued 7 such bulletins including the one under discussion in this alert.
[21] Rule 24.2(a).
[22] Rule 19.8(a) requires statements of intention relating to the post-offer period to be: (i) accurate statements of that party’s intentions at the time it is made; and (ii) made on reasonable grounds.
[23] Rule 19.8(b) requires a bidder to consult with the Panel if it intends to depart from its statement of intention in the 12 months post bid and Rule 19.8(c) requires a bidder to confirm in writing to the Panel at the end of the 12-month period post bid that it has fulfilled its post-offer statement(s) of intention.
[24] In summary, these exemptions afford dispensations from certain disclosure requirements and dealing restrictions.
[25] In August 2021, the Panel has reduced charges payable on offer documents by approximately 25%.
[26] These are circulars convening shareholder meetings to consider and approve the requirement on a party to make a mandatory or “Rule 9” offer where such a requirement has been triggered under the Code.
[27] These fees were last revised in 2015.
The following Gibson Dunn lawyer prepared this update: Selina Sagayam.
If you have any questions on the impact of the proposed changes, including application of the transitional arrangements, or are seeking advice on assessing and implementing alternative arrangements for companies which will come out of scope of the Code, we are happy to assist.
For questions about this alert or other UK public M&A or capital market queries, contact the Gibson Dunn lawyer with whom you usually work, the author of this alert or these public listed company and capital markets contacts in London:
Selina S. Sagayam (+44 20 7071 4263, ssagayam@gibsondunn.com)
Chris Haynes (+44 20 7071 4238, chaynes@gibsondunn.com)
Steve Thierbach (+44 20 7071 4235, sthierbach@gibsondunn.com)
For US securities regulatory queries, including the impact of the proposal on US transition companies, please contact:
James J. Moloney – Orange County, CA (+1 949.451.4343, jmoloney@gibsondunn.com)
© 2024 Gibson, Dunn & Crutcher LLP. All rights reserved. For contact and other information, please visit us at www.gibsondunn.com.
Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.
This update summarises the proposed scoping changes, the transitional arrangements and the implications for Excluded Companies and their shareholders and other parties considering a transaction involving an Excluded Company.
EXECUTIVE SUMMARY
On 24 April 2024, the UK Panel on Takeovers and Mergers (the primary regulator in the UK of takeovers of public companies) (the “Panel”) published PCP 2024/1, a Consultation Paper proposing changes to the types of companies to which the City Code on Takeovers and Mergers (the “Takeover Code”) applies.[1]
The proposed changes published by the Code Committee of the Panel (the “Code Committee”) largely narrow the scope of application of the Takeover Code to companies registered in the UK or any of the Crown Dependencies[2] and which currently are UK-listed or listed on a stock exchange of a Crown Dependency (or were so listed at any time in the three years before the company becomes subject of a Takeover Code-regulated offer or event).
The Panel pre-consulted with a number of potentially impacted market participants and industry bodies in devising the proposed changes. It is expected that the changes will be implemented largely as set out in the consultation paper. The likely implementation date will be in Q4 2024.
If the changes are implemented as proposed, a number of companies which are currently subject to the jurisdiction of the Panel and the Takeover Code will fall outside of their jurisdiction (“Excluded Companies”) and consequently companies and shareholders can expect to lose certain protections and benefits currently afforded to target companies under the Takeover Code. The Panel proposes to introduce a three-year transition period from the date of implementation to allow Excluded Companies to consider and implement (if so desired) alternative arrangements to address the loss of protections which will arise as a result of becoming an Excluded Company.
This update summarises the proposed scoping changes, the transitional arrangements and the implications for Excluded Companies and their shareholders and other parties considering a transaction involving an Excluded Company.
- Effective Financial Markets Regulation
- The key principles for good financial market regulators across the international regulatory landscape would generally expect to include the following: engendering in the regulated community; being robust including having an effective enforcement mechanism in place; being proportionate and fair; ensuring all relevant stakeholders understand the regulator’s approach and having a keen and active understanding of the relevant financial services markets[3].
- The proposed changes by the Panel is an exemplar of these principles in action and yet another instance where the Panel has demonstrate its pragmatic and agile approach to takeover regulation.
- The Panel is desirous of ensuring that its jurisdictional rules (being the gateway into the Code and regulation by the Panel – both of which are often seen by those unfamiliar with UK public takeover regulation as being a challenge to navigate – unusually light on black-letter law and heavy on the principles-based approach of regulation) are “clear, certain and objective”.
- Further, having undertaken a thorough pre-consultation exercise including with the key UK government ministry, financial services regulator, stock exchange and operators of secondary trading and fund-raising platforms, the Panel is mindful of not over-reaching nor imposing regulatory burdens which are not “appropriate or proportionate for pre-listing, growth phase companies”[4] nor being excessively protective in relation to certain companies post-listing.
- Post-Brexit, the UK has been on a mission to “cement its position as a leader in science, research and innovation[5]“ by supporting and encouraging growth companies and bolstering its position as a global trading centre in particular by making UK’s listing regime more accessible, effective and competitive. The proposed changes of the Panel, which tighten its jurisdictional remit, are aligned with these broader policy objectives.
- History … Expansion & Contraction
- In its 56 years of operation the scope and remit of Code has seen many changes. The Code was originally drafted with quoted companies only in mind but gradually expanded to cover certain unquoted public companies (i.e. entities with or set up with a view to extending offers to large numbers of shareholders) and even certain transactions involving private companies (or those who had been recently quoted or public). The types of transactions which fall within the remit of the Code has also seen an expansion over the years to address new and novel structures that market participants have implemented to secure effective direct or indirect control of Code companies.
- The Panel however has also been mindful to ensure that its stellar reputation and track record in relation to enforcement is upheld. In making this assessment the Panel has naturally been cognizant of its modest resources comprising a small (but effective) executive team of permanent and seconded staff. Accordingly, a cautious and risk-based approach has been adopted before extending the arm of the Panel/ Code to companies outside of its primary remit (being regulation of UK listed companies) to, for example, companies listed on overseas exchanges and/or whose management is outside of the comfortable (and proportionate) reach of the Panel.
- As part of the expansionist period, in 2005[6], as a result of implementation of the EU Takeovers Directive in the UK, the Panel was required to take on “shared jurisdiction” of companies which were UK registered but not listed in the EU or were EU registered but listed in the UK. In 2013[7], the Panel changed its rules on the application of the “residency test” (see 4.c, “UK resident: What does it mean” in section 4 below) in determining whether a company was in scope and removed this additional requirement in respect of certain types of companies thus potentially expanding the numbers of companies/ transactions within its regulatory scope.
- However, in recent years, the Code has seen a narrowing of the scope of companies within the remit of the Panel. In 2018[8], in the light of the UK’s withdrawal from the EU, the Panel took the view that it was appropriate (though not a mandated outcome) to cease to have the so-called “shared jurisdiction” with relevant EU members states. At that time, it was estimated circa x40 companies ceased to be regulated by the Panel.
- With these latest set of proposed changes, once again, there will be a number of companies which will cease to fall within scope of the Code. It is not practicable to identify the number of Code companies which will cease to be in scope as such but upon review of data between 2017 and 2024 the Code Committee estimates a reduction of the average number of transactions which it regulates from 76 to 72.
- Which companies will be in scope?
- Primary scoping rule – So what type of companies is the Panel proposing to regulate going forward? If the changes are implemented, the Panel would regulate companies which:
- are registered in the UK or in any one of the Crown Dependencies (a “Code Jurisdiction”); AND
- whose securities are admitted to trading on:
- a UK regulated market[9] – for example the Main Market of the London Stock Exchange or the Aquis Stock Exchange (AQSE).
- a UK multilateral trading facility[10] – for example the AIM market operated by the London Stock Exchange and the Aquis Growth Market; or
- a stock exchange in any one of the Crown Dependencies – for example The International Stock Exchange or “TISE”.
We refer to companies with securities admitted to trading in any of the categories in 1. – 3. above as “UK-listed”. As currently is the case, the Code will not apply to a company which is incorporated in or has its registered office outside the UK or one of the Crown Dependencies.
- UK-Listed: What it does not cover – Accordingly, companies with securities trading on:
(i) a matched bargain facility such as JP Jenkins or Asset Match ;(ii) a multilateral system or a platform such as the proposed new Private Intermittent Securities and Capital Exchange System (PISCES);(iii) a private markets (such as TISE Private Markets ); or(iv) a secondary market of a crowdfunding platform such as Seedrs Secondary Market or Crowdcube,will be outside of scope. - Three-year secondary scoping rule – In addition, companies which are registered in a Code Jurisdiction will also be in scope of the Code if they were UK-listed at any time during the three years prior to the date of announcement of an offer or possible offer (or some other Code-relevant transaction) – the “relevant date”. The retention of a “run-off” period is consistent with the current approach under the Code (albeit for a shorter period than the current 10 year run-off period – (see 4.b, ”Private companies” in section 4 below) and is designed to address the situation where for example a company has been subject of a takeover offer, been delisted but there remains a minority which chose not to accept the offer and remain as shareholders – some level of protection is considered appropriate for this cohort.
- Primary scoping rule – So what type of companies is the Panel proposing to regulate going forward? If the changes are implemented, the Panel would regulate companies which:
- Which companies currently in scope will become out of scope?
- Public companies – Currently, the Code also applies to public companies registered in a Code Jurisdiction if they are “UK resident”, regardless of whether the company’s securities are UK-listed or traded on an overseas market (e.g. NASDAQ or NYSE) or traded using a matched bargain facility.
- Private companies – Currently, the Code also applies to private companies registered in a Code jurisdiction, which are “UK resident” but only if: (a) they were UK-listed at any time during the 10 years prior to the relevant date; (b) dealings in the company’s securities were published on a regular basis for a continuous period of at least six months in the 10 years prior to the relevant date [NB: this would capture for example matched bargain facilities such a JP Jenkins]; (c) any of the company’s securities were subject to a marketing arrangement at any time during the 10 years prior to the relevant date; or (d) the company had filed a prospectus with a relevant authority in any one Code Jurisdiction during the 10 years prior to the relevant date (together the “10 year look-back rules”).
- “UK resident”: What does it mean? – One of the key drivers behind the proposed changes is the desire by the Code Committee to move away from a jurisdictional test which relies on “UK residency”. For Code purposes, a company will be treated as being “UK resident” if the place of central management and control of a company is in one the Code Jurisdictions. Of note, this is not a tax or other regulatory residency test. The Panel has applied its own test of “central management and control” which it has developed and indeed simplified over time. In the first instance, residency is tested against a quantitative test of where the majority of the board of a company reside but the Panel reserves the discretion to assess more qualitative factors (e.g. giving consideration to the specific roles of the members of the board) depending on the facts and the outcome of the quantitative test. By its nature, the “residency” of a company for Code purposes can change over time depending on where the majority of the board reside and indeed many companies have deliberately ensured that the majority of their board are not “UK resident” in order to avoid falling within the scope of the Code and regulation of the Panel. One of the challenges of the UK residency test (in addition to its more subjective and potentially shifting nature) is that it is “often not possible to ascertain from publicly available information whether at any point in time an unlisted public company [i.e. a non-UK Listed company] or a private company satisfies the residency test”[11]. For example, a UK registered which is listed on an overseas exchange may not be required to disclose and/or update its “UK residency” and relate Code status under applicable exchange and securities law or regulatory requirements. The Panel is no longer comfortable with this position and is desirous of putting in place a regime which allows both companies and market participants to reach an objective determination as to whether a company is or is not a Code company.
- UK residency test removed – Accordingly, the proposed changes involve the removal of the “UK residency” test scoping limb and also materially modify the 10-year look back rule replacing the latter simply with a three year look-back rule for UK-listed companies only.
- Excluded Companies – As a result of these changes, the following companies (each being an Excluded Company) will no longer be subject to the jurisdiction of the Code:
- a public or private company which was UK-listed more than three years prior to the relevant date;
- a public or private company whose securities are, or were previously, traded solely on an overseas market;
- a public or private company whose securities are, or were previously, traded using a matched bargain facility such as JP Jenkins or Asset Match;
- any other “unlisted” public company; and
- a private company which filed a prospectus at any time during the 10 years prior to the relevant date,
unless the company had been UK-listed at any time during the three years prior to the relevant date.
- Transitional arrangements for companies currently in scope which will become Excluded Companies
- The Code Committee considers that it is appropriate that Excluded Companies – being companies currently within (or potentially within the scope of the Code – to be given a period of time to adjust to the new regime. These will cover public companies referred to in paragraph a above and private companies described in paragraph 4.b above.
- These companies which will be referred to as “transition companies” will remain within the scope of the Code for three years from the date of implementation of the new scoping rules.
- The Code Committee has summarised out in its consultation paper the proposed transitional arrangements (see Appendix C) and has also provided helpful infographics to identify if a company is a “transition company” on the implementation date (see Appendix D) and if it will be a transition company in respect of a specific transaction (see Appendix E).
- The Panel expects transition companies to use this period to consider whether it is appropriate to implement alternative arrangements in the light of their pending exclusion from the Code. As noted above, the Code provides a number of protections for companies which find themselves in receipt of a potential takeover offer (target companies) and their shareholders. These include but are not limited to enhanced disclosure of interests and dealings when a company is in play, rules requiring equivalent treatment of all shareholders, the requirement for a person and their “concert parties” who obtains or consolidates control to make a “mandatory offer” on similar terms.
- Alternative arrangements (which will likely come with cost) may include a transition company:
- seeking admission of its securities to trading on a relevant UK market (e.g. a secondary listing) in order to become subject to the jurisdiction of the Panel;
- seeking admission of its securities to trading on another market in order to become subject to regulation of a comparable securities regulator;
- amending its Articles of Association to incorporate new provisions which are similar to or based upon certain ‘key’ provisions and protections of the Code; and/or
- implementing arrangements to facilitate an orderly exit of shareholders who do not wish to remain holders in a company without the protections granted by the Code.
- If the transition company proposed to entrench new “Code-like” provisions into the contract with its members (i.e. its Articles of Association), it will be for the company to assess (ideally taking into account the views of investors and other relevant stakeholders) which Code provisions they consider appropriate to incorporate. Amended governance documents will however need to be approved by shareholders. Shareholders will need to understand that whilst their new articles of association may include certain Code-like or Code-inspired provisions, the Panel will not have jurisdiction to regulate enforcement of these provisions.
- Excluded Companies (and companies who have previously publicly disclosed the potential application of the Code depending on whether they satisfy the UK resident test) including those traded on overseas exchanges, will need to consider whether and when to disclose to shareholders that they will no longer become subject to (or potentially subject to) the jurisdiction of the Code and Panel and the protections to shareholders that this affords. This will be dictated in part by reference to the (overseas) exchange and securities regulation applicable to such companies and the nature of any prior disclosures made to shareholders/ the public.
- Implications
- For Excluded Companies
Directors of these UK registered entities have a duty to promote the success of the company for the benefit of its shareholders taking into account, among other things, the interests of its employees. Companies which will become an Excluded Company should start to give early consideration about what alternative options the company should consider implementing if any in the light of the loss of protections both for the company (in the event it becomes subject of an offer), its shareholders and (to a lesser degree, its employees) when it becomes an Excluded Company. At the least, it should start to prepare to engage with its shareholder based on these issues - For Shareholders of Excluded Companies
Shareholders of companies who will fall outside of scope, as part of their stewardship duties and taking account (where relevant e.g. in the case of institutional investors or sovereigns) their fiduciary duties to their ultimate beneficiaries, they should start to give consideration to what are the key shareholder protections/regulatory expectations they have as a result of their investee company being a Code regulated company and what protections if any they consider critical to preserve going forward. Armed with this analysis and assessment they can then prepare to pro-actively engage at an early stage with investee companies which will fall to become an Excluded Company and/or to actively participate in any outreach and engagement that these companies may have with shareholders going forward during their transition periods. Is the “mandatory offer” concept a key protection from “effective”/ 30%+ controllers? How much comfort is taken from the “rule against frustrating action”? - For Parties Interested in an Excluded Company
Parties engaging with Code companies, whether with a view to carrying out a takeover offer, other Code regulated transaction or indeed even seeking to transact with a Code company which is “in play” (a “Code Transaction”), can find compliance with the Code’s target-company/target-shareholder friendly regime somewhat costly and burdensome in particular, if this is in addition to compliance with overseas exchange and securities law requirements which apply to that company in parallel. The prospect of undertaking a transaction outside of the regime of the Code may indeed be welcome. Whilst we are some years away from the end of the transitional period for Excluded Companies and these companies falling out of scope of the Code, third parties who may be considering a Code Transaction closer to that end date, should be mindful of that date and/or of any alternative arrangements that the Excluded Company may implement when assessing timing (e.g. waiting till post the expiry of the transitional period) and the structure of any possible transaction.
- For Excluded Companies
- Next Steps & Timing
- Comments to the Consultation Paper should be sent to the Code Committee in writing or by email[12] by 31 July 2024.
- The Code Committee intends to publish a response statement to the consultation in Autumn 2024 and the expected implementation date of the changes is circa one month after publication of this response document.
- As noted above, the transition period for Excluded Companies to prepare for exclusion is three years from the implementation date.
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[1] PCP 2024/1 – Companies to which the Takeover Code applies
[2] These are the Isle of Man, Guernsey and Jersey
[3] ICAEW Principles For Good Financial Regulators
[4] Paragraph 2.20 of PCP 2024/1
[5] UK Government Innovation Strategy Statement Nov 2023
[6] See PCP2005/5 – The implementation of the Takeovers Directive.
[7] See PCP2012/3 – Companies subject to the Takeover Code
[8] See PCP 2018/2 – The United Kingdom’s withdrawal from the European Union
[9] As defined in paragraph 13(a) of Article 2(1) of Regulation (EU) No 600/2014 on markets in financial instruments (“UK MiFIR”)
[10] As defined in paragraph (14A) of Article 2(1) of UK MiFIR
[11] Paragraph 2.14 of PCP 2024/1
[12] Email to supportgroup@thetakeoverpanel.org.uk
If you have any questions on the impact of the proposed changes, including application of the transitional arrangements, or are seeking advice on assessing and implementing alternative arrangements for companies which will come out of scope of the Code, we are happy to assist.
For questions about this alert or other UK public M&A or capital market queries, contact the Gibson Dunn lawyer with whom you usually work, the author of this alert or these public listed company and capital markets contacts in London:
Selina S. Sagayam (+44 20 7071 4263, ssagayam@gibsondunn.com)
Chris Haynes (+44 20 7071 4238, chaynes@gibsondunn.com)
Steve Thierbach (+44 20 7071 4235, sthierbach@gibsondunn.com)
For US securities regulatory queries, including the impact of the proposal on US transition companies, please contact:
James J. Moloney – Orange County, CA (+1 949.451.4343, jmoloney@gibsondunn.com)
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