Diary news plus insights, commentary and appointments from the legal world

July 26 2024

Editorial contact: fennell.edward@yahoo.com

SHORT THOUGHT FOR THE WEEK: Running Rings Round the Regulations

After years of hard preparation, careful planning and ensuring the right diet regime the Legal Diary wants to pay tribute to the teams of sports lawyers who are on their marks and ready to go for the next fortnight’s gruelling test of their resilience and determination in the face of fierce competition.

In the 24 hours before this evening’s opening Olympics ceremony a Romanian athlete has been banned from competing and there is a distinctly suspicions smell over the Chinese swimming competitors. But these are just the warm-ups – wait until the real competition begins. If memory serves correctly the lawyers for London 2012 were sitting in judgement around the clock in a hotel in the centre of town. It was the ultimate test of their legal endurance.

So, without doubt, plenty of adrenaline-packed law stories (not to mention other substances) will soon be poring down the Seine. Sit back and enjoy the action as the globe’s top sports lawyers go for gold.

The LegalDiarist

In this edition

+ LEGAL DIARY OF THE WEEK

– In-House Pay – Going Up (For some)

– Small revolution at Dentons

– Aussie Rules for Legal Aid

– Does Everyone Need a Henchman?

+ CONTRIBUTED ARTICLES OF THE WEEK

Bids Still Off for Renewable Energy CfD Scheme? by Billy Kay

LLPS Under Pressure – So how should LLPs should prepare for the changing Salaried Members Rules? asks Kiran Chotai

+ LEGAL COMMENT OF THE WEEK

on assisted dying, sexual assault and the Court of Appeal’s judgment in Comptroller-General of Patents, Designs and Trade Marks v Emotional Perception AI Limited

+ APPOINTMENTS OF THE WEEK

Burges Salmon and Clifton Ingram

LEGAL DIARY OF THE WEEK

In-House Pay – Going Up (For some)

The UK economy seems to be doing surprisingly well in terms of growth (at least compared with our EU neighbours) but, let’s face it, in this election year it is the US which is going from strength to strength. So no great surprise that North American CLOs and GCs (primarily U.S.-based) are out-earning everyone else by a significant margin according to the figures from the 2024 In-House Counsel Compensation Survey produced by Major Lindsey & Africa.

It’s not just the high productivity and greater entrepreneurialism of the US which matters. As the report comments, “The US labour market is more flexible with fewer regulations compared to many European companies. This can lead to higher wages as companies compete for top talent.”

Meanwhile Asia Pacific is falling behind, “APAC GCs are experiencing a sharp contrast to their counterparts in both North America and EMEA, driven by significantly lower base and bonus pay,” comments the report.

For those hoping to see further strides towards pay parity based on gender there will be disappointment in the figures. It is still a ‘long way off’, it appears. “GCs who identify as women received 32% less in total cash on average than their male counterparts globally. The gap is not as stark at the CLO level, but women still trail men by 14%.”

One interesting development is that younger lawyers seem to be doing marginally better than their seniors. Since 2021, total actual cash (TAC) compensation has decreased by 4% for GCs and CLOs. By contrast, Counsel, as the most junior members, saw a 19% increase.

“Global compensation trends within the in-house legal market have been far from linear over recent years,” commented Naveen Tuli, Managing Partner, EMEA & APAC, In-House Counsel Group, Major, Lindsey & Africa. “Turbulent economic climates, coupled with landmark elections this year in the UK, the US, and around the world, has resulted in many legal departments taking a wait-and-see approach to pay.”

Wait and see, yes – but for how long? If you are looking for a new job there is plenty of food for thought in what is an increasingly complicated market.

Small Revolution at Dentons

It was in 1788, the year before the French Revolution, that Samuel Denton opened his law firm in London. It would have been astonishing to him, maybe, that 230 years later his name would preside over what has become the world’s biggest law firm. Indeed maybe just thirty years ago partners in the firm (which by then was Denton Hall) would also have been pretty astonished by how far Dentons name now reaches.

But like all family sagas there are twists and turns. Today’s Dentons represents the merging of firms from both sides of the Atlantic – Salans and Sonnenschein Nath & Rosenthal to name two of the biggest – but, without question, the driving vision for the new firm came from North America.

So how come these partners agreed to submerge their various pasts and submit to what was possibly the weaker firm within the global merger. The answer was simple – name recognition. The new management tested their intended world market and Dentons was the name which had most resonance. And so we have it today as Kate Barton is named as the firm’s next Global CEO.

What might seem extraordinary is that she is coming in not as a Dentons veteran but fresh from Global Vice Chair at EY. As the firm explained “The process explored both internal and external candidates across all geographies.” That’s not the way they used to do things in law firms. But as Barton comments, “I am looking forward to … collaborating with Dentons’ accomplished regional leadership to continue challenging industry norms and adapting to the ever-changing world of technology and innovation faced by law firms.”

Yes, it’s different world from even 20 years ago – but then Samuel Denton, looking on at the French Revolution, would probably have said the same.

Does Everyone Need a Henchman?

The remorseless expansion of the big beasts of the legal tech world goes on with the news that LexisNexis® Legal & Professional, has acquired a legal tech company by the name of Henchman which ‘enriches data from Document Management Systems (DMS) for faster document drafting’.

Henchman’s ‘advanced technology’, says the business, enables law firms and corporations to quickly extract insights from their internal data repositories. LexisNexis will then combine this technology with its own AI technology, content, and drafting guidance to deliver ‘new, personalized generative AI drafting solutions in products including Lexis+ AI™ and Lexis® Create’.

By creatively waving together all these different systems the scope of legal technology is expanding at astonishing pace.“LexisNexis and Henchman share a vision of transforming legal work with personalized AI solutions,” said Mike Walsh, CEO LexisNexis Legal & Professional. “Together, our teams will make it easier and faster for customers to deliver high-quality legal work using generative AI that is grounded in both their internal firm data and LexisNexis content and tools. Customers asked for this capability, and we are delighted to answer.”

So are there no threats or downsides?

LexisNexis points out that it is ‘responsibly developing legal AI solutions with human oversight’. It is following the RELX Responsible AI Principles, considering the real-world impact of its solutions on people and taking action to prevent the creation or reinforcement of unfair bias. We will see what happens.

For more go to  www.lexisnexis.com/henchman-DMS.

Aussie Rules

Legal Aid in the UK is in a bit of a mess. But there might be a radically different way of approaching it, suggests Dr Liz Curran, Associate Professor in Clinical Legal Education at Nottingham Law School, who has been looking closely at an Austalian model developed by the Hume Riverina Community Legal Service at the Albury Wodonga Aboriginal Health Service which provides free legal advice and assistance – particularly to those impacted by poor mental health. 

As described by Dr. Curran the service works with trusted intermediaries such as nurses, doctors, psychologists, financial counsellors, and drug and alcohol workers. These then act as a bridge between legal practitioners and people who have often been unable to access legal services due to ‘cost, fear, or previous negative experiences with the legal system’. 

Dr Curran believes that the Australian model could pave the way in overhauling access to justice.   “Cuts to the UK’s legal aid system over the last decade have further entrenched inequality, leaving many people unable to deal with snowballing legal issues through no fault of their own,” she says.“My research shows that the development of ‘one stop shops’ – where community lawyers work with other professions to provide a consistent and thorough service – can make significant inroads into a social determinant of health – but only if done well… The new government can learn from this and recalibrate the UK system into something much more coherent and effective in terms of monetary and societal value.”

Let’s hope someone in the Cabinet is listening.

CONTRIBUTED ARTICLES OF THE WEEK

Bids Still Off for Renewable Energy CfD Scheme? by Billy Kay

The renewable energy industry continues to wait for the outcome of this year’s Contracts for Difference (CfD) scheme, which will be instrumental in shaping the success of the UK’s sustainable energy strategy. It has been confirmed that one or more applicants who were not initially successful have since lodged an appeal with the regulator meaning that results will not be published until early September 2024, the longest indicative timeline set out at the start of the process.

The Government has set an ambitious target: to reach 50GW of operational offshore wind by 2030 – right now, this figure stands at just 15GW. Hopefully we won’t see a repeat of last year, when the scheme failed to receive a single bid.

The CfD Scheme was introduced by the UK Government to support offshore wind development and make it possible. It involves multiple allocation rounds to determine which developers gain admission to the scheme, and guarantees them a fixed payment for electricity, referred to as a Strike Price.

This means the developer either pays or is paid back the difference between the ever-fluctuating price of electricity and the Strike Price, providing stability to them in the market.

Last year’s application cycle failed to attract the attention and investment of offshore wind developers for various reasons. Part of it was due to collective hesitation towards the Grid Connection system, which is perceived as amplifying delays due to the “first come first serve” basis upon which it is structured. This means the most viable applications are not being prioritised, and some developers are receiving 10-year lead in times for their grid connection dates.

We should also note that due to fierce competition in the international market, capital investment in less developed offshore wind markets may provide higher returns, which lessens the appeal of the CfD allocation rounds to some developers.

Finally, in 2023 the Strike Price didn’t consider the impact of the high inflation environment in which it was set.

Because of the above, the Government is increasing the financial threshold for offshore wind developments in this year’s allocation round, with large increases to both the maximum strike price for offshore wind projects (66%) and floating offshore wind projects (52%).

It is too soon to tell whether these changes alone go far enough to address the issues that caused there to be zero bids last year. For now, the renewable energy industry is keeping its fingers crossed as it awaits the result.

Billy Kay is a Partner in the Banking and Finance team, Morton Fraser MacRoberts

LLPS Under Pressure by Kiran Chotai

HMRC has begun probing private equity houses and professional services firms that operate as LLPs So how should LLPs should prepare for the changing Salaried Members Rules?

Salaried Members Rules (SMR) were introduced in 2014, but it took nearly a decade for a case borne out of these rules to come before a tax tribunal. The ruling by the upper tribunal in that case, which involved the hedge fund BlueCrest Capital Management LLP, appears to have resulted in a significant change in HMRC’s implementation of the SMR – with the potential for an even larger impact on law firms and other LLPs.

There are three conditions set out by the SMR that determine whether a member of an LLP will be taxed as a salaried member. These conditions are: a) that at least 80% of an individual’s total remuneration is disguised salary; b) the individual does not have significant influence over the affairs of the LLP; and c) the individual’s capital contribution is less than 25% of the reasonably expected disguised salary.

Following the BlueCrest ruling, HMRC updated their guidance to clarify ‘Condition C’ despite this not having been ruled on by the tribunal. Perhaps unsurprisingly, this has led to confusion, with the guidance now suggesting that members can invest capital at their own risk but still be caught by Targeted Anti Avoidance Rules (TAAR).

Various approaches have been made to HMRC seeking clarity, but none have been forthcoming. As a result, it may require a tribunal before clarity is provided. For LLPs including law firms, this uncertainty could impose potentially significant costs, including the time and expense of determining each member’s position, the costs of dealing with a potential HMRC investigation, and ongoing costs such as employers class 1 NIC.

Firms would accordingly be well-advised to nip any potential issues in the bud as a priority by conducting a thorough review of their members’ positions and documenting this evidence in detail, in case it is required in the future. That said, it should be remembered that one of the advantages offered by the LLP structure is the flexibility to appoint new members and promoting them to membership – in other words, the option to make an associate a partner. This option will remain for an LLP, so they will still be able to promote key personnel to membership.

In fact, appointing salaried members will allow these members to enjoy the perks that are on offer to those on the payroll – whereas members who are found to be salaried members after an HMRC investigation will not benefit from these employee perks. What is essential for firms is to ensure that if the original intention was to treat members as self-employed, their tax status reflects this.

Kiran Chotai is a Senior Manager, haysmacintyre

LEGAL COMMENT OF THE WEEK

TOPIC: Sexual Assault Increased Awareness

COMMENT BY: Daniel Jackson, Partner at BCL Solicitors

“The reported rise in levels of sexual assault being higher than 10 years ago, is likely to be principally due to an increased willingness among complainants to report matters to the police. A growth in public awareness and support available for complainants of sexual assault, may well be a significant factor in these latest set of results.”

TOPIC: Assisted Suicide: Proposed Changes in Law

COMMENT BY: Alexa Payet, Partner, Michelmores

“The criminal offence of assisted suicide stirs up strong opinions. But what is often overlooked in the debate is the potential financial consequences for families. Currently families of loved ones who die by assisted suicide risk losing everything.

“Anyone who assists or encourages another to commit suicide forfeits their interest in the deceased’s estate and any jointly owned assets, including property. Travelling with a loved one to an assisted dying clinic overseas, or even just helping them to book their travel could be enough to trigger the Forfeiture Rule.

“As the law stands, there is no alternative to the process of applying for relief from forfeiture. There is currently widespread and fundamental misunderstanding about these issues. If they are not dealt with contemporaneously, the effect on the assister’s interests and assets (including tax consequences) may impact on the administration of the assister’s estate decades later.”

TOPIC: The Court of Appeal’s judgment in Comptroller-General of Patents, Designs and Trade Marks v Emotional Perception AI Limited

COMMENT BY:  Conor McLaughlin, Managing Associate (Patent Attorney) at Mishcon de Reya 

“Today the Court of Appeal has handed down its judgment in Comptroller-General of Patents, Designs and Trade Marks v Emotional Perception AI Limited.

“This case related to an artificial neural network (ANN) system for providing media file recommendations to a user. The sole issue in debate was whether such an invention constituted subject-matter that was subject to or excluded from patent protection within the meaning of section 1(2) of the 1977 UK Patents Act. 

“The Court of Appeal decided that its subject-matter was excluded from patent protection, in particular because it was considered to relate to a ‘computer program as such’. Further, the Court of Appeal also commented (though did not finally decide on the issue) that even if the invention was not excluded as a computer program as such, it may well have been excluded in any event as relating to a ‘mathematical method as such’.

“The High Court decision had been widely welcomed in the industry as opening the way for patenting of AI-based inventions, seemingly being a first and significant step in lowering the traditionally high bar for protection of such inventions in the UK. The Court of Appeal’s decision would seem to return that bar firmly back to its previous position, and reaffirm the status quo that it remains difficult (though certainly not impossible) to obtain protection for AI-based inventions within the UK.”

APPOINTMENTS OF THE WEEK

BURGES SALMON

Alexandra Clayton (left) has joined Burges Salmon as a director in its Real Estate department. Previously with Linklaters where she was a managing associate in the firm’s Real Estate team, Clayton has a broad range of experience acting for a variety of built environment sector clients including corporate investors, landlords and tenants, developers and lenders on a variety of commercial real estate transactions on a domestic and cross-jurisdictional scale.

This work has included includes acquisitions, lettings, disposals, development projects, project finance, real estate finance, sale and leasebacks, and property joint venture and M&A transactions.  “We’re really pleased to welcome Alexandra to the team,” said Rick Read, head of the Real Estate department at Burges Salmon. “With her impressive track record in advising clients on a wide range of real estate matters, Alexandra is well placed to make a significant contribution to our practice.

Burges Salmon’s Real Estate team operates from offices in London, Edinburgh and Bristol and has a particular reputation for handling rural property and landed estates.

 CLIFTON INGRAM

Daniel York (left) has joined the prominent Thames Valley/Hampshire/Surrey firm Clifton Ingram as a Partner in its Commercial property team. Previously with Herrington Carmichael, York has a track record in secured lending transactions, leading negotiations on multi-million-pound refinances for corporate clients and managing the legal aspects of securing loans over varied property portfolios.His extensive experience in managing leasehold properties, granting leases and handling assignments and underletting is expected to be particularly useful.

“I am incredibly excited to join Clifton Ingram as a Partner and contribute to their renowned commercial property team,” said York. “This is a dynamic period of growth for the firm, and I am eager to help elevate our services and support our clients across Wokingham, Farnham, and Reading. Together, we will continue to deliver exceptional results and further strengthen Clifton Ingram’s position as a leader in the property law sector.”

This year has been significant for Clifton Ingram’s property division, particularly with the acquisition of Sloan Solicitors in Wokingham earlier in the year.

We hope that you have found this edition of the LEGAL DIARY interesting (and even useful). If so, please circulate it to colleagues.

In any case, please continue sending your diary-type stories, legal comment and insights plus latest appointments to fennell.edward@yahoo.com

Meanwhile enjoy the Olympics – a model for how we can all experience failure, disappointment and disillusion with dignity!