Legal update November 2018

Here is a round up of some of the latest legal developments for November 2018, in the areas of Corporate and Commercial, Intellectual Property, Employment Law, and Brexit.

Corporate and Commercial

• CAP Code alignment with GDPR - The new Section 10 of the CAP Code, which is now called ‘Use of data for marketing’, has been revised to remove rules relating to ‘pure data protection matters’ not specifically marketing related (for example, data security); align rules and definitions relating to data protection issues and specific to direct marketing with the GDPR (such as ‘consent’ and ‘personal data’ and new rules on transparency, lawful processing and the right to object); and include regulation of online behavioural advertising (previously just an Appendix to the Code).
• Reductions of capital: anti-avoidance provisions and cancellation schemes - The question for the High Court in the case of Unilever, earlier this month, was whether a cancellation scheme to simplify a corporate structure was an anti-avoidance provision, where a company reduced its share capital as part of a scheme of arrangement with the purpose of acquiring all the shares of the company (which is prohibited unless the acquisition adds a new holding company into the group). The court held that the mandatory transfer of legal title to most of the ordinary shares in the UK company to a nominee, in this dual parent structure, in this case, was a genuine commercial decision and so was not part of a scheme.
• Unlawful direct marketing and director personal liability - The Privacy and Electronic (EC Directive) Regulations 2003 are to be amended in line with draft regulations set out earlier this month. These amendments will allow the Information Commissioner's Office (ICO) to fine officers of a company up to £500,000 for breach of the Regulations’ rules on the use of automated calling systems and unsolicited direct marketing. If an Officer has consented or assisted in any way with the breach (by their actions or neglect) that Officer will now be personally liable. It is hoped that along with a statutory code on direct marketing, from 17 December 2018 when this change comes into force, this will reduce nuisance calls.

Intellectual Property

• Information Commissioner’s Office (ICO) new password and encryption guidance - This new guidance assists in explaining what is required in respect of encryption as an appropriate technical security measure under Article 32 of the GDPR. It is advised that organisations have an encryption policy and train staff in the use of encryption, that encryption be used for storing and transmitting data and solutions should meet current standards and be kept under review. Further, organisations should be aware of the risks that remain even with their systems in place and try to minimise these. In respect of passwords, organisations should review their password system regularly once introduced and look at alternatives to passwords.
• Digital Services Tax Consultation - From 1 April 2020 there will be a 2% tax on revenues (net of VAT) where more than £25million is earned by a UK business providing social media platforms, online marketplaces and search engines where that business has global revenues of more than £500million. The tax will only apply to revenues linked to the UK users of these businesses services.
• The taste of food cannot be copyrighted work - The ECJ has ruled that the taste of a food product cannot be protected by copyright under the Copyright Directive and that the legislation of member states should not offer such protection. The rationale behind this ruling is that it is not possible to scientifically narrow down the taste of a food product with precision and objectivity, as taste sensations and experiences are subjective and variable, and can depend on other factors such as the environment where the product is tasted and factors particular to an individual (such as their age, preferences and consumption habits). As a food taste cannot be technically, precisely and objectively identified, enabling it to be distinguished from the taste of other products of the same kind, it cannot qualify as a copyrighted ‘work’.

Information Technology

• Imprisonment under the Computer Misuse Act - Earlier this month a motor industry employee was found by the Crown Court to have breached section 1 of the Computer Misuse Act 1990 when causing a computer to perform a function with intent to secure unauthorised access to personal data (customer details including names, phone numbers and vehicle and accident information in this case) held on that computer. The employee was sentenced to six months’ imprisonment (from a possible maximum penalty of 2 years’ imprisonment). Confiscation proceedings under the Proceeds of Crime Act 2002 are also continuing against the convicted employee.

Employment Law

• Will there be a reintroduction of Employment Tribunal fees? - Following the Supreme Court’s judgment in R (on the application of Unison) v Lord Chancellor when Employment Tribunal fees were abolished, earlier this month Richard Heaton, the Permanent Secretary for the Ministry of Justice, said that a balance could be reached between increasing employment tribunal funding and ensuring that access to justice is not infringed. Whilst there are no immediate plans for the reintroduction of fees, the insinuation is that a new fee regime may well be under development.
• Increase in the ‘Real Living Wage’ - The Real Living Wage is set to increase 2.8% to £9 an hour, and in London a 3.4% rise to £10.55 an hour and is thought to affect around 180,000 employees. Companies who voluntarily sign up to pay the Real Living Wage, as opposed to the compulsory National Minimum Wage, must pay the real living wage to all staff and sub-contractors.
• Addison Lee drivers are workers - The Employment Appeal Tribunal agreed with the Employment Tribunal that the regular offer and acceptance of work by Addison Lee drivers meant that they were not genuinely self-employed, but were workers under the Employment Rights Act, the Working Time Regulations 1998 and the National Minimum Wage Act 1998.
• Inquiry into use of NDAs in harassment and discrimination cases - This month, the Women and Equalities Committee has launched an inquiry into non-disclosure agreements (NDAs) in harassment and discrimination cases. This builds on the inquiry into sexual harassment in the workplace but will focus on the use of NDAs in wider circumstances where any form of harassment or discrimination has been alleged. The purpose of the inquiry is to discover if there are certain types of harassment or discrimination for which NDAs are more likely to be used, whether NDAs should be banned or restricted in these cases and safeguards to prevent unethical use of NDAs.

Brexit

• Draft UK-EU withdrawal agreement agreed at negotiators’ level, endorsed by the EU leaders and the political declaration approved - On 14 November 2018 the full text of the draft UK-EU withdrawal agreement was agreed at negotiators' level and the UK Cabinet collectively agreed to back the texts by that evening, despite resignations including that of Dominic Raab, the Brexit Secretary. On 25 November 2018, the 27 EU leaders endorsed the draft withdrawal agreement and approved the political declaration, the latter of which outlines the future economic partnership (trade in goods and trade in services that go well beyond the parties' World Trade Organization commitments, and arrangements for the protection and enforcement of intellectual property rights going beyond multilateral treaties), Security partnership (law enforcement and judicial co-operation in criminal matters and consultation on sanctions), and institutional arrangements (dispute resolution, enforcement and safeguards would be in full respect of the parties' own legal orders, and arrangements in the withdrawal agreement). The outline also sets out "forward process", being the process that will follow the conclusion of the Article 50 withdrawal negotiations.

On 26 November 2018, the government laid before Parliament a statement that political agreement has been reached, a copy of the negotiated withdrawal agreement and a copy of the framework for the future relationship.

We shall report on any further updates arising on this in next month’s update.

*Please note that this update does not constitute formal legal advice and should not be relied upon as such. Always ask a solicitor if you are unsure of how the law relates to your business*