Self-driving cars are no longer a figment of the imagination for science-fiction fans. In the past month alone, the news has been awash with robo-taxis and autonomous oyster runs – but innovators are not the only ones sailing into unchartered territories. The Lexology Shipping and Transport Hub reveals that few jurisdictions have any specific legislation in place when it comes to autonomous vehicles. Instead, as litigation in the field increases, it falls to the courts and insurers to chart a course through this changing landscape – creating a golden opportunity for practitioners who are looking to make their mark.

A booming market

Hogan Lovells’ Lexology Getting The Deal Through Automotive chapters highlight a number of developments in the world’s top auto-manufacturing jurisdictions over the past few years. In its US chapter, the firm states that the most likely opportunity for new entrants in the market “comes from the prospect of autonomous-drive vehicles” – a sector in which various large and well-known tech companies are already investing significant resources.

One such company is Uber, which last month raised an additional $1 billion towards its autonomous vehicle division. According to Eversheds Sutherland (US) LLP, the investment – fronted by Toyota and Denso – will increase the value of Uber’s advanced technologies group to approximately $7.25 billion.

Volkswagen has also been making strides in automation. In April, the German carmaker announced that five of its electric cars have been fitted with the latest in autonomous technology are now driving on the streets of Hamburg. Eversheds Sutherland ascertains that new signals and other traffic management systems have been installed in the city to facilitate so-called ‘level 4’ vehicles, which are “designed to handle complex urban traffic patterns without help from drivers, although they must be ready to intervene”. Indeed, Hogan Lovells observes that German automotive companies in general “seem to have successfully adapted to the radically changing new automotive world” and that this, coupled with Germany’s strong technology focus, should ensure that the country plays a substantial role in the development of autonomous and connected vehicles.

The firm also highlights rapid advancements in Asia, with the Japanese government aiming to introduce level 4 vehicles into the market before 2030 and the Chinese government inaugurating the Made in China 2025 initiative, which – according to Hogan Lovells – aims to “transform the country into an innovation hub” and could enable it to dominate the rising Internet of Vehicles (IoV) sector.

The growing market is not limited to leading car-making jurisdictions either. Nishlis Legal Marketing points out that in 2017 the Israel automotive industry raised $814 million, “with companies in the fields of autonomous and connected vehicles raising the highest amount out of all sectors in 2018”. This upswing coincides with the country’s largest ever acquisition – Intel’s $15.3 billion purchase of Mobileye, an Israeli company which develops cutting-edge vision technology relating to autonomous driving.

Moreover, territories with significant technological ambitions are turning to the automotive industry as an area of innovation. Hogan Lovells states that autonomous driving is an important part of Singapore’s Smart City initiative, under which the government has authorised a number of trials and is encouraging R&D and investment in IoV applications.

Autonomous technologies are also being embraced in other areas of transport. According to Wikborg Rein, the Norwegian maritime authorities are leading the way in the development of unmanned shipping vessels, with established test areas to conduct autonomous trials and various projects underway to reduce traffic – including constructing the world’s first fully electric and autonomous containership.

Nevertheless, the firm raises the key question of how the emergence of autonomous ships will fit within the current legal framework – in terms of both technical requirements and liability. While the booming market will inevitably create opportunities for practitioners across a range of practice areas, when it comes to legislation, the firm admits that “clarifications are needed – and as is often the case – the law is not keeping up with technology”.

The rumblings of regulation

The effectiveness of current legislation is a key concern across most jurisdictions. Despite ongoing disputes over the rules to be implemented and the responsibilities of autonomous vehicle owners, Turunç reports that in Turkey there are no specific laws in place – and this seems to be a reoccurring theme. Although the first autonomous car was introduced in Vietnam in 2017, Hogan Lovells reiterates that the country has no regulations in place to govern such vehicles. Moreover, in the absence of specific legislation in Spain, the firm states that “general principles of law and regulation must be applied… which is often a challenge and does not guarantee legal security at all levels”.

Where legislation has been implemented, the first step has been to legally define ‘autonomous vehicles’. In South Korea, Kim & Chang notes that “the Motor Vehicle Management Act introduced a legal definition of autonomous cars in August 2015 and separately provided procedures to obtain temporary driving permits for autonomous cars intended for tests and research”. Echoing this, Hogan Lovells reports that a recent amendment to the Polish Road Traffic Act defines an ‘autonomous vehicle’ as “a car equipped with systems controlling its movement and enabling its movement without the intervention of a driver, who remains able to take control of the vehicle at any time” and has similarly introduced a legal permit for testing such vehicles on public roads.

The second step, then, has been to ensure that the appropriate infrastructure is in place for extensive research and safe testing. According to Hogan Lovells, these foundations are being laid in Russia through the creation of the consortium for the development of autonomous, connected and electric transport. Meanwhile, in Canada, Blake Cassels & Graydon LLP reports that a testing zone for autonomous vehicles has opened in Stratford, Ontario, where the government has a five-year plan to spend C$80 million on autonomous vehicle development.

In countries where testing has been running for longer, more legislation is being developed. Jones Day believes that the use of level 3 systems (those that can both monitor the driving environment and occasionally conduct driving tasks, provided that the driver is “able and ready” to take control of the vehicle) is imminent in Japan. As such, the Japanese Cabinet has approved a bill to add “automated devices” to the list of items that are subject to the Road Transport Vehicle Act’s safety regulations.

Moreover, Covington & Burling LLP reports that – in the absence of federal legislation – US states such as California, Washington and Pennsylvania are pushing forward with their own bills in relation to passenger vehicle policies, transit operators, personal delivery devices and the use of autonomous shuttles.

In general, though, legislative change seems to be slow – especially in Europe. Hogan Lovells admits that the Vienna Convention on Road Traffic 1968 creates a serious roadblock for autonomous vehicles in France as it repeatedly refers to the need for a driver. As such, the firm argues that autonomous cars face “a legal vacuum” in countries that are signatories to the convention.

Rising litigation

Where innovation leads, litigation is sure to follow and Crowell & Moring LLP warns that the past two years have seen a string of trade secret disputes relating to self-driving technology, with Uber forking out $245 million to settle a 2018 suit brought by Waymo (the subsidiary company behind Google’s self-driving car).

Uber is not the only one to have found itself in hot water recently. In April Jones Day highlighted the Northern District of California’s decision to grant a rare preliminary injunction following claims raised by WeRide against its former CEO. In its ruling, the court stated that autonomous vehicle technology “could well be the next disruptive technology”. This is echoed by Hogan Lovells, which reveals that “many patent cases against automotive companies focus not on purely vehicle-related technologies, but rather on aspects of the infotainment, navigation, autonomous vehicle and connected car technologies incorporated into the vehicles”. As such, the number of related cases involving standard-essential patents is likely to increase.

The implementation of autonomous transport technologies has also become a contentious issue with regard to collective bargaining. Borden Ladner Gervais LLP warns Ontario logistics companies that despite their efforts to alleviate delivery demand, unions may seek to restrict the use of automated delivery technology in order to protect employees against downsizing.

It seems, then, that the emerging industry is already sending ripples through the contentious sphere. Until adequate new legislative frameworks are developed, all eyes will be on the courts for guidance. However, insurers will also need to remain characteristically ahead of the curve.

The changing face of insurance

Although autonomous vehicles are expected to reduce road accidents by up to 90%, Wilson Elser reminds readers that some accidents are inevitable, “raising new liability questions as to who will be responsible for a car’s negligence”.

Hogan Lovells notes that the new UK Automated and Electric Vehicles Bill provides for “liability of insurers in the case of accidents involving autonomous vehicles that are insured at the time of the accident, and for liability of vehicle owners in case of accidents involving autonomous vehicles that are not insured at the time of the accident”. What is more, Irish legislation is expected to follow suit. As Matheson states, the existing, driver-centred framework will need to be updated to facilitate driverless cars on Irish roads and, while this is yet to be meaningfully considered, “the legislature is likely to follow the approach taken in the United Kingdom, given the similarities between the existing road traffic frameworks in both countries”.

Tully Rinckey PLLC explains that traditional concepts of negligence still apply to auto insurance policies – either in relation to the driver (eg, did the driver maintain a safe speed or distance?) or in relation to the car manufacturer (eg, did an alleged product defect contribute to the accident?). Yet, in a future of fully autonomous cars, all accidents could theoretically be product liability cases, meaning that the focus will likely be on the design and manufacture of the car, with liability shifting from the driver to the carmaker. As such, individual policies could become obsolete. Indeed, Cooley LLP warns that “new technology has the potential to upend the traditional insurance industry”, with regulators struggling to determine how best to adapt the law to the changing automotive industry. The firm goes so far as to predict that “the advent of self-driving cars will cause the personal auto insurance policy, as we know it, to disappear at some point in the future”.

While the likelihood of this has been hotly debated, what is certain is that there will be an interim period in which cars are being operated in a semi-autonomous mode, during which time the driver retains some form of control and the car manufacturer is unlikely to assume full liability. It is during this period that Hogan Lovells states “drivers will likely be obliged to monitor the driving process constantly and remain prepared to deactivate or override the system at all times”.

Although the introduction of autonomous vehicles should reduce the risk of human error, new risk factors will undoubtedly emerge – including technological failures and cyber threats. As such, Wikborg Rein states that the biggest challenge will be “to understand and price the risk correctly”.

Insurers and their legal counsel are well up to the challenge. In fact, as auto insurance policies transition from driver liability to product liability, there could be a window of opportunity for practitioners to reach new heights of specialism. As such, autonomous transport technology could create an exciting new field of practice for up-and-coming lawyers to carve out a name for themselves.