Edward Fennell’s Legal Diary – Edition 35
Friday November 20 2020 Edition 35
Diary news, commentary, insights, appointments and arts from the legal world
SHORT THOUGHT FOR THE WEEK
GRENFELL, A MORAL AND LEGAL FAILURE?
On Desert Island Discs this morning Sir Kier Starmer highlighted that the Grenfell tragedy demonstrated what politics was was all about. Meanwhile the current Grenfell inquiry might do the same for law. Certainly the revelation in the past few days that Celotex, the manufacturer of the fatal cladding materials, had cheated to ensure its product met the regulatory requirements on flammability almost beggars belief. Jonathan Roper, the former assistant product manager, has admitted complying with acts which were “completely unethical” and a “fraud on the market” – but the responsibility goes much wider than this young man.
Celotex clearly had, corporately, a profoundly irresponsible approach to its legal and regulatory obligations. This is now being exposed by the forensic examination undertaken by inquiry barrister Richard Millett QC. No doubt at the end of it all there will be calls for better regulation. But the moral failure by those involved goes beyond regulation. Solving that might be the even bigger challenge.
The LegalDiarist
In this week’s edition
+Legal Diary of the Week
– Beirut Explosion Inquiry needed
– Green light for money laundering?
– Social Mobility Employer Index
– Need to slow down the traffic
+ Appointment of the Week – Colin Costello at Freshfields
+ Legal Analysis of the Week – The ICO Ticketmaster case
+ Court Case of the Year – BCA vs. BoE
+ Webinar of the Week – Ethnicity Matters from Wedlake Bell
+ Art Law of the Week – Restrictive Covenants
LEGAL DIARY OF THE WEEK
Beirut explosion victims demand justice
The demand that there should be an independent and impartial fact finding mission into the catastrophic explosion of ammonium nitrate in August in Beirut is now gaining traction.
As a starting point international legal charity Legal Action Worldwide (LAW) has compiled a report on what happened on the day of the accident and the events leading up to it. This is a prelude to what should be an international investigation ‘to establish the facts of the explosion as well as the root causes which include a vacuum of rule of law and lack of effective governance resulting in gross human rights violations which can (and often do) amount to serious crimes against vast numbers of Lebanese civilians’.
Among a number of demands LAW is asking ‘That victims are ensured representation and participation in any proceedings arising from
investigations, including civil or criminal proceedings before a competent court or tribunal, or any public inquiry.’
To see the full report go to: http://www.legalactionworldwide.org/wp-content/uploads/2020/11/REPORT.pdf
Carry on money laundering?
Some time ago the Financial Conduct Authority signalled its resolve to use criminal powers to deal with the most egregious breaches of money laundering regulations. Nonetheless the latest figuresfrom the FCA reveal that half of its investigations into breaches of money laundering regulations have been discontinued since the beginning of 2020.
As Eversheds Sutherland points out, current money laundering legislation provides for both civil and criminal enforcement. “This means the relevant regulator may open a criminal or a civil investigation into Anti-ML systems and controls issues, and that any finding or admission may be dealt with using criminal or civil sanctions.”
However, the FCA’s figures reveal:
- Only one single track criminal investigation into breaches of the MLR is now ongoing.
- It is currently investigating six dual track investigations into breaches of the MLR
- Five single and two dual track investigations into breaches of MLR have been discontinued since January 2020
“Whatever the current figure for open investigations into financial crime matters, the FCA’s response makes plain that the vast majority of its investigations into potential breaches must be solely civil in nature,” says the firm. Who said London wasn’t the money laundering capital of the world?
Clifford Chance absent from this years Social Mobility Employer Index
The publication of this year’s Social Mobility Employer Index highlights the contribution that the legal industry is now making to ‘levelling up’ with 30% of the Top 75 recognised organisations coming from the legal sector. With the exception of Whitehall Departments, the Inner Temple and Radcliffe Chambers, however, they are all firms of solicitors. There may, of course, be perfectly good reasons why barristers’ chambers find it difficult to participate in this kind of exercise but it does not help their cause collectively in trying to change their image of social elitism.
From the solicitors’ side Clifford Chance is the only member of the Magic Circle not to appear in the list. Meanwhile the other top firms have some impressive claims to their credit. For example, as recently announced, Freshfields aims to factor in racial diversity when building disputes teams. It also has other impressive initiatives such as the Freshfields Stephen Lawrence Scholarship Scheme which is designed to address the disproportionate under-representation in large commercial law firms and other City institutions of black men from less socially mobile backgrounds.
Meanwhile Slaughter and May’s Law Springboard project, delivered in partnership with charity upReach, is designed to improve access to the legal sector for high potential undergraduates from less advantaged backgrounds across all UK universities. It has already led to the firm hiring future trainees from the first cohort. And ‘Lead in to Law’, which is delivered with equal opportunities agency Rare, provides twenty 16 to 18 year olds from less advantaged backgrounds with work experience, insight opportunities, mentoring and university visits. The next step, of course, is actually to get the disadvantaged on to the career ladder.
Here’s the full list.
http://www.socialmobility.org.uk/index/
Clarke Willmott says Slow Down
Road Safety Week 2020 has unveiled some shocking statistics leading to lawyers calling for tighter road safety measures. And while the press has featured some appalling motor accidents in recent weeks – leaving parents and children alike devastated – these sensational cases are merely the tip of the iceberg. Excessive speed is now held responsible, in whole or in part, for 11 deaths or serious injuries on UK roads every day That is why Clarke Willmott LLP is now backing the “No Need to Speed” campaign organised by the road safety charity BRAKE.
Philip Edwards, a partner and serious injury expert at Clarke Willmott said, “BRAKE has commissioned research that has produced some shocking results, which should provide food for thought for all road users.”
The research revealed that, amongst male drivers, 28% have admitted to driving in excess of 100mph. There have been incidences where the Met Police caught a driver doing 152mph in a 30mph zone, and the highest speed recorded was a motorist apprehended by Nottinghamshire police doing 180mph.
Edwards added, “The examples BRAKE has highlighted represent reckless behaviour and it is only a matter of time before someone who drives like that will take a life or cause someone serious injury. Speeding, or more particularly driving too fast for the conditions, of any type, increases the risk of people suffering needless heartbreak.”
Research by RoSPA shows that speed dramatically increases the consequences of the collisions; of pedestrians who have been killed when hit by a car, 85% died in a collision that occurred at impact speed of less than 40mph, 45% at speed below 30mph and only 5% at speeds below 20mph.Joshua Harris, the Director of Campaigns for BRAKE added, “The voices of the bereaved and injured help us all to understand that getting somewhere a few minutes earlier is never worth the risk.”
APPOINTMENT OF THE WEEK
COLIN COSTELLO AT FRESHFIELDS
As the world waits for all-change in Washington various ‘end-of-era’ job changes are underway. One which is attracting particular interest is the recruitment by Freshfields Bruckhaus Deringer US LLP of Colin Costello as ‘Committee on Foreign Investment in the United States’ (CFIUS) client advisor.
Costello joins Freshfields from the Office of the Director of National Intelligence (ODNI), where he served as the Acting Director of the National Intelligence Council’s Investment Security Group. In this role, he was the Intelligence Community’s primary representative to CFIUS and managed critical intelligence input into every CFIUS review since March 2013.
While at ODNI, says Freshfieds, Mr. Costello developed the threat analysis methodology used by the Intelligence Community (IC) to analyze CFIUS transactions and other foreign investment-related regulatory filings. He also coordinated the analysis of over a dozen IC agencies to develop the threat assessment that forms the core of every CFIUS review and played an active role in informing deliberations over, and implementation of, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) and corresponding regulations.
“Colin is a stellar addition to our national security team, having played a highly consequential role in the CFIUS process for the better part of a decade,” said Freshfields partner Aimen Mir who also has a background at ODNI. “At a time when government scrutiny of investment flows is at a historical high, our clients will benefit tremendously from the real-world, direct insight that Colin brings from having shaped the outcome of hundreds of CFIUS cases.”
He also brings, of course, the experience of serving in a Trump-led government – in itself a unique experience one imagines and rather different, one hopes, from life at Freshfields.
LEGAL ANALYSIS OF THE WEEK
SORTING OUT THE ICO TICKETMASTER FINE
The penalties were inevitable in this ‘salutary tale’ says James Castro-Edwards, Head of ProDPO, an outsourced Data Protection service of law firm Wedlake Bell.
On 13th November, the Information Commissioner’s Office (ICO) fined Ticketmaster UK Limited £1.25 million for failing to keep the personal data of up to 9.4 million of its EEA customers (1.5m in the UK) secure, in breach of the General Data Protection Regulation (GDPR). As a result of the ensuing fraud, Barclays Bank reported that around 60,000 individual card details had been compromised, Monzo Bank reported that 6,000 cards had to be replaced and Ticketmaster received approximately 997 complaints alleging financial loss and/or emotional distress.
This was caused by a chat-bot on the Ticketmaster website, that was designed to deal with web visitors’ questions. The chat-bot was hosted by a third party, Inbenta Technologies, Inc., and installed on a number of Ticketmaster’s web pages, including its payment page. An attacker was able to insert malicious code to Inbenta’s servers, which enabled them to collect customers’ payment details. The stolen information included name, payment card number, expiry dates and CVV numbers; all the details that were necessary to make a fraudulent transaction.
The ICO found that Ticketmaster had failed to implement security measures that were appropriate to the level of risk. It did not accept Ticketmaster’s claim that the attack was of a novel type; the risk of injecting malicious code to a chat-bot was well established within the cyber and payment card security industry and widely published. Ticketmaster ought reasonably to have been aware of the risk at the time it implemented the third-party chat bot.
The potentially enormous rewards for a criminal that obtains payment card details meant that the likelihood and severity of an attack on Ticketmaster’s payment page were both high. Further, Ticketmaster could have employed a range of technical measures that were available, in order to mitigate or remove the risk. Ticketmaster reportedly intends to appeal the ICO fine. However, it is difficult to avoid the conclusion that this was a widely-known type of attack and would have been relatively simple to prevent. e-Commerce businesses should consider this a salutary tale.
COURT CASE OF THE YEAR – BCV v BoE
In what is rapidly becoming a ‘box set’ of court appearances the existential issue of who is the rightful President of Venezuela was back in the news this week. Focused on the Bank of England’s holding of substantial gold reserves on behalf of the Banco Central de Venezuela (“BCV”) the question to be resolved, before the money can be handed over, is whether ithe legitimate President is, in the red corner, Nicolas Maduro or, in the blue corner, Juan Guaidó.
So far, you might say, the Maduro/BCV camp advised by Zaiwalla & Co. is winning on points having succeeded in October in its Appeal of an earlier Judgment of the High Court. As a result, the Guaidó Board was required to pay BCV’s legal costs. However no money was forthcoming from the Guaidó side by the due date on the grounds that the sanctions in place against Venezuela by the United States prevented them.
In response Mr Vineall QC on behalf of BCV highlighted this week that it is the laws of the United Kingdom that the Guaidó Board must comply with, rather than US law. Strong point! Indeed, Mrs Justice Cockerill stated that the Guaidó Board would need to return with “better excuses” than what they have presented so far for their failure to comply. Moreover if they fail to pay the costs order without better reasons the Guaidó Board will be in “all sorts of trouble.”
The case, as they say, continues.
WEBINAR PROMOTION
WEBINAR BRIEFING FOR NEXT WEEK from WEDLAKE BELL
ROUNDTABLE AND LIVE Q&A: IN THE RACE FOR BUSINESS SUCCESS – ETHNICITY MATTERS
Webinar and Live Q&A: In the race for business success – ethnicity matters
Wedlake Bell has partnered with pay gap specialist Spktral for a live webinar (12 – 1pm, 26 November) giving practical advice on how businesses can promote diversity, including key considerations to bear in mind when preparing for ethnicity pay gap analysis.
Promoting diversity & inclusion (D&I) in your workplaces doesn’t just make financial sense. The Black Lives Matter movement has highlighted how important it is for CEOs and the Boards of corporates and employer brands to ensure that the issue of ethnic D&I is now at the top of their agendas –and a good starting point is ethnicity pay gap analysis.
During the webinar the following topics will be discussed:
- Behaviours to tackle and steps to take to protect your business and become a leader in diversity;
- The difference between positive discrimination and positive action;
- How to prepare for ethnicity analysis, including data gathering and categorisation (use of “BAME”);
- Risk areas – pre-empting and addressing these;
- Likely impact of BLM on the workplace.
Who should attend this workshop?
As well as HR, finance and senior management involved in the ethnicity analysis process and employee relations issues, this is an essential session for board members and business leaders who take ultimate responsibility for workplace culture and the associated risks.
To register your interest, please email events@wedlakebell.com
ART LAW OF THE WEEK
RESTRICTIVE COVENANTS: WANT TO MAKE YOU SCREAM?
Reading anything about the business aspects of the art world would quickly disillusion almost anyone about the morality of galleries and art agents. Hence the legal topic which particularly seems to be gripping people at the moment is the use of restrictive covenants in the primary art market.
As an article in the current edition of artnet News points out
‘Artworks are [being] sold to buyers with a legal clause, sometimes buried in the terms printed on the back of the invoice, which restricts the ability of the buyer to re-sell the work by auction or sometimes imposes a complete ban on any form of resale for a fixed period. Some include an obligation on the buyer to re-offer the artwork back to the original seller before reselling it. While there are many variants, the covenant will typically say something along the following lines: “For a period of 5 years from the date of the purchase the Buyer agrees not to offer the Artwork for sale at auction”
However as the article goes on to say, “The enforceability of these clauses has not yet been tested by the UK Courts. Once they are tested we will know for sure whether or not they are enforceable – and in what circumstances.”
Roland Foord, a disputes specialist at Stephenson Harwood, is quoted as saying that he does not think that such contractual terms would be enforceable. However, that might not be the point. According to the article one of the reasons that the UK courts have yet to test these arguments is that galleries employ the more effective deterrent of blacklisting clients who ignore these covenants. “It’s effectively the market’s own regulatory mechanism,” Foord says. Cue ‘The Scream’. You can sell but you’ll never buy art in this town again.