13 December 2021
Radar - December 2021 – 10 of 10 Insights
We've seen a number of other interesting developments relevant to the tech, data and consumer sectors this year. In the UK, these have centred on the post-Brexit legal framework. We have also seen some interesting commercial cases both in the UK and from the CJEU.
With the UK out of the EU, the government has been reviewing existing legislation, not only to fix any gaps created by Brexit, but also to assess in which areas new law might be beneficial.
Proposed changes to consumer, product liability and data protection law are considered in the relevant sections of this update.
The Law Commission published its views on possible reforms in a March consultation. Key suggested areas of focus include:
The consultation closed on 31 July. The final programme is expected to be published in the first half of 2022.
The CMA is recommending that the UK replace the retained EU VBER with a UK Vertical Agreements Block Exemption Order when the former expires on 31 May 2022. It concludes that largescale changes would be inappropriate but does plan to make some changes to the current rules on hardcore restrictions. These include:
The UK Order would expire after six years.
The CMA published further recommendations following the consultation in November.
The CMA thinks the current rules on hardcore restrictions remain largely appropriate but suggests some additional clarifications including:
BEIS consultation on reforming the framework for better regulation
BEIS consulted on reforming the framework for better regulation. It is seeking views on a range of options including:
Reform of competition law
BEIS also consulted on reforming competition and consumer law (see section on Consumer law for more). In terms of competition law, BEIS made a range of proposals including:
Both consultations closed on 1 October.
In its response, the CMA commented that the issue is not how much regulation there is, but whether the regulation we have promotes or inhibits well-functioning competitive markets. The CMA does not think that, for the most part, there is a need to strengthen the existing competition duties of sector regulators. It has no view on areas of law (particularly retained EU law) that would benefit from reform to a less codified, more common-law approach.
In October, the government announced that there will be a reform of the Human Rights Act 1998 this Parliament. This will prevent convicted criminals from using the HRA for their own gains. The announcement comes despite the fact that a government-commissioned review has not yet delivered its findings, and that the Joint Committee on Human Rights concluded in July this year that there was no case for changing the HRA.
The National Security and Investment Act 2021 gained Royal Assent on 29 April and was published in final form on 5 May. It will commence in full on 4 January 2022. It establishes a new statutory regime for government scrutiny of and intervention in investments for the purposes of protecting national security. You can read more here.
The Company Law Committee of the Law Society published Q&As on how to use electronic signatures and complete virtual executions. This was particularly timely given the numbers of people, especially from the corporate workforce, working from home. You can read a summary here.
The Law Commission published an update on three of its emerging technology projects covering smart contracts, digital assets and conflict of laws in November. The update confirmed that the Commission considers current law is able to support the use of smart legal contracts without a need for statutory reform, although some problems were identified.
Regarding conflict of laws, the Commission identified that there is a problem in ascribing real-world locations to digital actions and objects. The Commission has therefore agreed to undertake a project looking at conflict of law rules as they apply to emerging technology including smart contracts and digital assets, to decide on whether or not reform is needed. This is likely to start in mid-2022. The Commission is not expecting to complete its digital assets project until mid-2022.
Case on equitable obligation of confidence
In January, the Court of Appeal dismissed an appeal against a decision that a company breached confidentiality obligations by using a business rival's client information which was received through an ex-employee of the rival.
The appellant argued that the High Court had applied the wrong legal test and that it was not the case that if a reasonable person would have made enquiries as to whether or not information received by them was confidential, that would be sufficient to create an obligation of confidence.
Arnold LJ disagreed and said the test was:
This potentially places a greater burden on the recipient to raise questions than previously although Arnold LJ cited precedent including a 2020 Court of Appeal decision in Racing Partnership v Done Brothers (EWCA Civ 1300).
High Court decisions on liability cap and mitigation clauses in SPA
We discussed High Court connected decisions on liability caps and mitigation clauses in SPAs here. Cases which revolve around the minutiae of drafting are often highly specific to the circumstances but these judgments contain some more widely relevant points including:
CJEU Opinion – inaccurate health advice in newspaper not a "defective product" for purposes of Product Liability Directive
AG Hogan gave an Opinion in April that inaccurate health advice in a hardcopy newspaper was not a "defective product" for the purposes of the Product Liability Directive. He said that inaccurate advice which led to injury to the claimant was not covered by the Directive because the Directive only applies to tangible, physical products rather than intellectual content. The injury was not caused by a physical defect in the newspaper.
In addition, the advice in the newspaper was a service not a product. While the distinction between the two is blurring, a wide interpretation would open a floodgate of claims relating to defective or negligent supply of services and exposing service providers to open-ended strict liability to a large class of claimants. Extending the interpretation to scenarios where information is contained in a movable product would also lead to inconsistences. For example, it might result in strict liability for information contained in a publication but not for information contained in a radio or TV broadcast.
The Directive is implemented in the UK by the Consumer Protection Act so the Opinion and the ultimate judgment may have a bearing on interpretation of the CPA should the same issue arise in the UK.
CJEU says electronically supplied software is 'goods' for purposes of Commercial Agents Directive
As we reported in October, the CJEU ruled on a reference from the Supreme Court of England and Wales on the meaning of 'sale of goods' in Article 1(2) of the Commercial Agents Directive. The term is not defined in the Directive which has led to disputes over electronic supplies of software.
As the reference was made from the UK before the end of the Brexit transition period, the decision applies and the Supreme Court will rule accordingly.
The Commercial Agents Directive has been implemented differently across the EU with some jurisdictions including services and software as well as goods within scope of their implementing legislation.
This ruling puts electronically supplied software firmly within scope as a sale of goods provided its supply is paid for and comes with a perpetual licence.
This potentially impacts commercial agency agreements for the sale of downloadable software which would previously have been presumed to be outside the scope of the Commercial Agents Regulations. We await the Supreme Court ruling.
CJEU ruling on decompilation rights under the Software Directive
The CJEU ruled in October, that a lawful acquirer can use decompilation to correct errors or to make the changes necessary for lawful use under Article 5(1) of the Software Directive. This can be without any of the Article 6 conditions around using decompilation to achieve interoperability ie that the acts were performed by the licensee or other authorised person, that the information necessary to achieve interoperability was not already made available to the licensee and that the acts were confined to the parts of the original programme necessary to achieve interoperability, and for no other goals.
However, the lawful purchaser would be entitled to carry out decompilation only to the extent necessary to make the correction and in compliance, where appropriate, with contractual conditions made by the right-holder.