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Arbitration

International

The revised United Nations Commission on International Trade Law Arbitration Rules are in force. Key amendments include new provisions to accommodate the potential for multi-party arbitrations, expanded rules on interim measures and a requirement that a respondent serve a response to the notice of arbitration. This last change will be particularly welcomed by corporate counsel.

United Kingdom

The extent to which parties may agree to submit intra-corporate disputes - in particular claims under company legislation - to arbitration has long been uncertain. The Court of Appeal recently ruled in favour of the arbitrability of a shareholder's unfair prejudice claim brought under Section 994 of the Companies Act 2006 and has provided important guidance on the arbitrability of corporate disputes more generally.

The Supreme Court ruling in Jivraj v Hashwani removes the question mark over the legality of provisions in certain institutional rules which restrict the nationality of arbitrators. After much recent uncertainty over nationality criteria, the ruling marks a welcome return to business as usual for those involved in arbitration in the United Kingdom.

The Technology and Construction Court recently considered whether a party could reject a nominated adjudicator by abandoning the reference under the Housing Grants Construction and Regeneration Act 1996 Part 2. The case discloses a gap in the act: it appears that a referring party can withhold service of referral documentation with a view to obtaining the appointment of another adjudicator which is acceptable to it.

A recent Court of Appeal decision provides a salutary warning to parties - even where they are partially successful - of the potential adverse costs consequences of refusing to mediate. It represents another endorsement of mediation by the Court of Appeal, which exercised its discretion to make no order as to costs.

A High Court decision confirms that disputes which would otherwise be raised through an unfair prejudice petition before the courts can be referred to arbitration. It reflects the established pro-arbitration stance of the English courts by recognising that parties should be free to agree how their disputes are resolved.

The UK government has committed to greater use of mediation and other alternative dispute resolution (ADR) in the civil justice system, announcing its intention to consult on wider use of ADR in the civil courts. A study estimates that the government's 2001 pledge to seek to resolve public-sector disputes by ADR has saved £36 million, and that a similar move in Scotland could save £40 million in four years.

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Commercial Property

United Kingdom

Stamp duty land tax (SDLT) replaced stamp duty on land on December 1 2003. SDLT applies to a broader range of transactions than stamp duty and introduces a radically altered compliance regime. The SDLT charge on the rent element of new leases has earned the most publicity, as it is significantly higher than the charge under the stamp duty rules.

Corporate Finance/M&A

United Kingdom

New changes made to the stock exchange include the extension of SETS order book trading and the reorganization of its share structure.

The Financial Services and Markets Bill is still making its way through the House of Commons, but it is unlikely that it will come into force before October 2000.

New guidance from the Bank of England will help companies restructure share offerings.

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Corporate Tax

United Kingdom

Overview
Including: Calculating Corporation Tax Profits; Loan Relationships, Forex and Derivatives; Goodwill, Intellectual Property and other Intangibles; Withholding Tax; Groups of Companies; The International Aspect; Controlled Foreign Companies; Stamp Duty; Further Corporation Tax Reform.

The 2007 Budget brought mixed news, but the overall perspective hints at what would be a welcome trend towards simplification. The cut in the standard rate of corporation tax may make the United Kingdom more attractive to potential inward investors, but the reduction in the general rate is fiscally offset by reductions in the rate of capital allowances.

A European Court of Justice decision suggests that the UK credit method of taxing dividends received by UK groups from subsidiaries in the European Economic Area (EEA) may comply with EU law on freedom of establishment. However, this requirement precludes UK taxation of dividends from portfolio holdings of UK investors in EEA companies, even though credit is allowed for overseas withholding tax.

Many of the provisions of the recent Pre-Budget Report were foreshadowed by announcements by Her Majesty's Revenue and Customs or trailed in the media. Other changes were either prompted by recent case law or disclosures made under the tax disclosure regime introduced in 2004.

On October 25 2006 the House of Lords overruled the Court of Appeal decision in Deutsche Morgan Grenfell Group Plc v Her Majesty's Commissioners of Inland Revenue and reinstated the High Court decision, holding that a claimant which makes a payment to Her Majesty's Revenue and Customs under a mistake of law is entitled to a restitutionary remedy.

EU law precludes the United Kingdom from charging tax under the controlled foreign company provisions on the profits of non-UK subsidiaries based in the European Economic Area, unless the provisions contain a 'carve-out' for transactions and structures which are not wholly artificial. The attempt to clarify the issue at EU level in the Cadbury Schweppes Case has proved unsatisfactory to many.

The United Kingdom is free to restrict to an arm's-length amount the deduction for interest paid by a UK company to another member of a group with a parent company in the European Economic Area, provided that certain safeguards are met. This is the view expressed by the advocate general in his non-binding opinion on a case before the European Court of Justice.

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Employment & Labour

United Kingdom

Employers should not assume that they have the right to restrict an employee's freedom to express views on social media where these concern personal beliefs and have no work-related context (ie, being about the employer or work colleagues). However, where Facebook comments are work related (eg, abusive comments about work colleagues that could amount to harassment), employers should act quickly.

The government has published a consultation document on implementing its proposal to introduce the new employment status of 'employee owners'. The proposal will enable companies to offer between £2,000 and £50,000 of shares that are exempt from capital gains tax in exchange for employees surrendering various employment rights.

Where an employee is unable or unwilling to take his or her EU-derived entitlement to four weeks' statutory holiday in the current holiday year due to being on sick leave, the employer must allow the employee to carry over this leave into a new holiday year, even if the employee has not expressly requested this.

The government has proposed an amendment to the Enterprise and Regulatory Reform Bill to provide that an offer made or discussion held with an employee with a view to terminating employment by agreement cannot be taken into account in unfair dismissal proceedings. Further plans for reform would affect equal pay audits, collective redundancy consultations and other issues.

A High Court ruling has highlighted the need to ensure that oral assurances are carefully considered. The case concerned a promise made at a bank's staff meeting - of which there was no formal written record - of a guaranteed minimum bonus pool. The judge held that there was a clear intention to create a legally binding obligation with the aim of stabilising the workforce and assuaging concerns over the bank's future.

Employers should review any precedent payment in lieu of notice (PILON) clauses and compromise agreement wording to ensure that any payment will not be payable or can be recovered if, having dismissed an employee, the employer subsequently discovers the employee's prior gross misconduct.

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Energy & Natural Resources

United Kingdom

1999 has seen the introduction of new legislation and a determination by the Office of Water Services.

The Chancery Division recently ruled in favour of a sewerage undertaker who discharged surface water without consent.

Electricity trading arrangements are under revision by the electricity regulator and the Department of Trade and Industry. New features include the abolition of the current wholesale trading mechanism, the introduction of a balancing mechanism and a new settlement process.

A range of proposals for legislation on energy regulation has been made by the Department of Trade and Industry. The proposals are expected to be included in the forthcoming Utility Bill.

The energy regulator is to revise the standard conditions in gas transporters' shippers' and suppliers' licences in a move towards covvergence between gas and electricity regulation.

A new on-the-day screen-based commodity market has been introduced to Transco's Network Code. This has replaced the flexibility mechanism that formerly achieved on-the-day balance in the National Transmission System.

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Information Technology

United Kingdom

The government's new open source software policy reflects a trend towards wider acceptance of this software as a viable alternative to proprietary software. It recognizes that its success is dependent on ensuring that those responsible for procurement are given adequate training and possess the necessary expertise to attain value for money.

In the majority of cases cookies are used without the explicit approval of the relevant user. However, users can protect their privacy with a growing range of software products which block and delete cookies. Other products can create pop-up boxes to alert the user when a third-party cookie has been received by his computer.

The Data Protection Act makes it essential for data controllers to familiarize themselves with the wide-ranging and complex regulations controlling the use of information concerning identifiable, living individuals. This update examines some of its requirements.

The European Commission has officially declared that Canadian data protection laws provide adequate protection for personal data under EU law. Companies within the European Economic Area (EEA) can now safely transfer personal data to Canada in the same way that they can transfer data within the EEA.

UK law now expressly provides that graphic symbols and type-faces can be the subject of registered design protection. The design right is a monopoly right which will be infringed by anyone who makes unauthorized use of the design, irrespective of whether he copied the work of the designer.

Including: Limitation of Liability; Data Transfers Outside the European Union; Accessing Communications Data; The Freedom of Information Act 2000.

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Intellectual Property

United Kingdom

The High Court recently refused to stay an inquiry as to damages for patent infringement, despite the fact that the patent in question was held invalid in a subsequent action. The decision was based on the doctrine of action estoppel – namely, that an action between two parties should not be re-litigated.

Arsenal recently won another victory in its action against a street trader who sold Arsenal-branded memorabilia near the team's London football ground. The Court of Appeal overturned a December 2002 High Court decision in which the judge refused to follow the ruling of the European Court of Justice (ECJ) on the basis that the ECJ had ruled outside its area of competence.

The UK High Court recently accepted that the difference between the word 'Mezzacorona' and the name of the Mezzocorona wine-producing commune was insignificant in the context of deciding whether the name of a smaller geographical unit for wine could be used as a brand name under Regulation 2392/89 on wine labelling, and therefore whether it could be registered as a UK trademark.

The High Court has refused to follow the decision of the European Court of Justice (ECJ) in Arsenal v Reed, a trademark infringement case. The court found that the ECJ had exceeded its jurisdiction by making factual findings that it was not entitled to make. This appears to be the first occasion on which an English High Court has refused to follow an ECJ judgment on this basis.

The Court of Appeal recently gave a judgment that is of importance in cases where a patent can be implemented over the Internet. The decision will be welcomed by all patent holders in the communications and computer field, where systems often work across borders.

The English Patents County Court recently gave judgment in a case that may have important consequences for the conduct of unregistered design right cases. In particular, the court sought to limit the scope of the prior art that can be relied upon by a defendant who argues that a claimant’s design is not entitled to protection because it is 'commonplace'.

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Litigation

United Kingdom

Overview
Including: Courts; Commencing litigation; Court process; Appeals.

A recent decision casts new light on the measure of damages available in fraud cases. Among other things, it establishes that in cases of deceit, recovery of lost profits is not limited to specific alternative transactions which would have been entered into but for the fraud. The claimant recovered damages for the loss of the chance to profit from his trading strategy on the basis of a proven record of succesful trades.

An interim report has been published on Lord Justice Jackson's year-long review of the rules and principles governing the costs of civil litigation. Its author emphasizes that it is a preliminary report which is intended to provide a basis for discussion during the consultation period, but if some of the more radical ideas are implemented, they will have a dramatic impact.

The High Court has confirmed the strict test which applies where a claimant seeks to bring proceedings on behalf of others with the same interest in the claim. However, claimant lawyers are increasingly willing to test the boundaries of existing procedures for multi-party litigation, with the aim of persuading the courts to develop something akin to the US-style class action.

The Court of Appeal has clarified that judges have no power to give procedural directions which depart from or vary existing rules or practice directions, but may issue guidance on their application or interpretation. It further confirmed that judges may give procedural directions on issues which are not covered by existing rules or practice directions.

It is often difficult for contract drafters to know whether a term that provides for financial consequences of a certain event will be construed as a liquidated damages clause or a penalty clause. However, a number of recent judgments provide guidance on the High Court's approach to this issue.

In 2006 the United Kingdom notified the European Commission that it intended to opt out of the Rome I Regulation on the law applicable to contractual obligations. However, a subsequent consultation on a substantially revised version showed clear support for an opt-in. The commission has confirmed that the regulation will apply in the United Kingdom in full by the end of 2009.

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