Key themes and developments on the agenda for businesses in July include dealing with the implications of the EU referendum result, the introduction of the new EU market abuse regime and the publication of the Briggs review of the civil courts structure.
Implications of the EU referendum result
The EU referendum result was announced on 24 June, with a majority of voters deciding that that the UK should leave the EU. The two-year period for the negotiation for exit under Article 50 of the Treaty of the European Union will not start until the government formally notifies the European Council that the UK has decided to leave the EU.
Practical Law has spoken to practitioners in a number of areas to gauge their reactions on the short and long term implications of this decision. We have also published detailed coverage of the legal implications of the decision.
MAR (still) comes into effect
The new EU market abuse regime under the Market Abuse Regulation (Regulation 596/2014) (MAR) and the Directive on criminal sanctions for market abuse (2014/57/EU) (CSMAD) comes into effect from 3 July. Together, MAR and CSMAD will introduce an updated and strengthened EU market abuse regime, incorporating a wider range of, and tougher, sanctions. These include criminal sanctions under CSMAD for serious cases of market abuse.
The EU referendum result has no immediate impact on the introduction of the new regime in the UK, as the UK has not opted into CSMAD and MAR has direct effect. As with all EU regulations that have direct effect, when the UK leaves the EU a policy decision will need to be taken whether to re-enact MAR in UK law, either as primary or secondary legislation or in rules made by the Financial Conduct Authority, the Prudential Regulation Authority or the Bank of England, or a combination of all three.
At a recent breakfast briefing hosted by Practical Law, a panel of general counsel and company secretaries of FTSE 100 companies discussed the steps they are taking to implement MAR.
ICSA, GC100 and the QCA have jointly published a guidance note on MAR. It contains a specimen group-wide dealing policy, which is designed to introduce the concept of market abuse to all group employees and directors; a specimen dealing code; and a specimen dealing procedures manual for the company’s use.
Other EU Regulations taking effect in July
Several other EU regulations are due to take direct effect in the UK this month, including the Electronic Identification Regulation (EU/910/2014) (which aims to encourage the use of e-signatures and online authentication methods in transactions across the EU) and the European Account Preservation Order Regulation (EU/655/2014) (which establishes a new procedure for the preservation of bank accounts in cross-border cases).
As with MAR, the referendum result has no immediate impact but in due course a policy decision will need to be taken about whether to re-enact these regulations when the UK leaves the EU.
Publication of delayed Fair and Effective Markets Review report expected
The delayed implementation report by the chairs of the Fair and Effective Markets Review to the government and the Bank of England is expected by the end of July.
The review was established in June 2014 to assess standards and make recommendations in relation to wholesale fixed income, currency and commodity (FICC) markets. The implementation report was due in May but was delayed pending the referendum.
Data protection and the EU-US Privacy Shield
The Article 31 Committee of EU Member States’ representatives will hold meetings in early July to try to agree the EU-US Privacy Shield.
The European Data Protection Supervisor has already published his opinion on the Privacy Shield, welcoming the draft adequacy decision but also raising several concerns. This will be of interest as it may indicate how the UK’s future relationships with the EU and the US could look in terms of data transfers.
In terms of data protection policy generally, there is welcome clarity. The Information Commissioner’s Office has long-trailed its view that data protection standards in the UK will need to match those in the EU whatever the outcome of the referendum, so businesses will not be surprised by the official ICO response to the referendum result:
“[I]f the UK wants to trade with the Single Market on equal terms we would have to prove ‘adequacy’ – in other words UK data protection standards would have to be equivalent to the EU’s General Data Protection Regulation framework starting in 2018.”
Separately, Max Schrems has now challenged the validity of the EU’s standard contractual clauses (upon which businesses currently rely in the absence of the EU-US Safe Harbour) and the Irish Data Protection Commissioner has referred questions about their validity to the ECJ. However, for the time being, businesses can continue to rely on alternative data transfer mechanisms, such as the EU’s standard contractual clauses and binding corporate rules.
SRA consultation on regulation of the profession
The Solicitors Regulation Authority’s (SRA) has launched a consultation on changes to the SRA Handbook 2011 and solicitor’s Code of Conduct. The changes are aimed at simplifying the SRA handbook so that it focuses on principles and professional standards rather than detailed, prescriptive rules. The main proposal is to divide the Code of Conduct in two: one code for individual solicitors and a second for law firms. The consultation ends on 21 September 2016.
Report on the structure of civil courts due
The Briggs review of the structure of the civil courts is due to be completed by the end of July 2016. The review will consider several developments, including the creation of an online court for lower value disputes.
New operational guidance on presence of legal advisors at SFO interviews
There is a new formal process for requesting the presence of a legal advisor at Serious Fraud Office (SFO) interviews under section 2 of the Criminal Justice Act 1987. In the future, in-house lawyers will have justify their attendance ahead of the interview, rather than taking it as read that they will be attending.
Employee share schemes: annual returns deadline approaches
The deadline for filing annual share schemes returns for 2015-16 is 6 July. All annual returns must be filed online by that date and, to do so, companies must have already registered employee share schemes online.
Schemes that operated in 2014-15 should already be registered, but any new schemes adopted on or after 6 April 2015 must be registered before an annual return for that scheme can be filed. Failure to register tax-advantaged schemes in time will affect the tax treatment of future, and in the case of company share option plans, current, participants.
Support on Modern slavery Act reporting requirements
The reporting requirements of the Modern Slavery Act 2015 (MSA) remain high on agenda for businesses, with an estimated 12,000 to 17,000 businesses still to issue their annual statements under section 54 of the MSA, and some evidence of possible confusion about the requirements. Anna Triponel, a business and human rights advisor, has suggested that organisations can find guidance in the UN Guiding Principles that shaped the MSA.
Copyright revived in some industrially-produced articles
On 28 July section 52 of the Copyright, Designs and Patents Act 1988 will be repealed, meaning that full copyright protection will be extended from the current 25 years to the period of the life of the author plus 70 years in relation to artistic works that have been exploited with the copyright owner’s consent by making industrially-produced articles that amount to copies of the work.
The change will have most impact on UK businesses that manufacture or sell unlicensed copies of three-dimensional copies of works of artistic craftsmanship that had fallen into the public domain due to section 52 (such as items of furniture), or that create and use two-dimensional copies of artistic works (such as paintings or photographs) that had fallen into the public domain under section 52. They will need to adapt their business models and change their product ranges to ensure compliance with the new law.
Last orders: consultations closing in July
Consultations on each of the following matters are closing in July:
- Use and impact of non-compete clauses.
- Draft legislation and guidance for the corporate offence of failure to prevent the criminal facilitation of tax evasion.
- The existing rates of national minimum wage and national living wage, and the rates that should apply from April 2017.
- The introduction of a Services Passport and regulatory barriers to cross-border provision of business services.
- The availability of information in the UK equity IPO process.