Welcome to the latest edition of our monthly Regulatory Update.
The developments covered in this Regulatory Update span a broad range of sectors and regulatory regimes. One recurring theme is the use of transparency as a tool to support business regulation. Whether in the context of consumer payment accounts, online intermediaries or offshore structures (to take just a few examples that we cover this month), businesses are increasingly being asked to provide information for the scrutiny of regulators and, in many cases, the general public.
Often the main impact for businesses of publishing information is reputational. But the Crown Commercial Service has shown how, once this information is available, it can be leveraged in other ways, such as through conditions being imposed for bidding for public contracts.
The Environment Agency has shown that the transparency agenda can work both ways. By the regulator being more open as to its approach to enforcement, businesses can better assess their enforcement risk. The hope is that they will be encouraged to be more cooperative with the regulator where a potential compliance issue is identified.
This is a trend that is set to continue, both in the UK and other jurisdictions. Businesses will need to consider in each case where transparency can create risks, and where instead it can be a positive for the business and its brand.
Next month we will be publishing the latest Regulatory Outlook, with a focus on what Brexit means for each area of business regulation – so do look out for that.
Anti-Bribery, Corruption and Financial Crime
Legal privilege and investigations | SFO criticised for not challenging privilege over interview notes
The decision in R (AL) v SFO provided the latest judicial consideration on the extent of legal privilege in internal investigations, with the High Court again adopting a restrictive view of privilege consistent. The case is likely to lead to the SFO taking a more aggressive position in relation to companies that seek to claim privilege over internal interview notes.
New SFO Director still to be appointed
Former Deputy General Counsel to the FBI, Lisa Osofky, is strongly rumoured to have been appointed to take over from David Green as Director of the SFO, although this is still to be confirmed.
The delay in the appointment is likely to mean a delay in critical decisions being taken on a number of high profile cases, including G4S, GSK and Rolls Royce. These may now not be made until the end of the year. Until then the future direction of travel for the SFO will remain unclear.
Read more on this and related issues in our latest Business Crime Newsletter.
Vertical mergers in the technology sector
The European Commission recently announced that it was conducting an in-depth investigation into Apple’s proposed acquisition of UK-based music-recognition service Shazam, highlighting that the digital sector remains an area of focus for competition authorities and raising questions as to whether there is a move towards asserting jurisdiction over proposed mergers in the digital sphere without relying exclusively on parties’ turnover.
European Commission fines Altice Group €125.5M for early implementation of its proposed acquisition of PT Portugal
In an important reminder of the importance of receiving merger control clearance before implementing transactions, the European Commission has announced that it is to impose a €125.5M fine on the Netherlands-based Altice Group for taking steps to effectively implement its proposed acquisition of Portuguese telecommunications operator PT Portugal prior to the transaction receiving official Commission approval.
FCA publishes its Business Plan for 2018/19
On 9 April 2018, the FCA published its business plan for 2018/19. The annual business plan provides details of the specific areas of work the FCA is prioritising for the next year and displays a packed agenda, particularly in the consumer finance sector.
Sector priorities for consumer finance include: assessing consumer creditworthiness; making the mortgage market work better for consumers; credit-broking remuneration at the point of sale; motor finance and ensuring the debt management sector works well for consumers.
Claims management regulation | Consultation on secondary regulations
The government has opened a consultation on proposed secondary legislation that would transfer the regulation of claims management companies from the Ministry of Justice to the FCA.
If regulatory jurisdiction is transferred from the Ministry of Justice to the FCA as intended, CMCs may be subject to an increase in regulatory costs, tighter governance and controls and greater scrutiny. This could ultimately lead to consolidation in the sector.
Consumer payment accounts must comply with new transparency requirements from 31 October 2018
On 30 April 2018, the FCA published the UK’s final linked services list. This is a list of standardised terminology which describes the most representative services linked to certain types of payment accounts. Its publication triggers certain transparency requirements under the Payment Accounts Regulations 2015 coming into force six months later, on 31 October 2018.
The FCA is required to monitor compliance with these transparency requirements and will have the power to publicly censure and penalise firms that fail to comply.
European Commission announces first piece of cross-platform regulation to ensure online platforms and search engines deal fairly with other businesses
The European Commission has announced the first piece of cross-platform regulation which aims to ensure that online platforms and search engines deal fairly with other businesses.
The regulation will apply to online intermediaries, including: e-commerce marketplaces, app stores and price comparison tools. The regulation will also capture search engines.
Intermediaries may have to amend their terms and ensure their processes and internal policies are compliant, which could require a wider review of legal documentation and approaches to dealing with other businesses.
NIS Regulations now in force
The Network and Information Systems Regulations, which implement in the UK the EU Network and Information Systems Directive, came into force on 10 May 2018.
The NIS Regulations impose obligations on operators of essential services and certain digital services providers to take ‘appropriate and proportionate’ cyber security measures, and to notify relevant incidents within 72 hours. In-scope organisations will need to carry out a thorough review of their network and information systems, on the basis of the 14 outcomes-focused principles set out in the Regulations.
Demystifying the ICO’s approach to regulatory action? ICO releases draft regulatory action policy for consultation
The ICO has published its draft regulatory action policy, which sets out guidance on its ‘risk-based approach’ to taking regulatory action.
The draft policy identifies the ICO’s number one regulatory priority for the coming year as “large scale data and cyber security breaches involving financial or sensitive information”.
Companies can, therefore, expect intense ICO scrutiny in the event of a cyber-attack and should take action now to ensure that their compliance with data protection obligations will withstand ICO investigation.
The ICO has invited comments on its draft policy by 28 June 2018.
Environment Agency updates its Enforcement and Sanctions Policy: what does it mean for businesses?
Following its consultation held between November 2017 and February 2018, the Environment Agency has updated its Enforcement and Sanctions Statement and Enforcement and Sanctions Guidance so that the two documents are now combined into a single Enforcement and Sanctions Policy.
The new Policy provides much-sought-after clarity on the EA’s approach to enforcement, with a move to a more open and transparent enforcement system.
Plans for post-Brexit environment watchdog and environmental policymaking
DEFRA has published proposals to establish an independent, statutory environmental body in time for the end of the Brexit transition period in December 2020. The proposals form part of the Environmental Principles and Governance Bill and address DEFRA’s plans to bring forward a set of core environmental principles to underpin future environmental regulation and policymaking.
A consultation on the contents of the Environmental Principles and Governance Bill opened on 10 May 2018 and closes on 2 August 2018. A draft Bill is due to be published in autumn 2018.
New deposit return scheme for England
On 28 March 2018, DEFRA announced plans for a deposit return scheme for drinks containers in England, subject to a consultation later this year.
The decision ignores the findings of the Voluntary & Economics Incentives Working Group Report, published in February this year, which concluded there was little direct evidence of the impact of such schemes on litter reduction and that more work needed to be done before one is introduced. While environmental groups have celebrated the news, there is concern over how the scheme will be funded and whether it will be effective.
The consultation later this year will follow the recent call for evidence by HM Treasury on taxes and charges to reduce waste from single-use plastics, so that all relevant findings can be fed into the proposals.
Boost to Green Finance | Calls for change in investment
The UK is on course to miss its fifth carbon budget target and experts believe that this failing has been largely influenced by a lack of green finance.
The government-commissioned Green Finance Taskforce published its report to government, ‘Accelerating Green Finance’ in March this year. The report calls for a change in investment strategy. Amongst other suggestions, it recommends the introduction of a world-class UK sovereign green bond framework that would issue a single or rolling programme of green bonds to invest in clean growth projects in the UK.
Export Control and Sanctions
Sanctions and Anti-Money Laundering Bill receives royal assent
On 23 May 2018, the Sanctions and Anti-Money Laundering Act was given royal assent, completing its legislative process. The Act introduces powers necessary for the UK to have in place its own sanctions regime once it leaves the EU.
One major amendment introduced by the House of Lords and upheld by the Commons was to introduce the requirement for British Overseas Territories to introduce a beneficial ownership register, similar to that which already exists in the UK, by 31 December 2020.
Re-imposition of US sanctions against Iran and the future of the JCPOA
On 8 May 2018, President Trump announced his decision to cease the United States’ participation in the Joint Comprehensive Plan of Action and to begin the process of re-imposing the US nuclear-related sanctions that were lifted to effectuate JCPOA sanctions relief.
The EU continues to support the JCPOA and is taking steps to activate a ‘blocking statute’ to protect EU businesses, but EU businesses already active in or considering investing in Iran will need to give careful consideration as to the risks and rewards involved.
Health and Safety
Key messages for developers, investors and building owners from Dame Judith Hackitt’s independent review of Building Regulations and Fire Safety
The eagerly awaited final report following the independent review of Building Regulations and Fire Safety led by Dame Judith Hackitt has now been published. The report recommends a step-change in the regulatory framework for fire safety, including the creation of a new Joint Competent Authority, clarification of roles, responsibilities and accountability of duty holders, and more ‘teeth’ for regulators.
The report makes it clear: duty holders should not wait for the government to legislate on this. The report stresses that there is “no reason to wait to start the process of behaviour change once it is clear what is coming and what is expected”.
Watch and read our Insight discussing the implications of the Hackitt Report for businesses.
Supreme Court decision widens the scope for challenging enforcement notices
Challenging a health and safety prohibition or improvement notice has been notoriously difficult. Businesses bringing an appeal have traditionally considered that they have to demonstrate that the “opinion” of the inspector issuing the notice was flawed. This has often frustrated those receiving notices and has allowed inspectors to take a less rigorous investigation approach before serving a notice requiring an activity to stop or changes to be made.
However, in a landmark decision (R v. Chevron North Sea Limited  (Scotland)), the Supreme Court ruled that tribunals hearing these appeals should be looking at the notice itself and not the opinion of the inspector when making a decision about whether they have been correctly issued. The judgement confirms that appeals can take into account evidence that emerged after the notice was served and that was not available to the inspector when serving the notice.
New international health and safety ISO standard introduced
The much-awaited international standard for occupational health and safety was published on 12 March 2018. ISO 45001 replaces OHSAS 18001. Organisations currently certified to OHSAS 18001 have three years to migrate to the new standard, before OHSAS 18001 certification is withdrawn.
The new standard is designed to be integrated with other international standards (e.g. quality management (ISO 9001) and environment (ISO 14001)). It also introduces a greater focus on an organisation’s ‘context’, a stronger role for management and leadership, and a requirement to manage the organisation’s procurement, outsourcing and sub-contracting. This will assist businesses in streamlining their systems to drive efficiency and improve safety performance.
Focus on stress during Mental Health Awareness Week
As part of Mental Health Awareness Week, from 14 – 20 May, the Mental Health Foundation published a report which, in relation to work-related stress, recommends that Government and the HSE treat physical and psychological hazards equally under existing legislation.
According to the latest statistics published by the HSE, work-related stress accounts for around 11 million working days lost annually. The main factors involved are workload pressure and a lack of managerial support.
Employers already have a legal duty to protect employees from stress and duties include preparation of a risk assessment, looking at stress risks and implementing controls.
Reducing work-related stress will be a key priority during 2018/19 for the HSE, which will be publishing revised guidance for employers on the assessment and management of work-related stress in early 2019.
New gas safety requirements on private landlords from 6 April 2018
The Gas Safety (Installation and Use) (Amendment) Regulations 2018 came into force on 6 April 2018. This will impact on private landlords of domestic (and certain commercial) premises. The key change is the introduction of a flexible two month window for the timing of gas safety checks. This was introduced in recognition that landlords often face issues with property access and arranging an engineer within the strict 12 month deadline.
The amended regulations will also incorporate an existing exemption that enables alternative checks to be carried out where the gas meter is not accessible, the meter display is not working, or the engineer cannot measure the pressure.
The HSE has published a revised guide to landlords’ duties in light of the amended regulations.
Government consults on exclusion from public contracts for late payment of sub-contractors
The Crown Commercial Service has launched a consultation on its proposals to consider suppliers’ “approach to payment of subcontractors” as part of the selection criteria for public contracts valued at over £5m.
The CCS has proposed that paying 95% of undisputed invoices within 60 days, over two consecutive six month periods, would be an appropriate benchmark of payment performance.
GDPR public sector toolkit guidance
On 13 April 2018, the Crown Commercial Service published the GDPR customer toolkit guidance, which is aimed at those public bodies currently using CCS commercial agreements. It provides an overview of the work that the CCS is doing to update overarching commercial agreements to bring them into line with the GDPR, and sets out the actions CCS customers need to take to ensure call-off contracts under CCS framework are also brought into line with the GDPR.
Proposal for a new Directive to protect whistleblowers who report breaches of EU public procurement law
The European Commission has adopted a package of measures to protect whistleblowers reporting breaches of EU law. The package includes a proposal for a new Directive for the protection of whistleblowers, to be put to the European Parliament.
The Commission recognises that breaches of EU public procurement rules result in distortions to competition, increased costs of doing business and less appetite for investment. The Commission highlights the need to tackle insufficient enforcement of public procurement rules by national contracting authorities.
The Directive would protect qualifying whistleblowers from all forms of retaliation if they had reasonable grounds to believe that the information reported was true at the time of reporting.
European Commission adopts Recommendation on cross-border access for sub-suppliers and SMEs in the defence sector
The European Commission has adopted a Recommendation to facilitate a better integrated and more sustainable, innovative and competitive defence technological and industrial base.
The Recommendation states that Member States should provide early information about their future long-term plans with regards to armaments (capability and research and technology requirements and priorities). This can be done by publishing planning documents, organising targeted events for key businesses, and providing information to key associations within the defence industry so that relevant information is disseminated effectively.
Contracting authorities should: use pre-procurement advertising tools to advertise below-threshold contracts; provide the market with meaningful and accurate information in short form to allow businesses to screen opportunities quickly and effectively; consider sub-dividing contracts; increase time limits for submitting tenders; and use only proportionate selection criteria with no unnecessary requirements.
Government launches a simplified Public Sector Contract
The Government Legal Department has condensed the standard CCS template contract into a slimmer ‘Public Sector Contract‘.
Key points to note include that: there is a focus on using plain English and avoiding legalese; infrequently-used provisions have been moved into modular schedules; and the contract includes some new CSR obligations, including equality and accessibility, income security, working hours and sustainability.
Government consultation on draft Public Bodies (Websites and Mobile Applications) Accessibility Regulations 2018
The Government Digital Service has issued a consultation on the implementation of the EU Directive on the accessibility of public sector websites and mobile applications in the UK.
The draft Public Bodies (Websites and Mobile Applications) Accessibility Regulations 2018 will require public sector bodies to make their websites and mobile applications “perceivable, operable, understandable and robust”.
The consultation seeks views on compliance with the new requirements; how the rules should be monitored and enforced; and any other comments on the draft Regulations. The deadline for responses to the consultation is 29 May 2018.