Diary news plus insights, commentary and appointments from the legal world
June 9 2023
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SHORT THOUGHT FOR THE WEEK: IN AI WE TRUST
With his intelligence could Rishi Sunak have been a lawyer?
‘Win-some, lose-some’ – that could be the position for British lawyers following the avalanche of debate about the threat and the opportunities arising from advances in AI over the past month.
Once again this morning the vulnerability of lawyers’ careers to AI was highlighted in the national press. But, alongside that, Rishi Sunak has been promoting the UK as the leading candidate to take on the global role of ‘honest regulatory broker’ for AI technology. Not only, as Sunac puts it, is Britain a “mid-sized country [which] happens to be a global leader in AI” but it also has a well-established position as one of the world’s most important legal centres. The five continents come to the UK to settle their business disputes. That could set a precedent for regulating AI as well.
In This Week’s Edition
+ LEGAL DIARY OF THE WEEK
– 100 years Walk for Justice
– Not So Bold Maybe?
– Ukraine Legal Disputes Continue Despite the War
– Crypto Lawyers Thriving on Growing Market
– BDP Partner gives warning on infrastructure muddle
+ LEGAL COMMENT OF THE WEEK
on the Telegraph take-over and crypto currency regulation
+ APPOINTMENTS OF THE WEEK
at A&O and ARC Pensions Law
LEGAL DIARY OF THE WEEK
100 years Walk for Justice
Next Tuesday’s annual London Legal Walk will benefit from an appetiser thanks to The Next 100 Years team which is offering a pop-up meet-up point on the Bench Steps in the South Square of Gray’s Inn. The aim is to gather supporters together there before walking to The Law Society in Chancery Lane where the London Legal Walk proper begins.
The hook for the pop-up is the coincidental one hundredth anniversary of the call to the Bar of Edith Hesling, the first woman member of Gray’s Inn. Hesling came from the Manchester area where she went to the High School for Girls. She gained a law degree from the Victoria University of Manchester (now the University of Manchester) and aged 24 she was called to the Bar by Gray’s Inn. “We hope to host as many of you as possible, including several women trailblazers from Gray’s Inn,” said Dana Denis-Smith, the Founder of First/ Next 100 Years.
Meanwhile, the London Legal Walk is now in its 19th year ‘Bringing together the legal community to support free legal advice services on the frontline,” say the organisers. “As the cost of living rises, the need for free legal help with debt, benefits, housing, asylum and domestic violence is now greater than ever. We will be joining together to raise vital funds for access to justice.”
So, best foot forward.
Not So Bold Maybe?
Given the daily tergiversations in the economy it is no great surprise that the latest Bellwether report from LexisNexis Legal & Professional® – entitled somewhat ambiguously “Bold Ambitions?” – reports that law firms are much less bullish than they were a couple of years ago. Back then, as the end of Covid came into sight, 66% predicted growth. Now that figure has dipped very significantly. Instead there is more a ‘steady as it goes’ approach with a realisation that they must work hard to retain clients and even harder to win new ones.
“Only 13% of respondents said they plan to grow through Mergers or Acquisitions, a drop from 16% in 2022 and 15% in 2021,” says the report. “An easy plan in theory, but 81% said that attracting new business is going to be one of their top challenges.”
In fact, the focus now is on a major increase in promotional effort with 81% of firms planning to increase investment in marketing and 88% in business development. “The results suggest that a strategy of retention is sensible. 88% felt that their firm enabled them to offer a good service to clients – which might help to balance the fact that 79% of respondents were concerned about client retention.”
Curiously enough, given the general excitement right now about the impact of computing on the law, only one quarter of firms plan to implement new technology over the next 12 months. Nonetheless, there remained a strong appetite for legal intelligence technology with two-thirds making use of free and paid digital legal research tools and legal practical guidance.
Ukraine Legal Disputes Continue Despite the War
There is much that is black and white about the situation in Ukraine right now. But that does not mean that everything is binary. As the debate about sanctions has demonstrated, drawing a hard line can leave some people, possibly unfairly, on the wrong side. Meanwhile, despite the war, business continues in Ukraine – and with business, of course, comes business disputes. Hence British citizen and investor Tamaz Somkhishvili has recently instructed Zaiwalla & Co to act as his English counsel to vindicate his rights as an investor in Ukraine before the English courts.
At stake is a landmark case involving the municipal authorities of the city of Kyiv. A lot of accusations and smears are being thrown around along with suggestions of media manipulation.
“It is surprising that in Ukraine, a country which has received such unconditional support from the United Kingdom in its current struggle, a British citizen and investor in Ukraine for more than 17 years should become the subject of such an attack, intended to deny him a fair adjudication of his claim in court and effectively to expropriate his investment without compensation,” commented Zaiwalla Partner Leigh Crestohl. “It is unfortunate that the Ukrainian authorities have done nothing to protect Mr Somkhishvili’s rights. The UK’s legal system enjoys a global reputation, often commented on by the President of Ukraine, and Mr Somkhishvili must now rely upon British justice to protect his rights and to hold those who stand behind the attack, accountable.” Meanwhile the bombs continue to fall.
Crypto Lawyers Thriving on Growing Market
There are no surprises that ‘crypto’ is now becoming a meaty specialism for some lawyers.Already firms from Simmons & Simmons – one of the Top Ten Crypto firms – to Dechert to Blake Morgan have got healthy practices. The reasons is that the potential market for their services is growing rapidly. According to Finbold the number of crypto users has ramped up to 417.5 million as of 2023, representing a year-over-year growth of 36.88%. This means an additional 112.5 million users compared to the 305 million recorded in 2022.
“Despite the crypto sector facing one of its most challenging phases, marked by a sustained bear market, the global user growth is impressive,” commented Finbold. “Given that the growth has occurred in the wake of high-profile incidents such as the FTX crypto exchange collapse and the Terra (LUNA) ecosystem crash, partly resulting in an erosion of trust within the sector.”
User numbers are likely to increase, particularly in regions with favourable regulations, added the report. But that does not include EU countries. “One notable trend in usage indicates that Europe saw a drop….[coinciding with] with the region’s enactment of the Markets in Crypto Assets (MiCA) law. The law aims to create a legal framework designed for the market of crypto assets. The content of the law has been dubbed to act as the global benchmark.”
So is Europe being left behind – or just being prudent? [For more on crypto and the law see LEGAL COMMENT OF THE WEEK]
Infrastructure Warning from BDP Pitmans
BDP Pitmans has recently announced the appointment of Mustafa Latif-Aramesh (pictured left), the youngest Parliamentary Agentto be enrolled for a generation, as a partner. Given that he is also a member of the Strategic Advisory Board of the Nuclear Industry Association and a member of the Advisory Board to the Office for Place, which sits within the Department for Levelling Up, Housing, and Communities, he is something of a star. Which means one has to take seriously his warning about the current state of infrastructure development in the UK.
“We’re grappling with new technologies like Small Modular Reactors, and a changing policy and legislative context in the form of challenging environmental benchmarks as well as a new environmental assessment regime,” he says. “That changing landscape infrastructure planning is interlaced with increased delays and increased legal challenges. One of my specific sectors is the nuclear new builds, and there are a few things that could improve the system. The first is to have a more certain policy landscape; nuclear is clearly backed by the government, but the delays to designating a new National Policy Statement add to uncertainty. Environmental assessments could be much more proportionate but have become unwieldy which serves no one, be it the developer or the community. Finally, clearer guidelines on consultation and application document quality would be appreciated by the industry. Without addressing these points, exciting and much needed innovative technology like Small Modular Reactors will be prevented, having an unfortunate effect both on our ability to get to Net Zero and to secure energy resilience in the face of an aggressive Russia willing to turn the gas taps to Europe off.”
Anyone listening in Whitehall?
LEGAL COMMENT OF THE WEEK
TOPIC: The sale of the Telegraph Media Group
COMMENT BY: Jeremy Whiteson, Restructuring and Insolvency Partner at Fladgate
“The appointment of receivers over the Bermudan ultimate holding company of Telegraph Media Group Limited (TMG) and other Barclay family interests is an unusual step by the banks involved.
Information filed at Companies House in England indicates that banks have the usual armoury of fixed and floating charges over TMG. The expected move by a worried bank following customer default would, therefore, be to appoint administrators to TMG. Banks holding a “qualifying floating charge” can generally appoint administrators, pursuant to that security, quickly and without court order.
There are a few possible explanations. No existing security is shown for Spectator (1828) – and so the banks could not so easily appoint administrators to that company (but may be able to do so with a court order if debts are owed by it to banks). It may also be that the TMG security shown at Companies House is now satisfied- but that satisfaction is not registered. The banks may also be worried about the damage to value that appointing administrators to TMG may have.
Even if the banks are unable to easily appoint administrators, further formal insolvency or rescue procedures could be expected. If the banks have withdrawn its facilities, and the company unable to meet its debt, directors would be exposed to claims that they were acting in breach of their duties by continuing to trade, and the company would be exposed to hostile creditor actions where creditors were entitled to accelerate their debts. Directors of the trading companies may well, therefore, be considering appointing administrators or entering a moratorium to create a breathing space and so permit a business sale to be concluded.
However, as these are national newspapers, there will be significant regulatory hurdles to address before any sale can be completed- particularly if the buyer is also a media company. A sale may not, therefore, be easy to conclude quickly.”
TOPIC The introduction by the FCA of tough new rules for marketing crypto assets
COMMENT BY: Haydn Jones, Global Lead of Blockchain and Cryptocurrency Solutions at Kroll
“These latest measures show the FCA is steadfast in regulating cryptocurrency in the UK and bringing it in line with other investments. These are significant measures in proactively ensuring consumers fully understand the risks associated with crypto investments. There are currently over 25,000 different cryptocurrencies, encompassing a whole variety of exchange and utility tokens, stablecoins and NFTs. Some of these are already being treated as viable investible assets, but not every one is a suitable investment opportunity for consumers. With cryptocurrencies, as with any investment, it’s vital that consumers do their research.”
“For the wider industry and the different institutions which have invested in digital asset infrastructure or partnered with cryptocurrency-focused organisations, this is an important landmark. Although regulating cryptocurrency undoubtedly has challenges, the FCA has demonstrated that it is more than possible and that it will continue provide further guidance on the matter. Regulatory oversight and the ability to trace the provenance of a crypto asset, and profile its hygiene, is vital to guard against criminal activity. All forms of oversight will be increasingly important in unlocking the future potential of cryptocurrency’s underlying technology.”
“The underlying technology is already being used to explore new forms of tradable assets and securities, which take advantage of the efficiencies and reduced frictional costs that digital asset technology allows. As cryptocurrency technology becomes more and more part of the mainstream, we are going to see more innovation and more choice.”
TOPIC The All Party Parliamentary Group on Crypto Assets’ call for regulation of cryptocurrencies in the UK https://cryptouk.io/wp-content/uploads/2023/06/Crypto-and-Digital-Assets-APPG-Inquiry-Full-Report.pdf
COMMENT BY: Sean Curran, Partner at law firm, Arnold & Porter (London)
“It comes as no surprise that the APPG on Crypto Assets is calling for regulation of digital assets in the UK.
“As much as the government has talked about making the UK a global hub for crypto technology, we are yet to see any concrete regulation that would allow crypto-asset businesses to understand how they will be able to operate here legitimately. In the meantime, without regulation, criminals are able to take advantage of the public interest in these types of assets, with fraud associated with crypto assets increasing.
“Once the legal framework is put in place, businesses will feel confident investing resources in building crypto-asset ventures in the UK and those who seek to misuse such assets can be properly policed.”
John Binns, Partner at BCL Solicitors, said: “The connection between ‘crypto’ and ‘fraud’ in the minds of many is long-standing and understandable. It does have some basis in reality, but it is far from fair to tar all crypto asset businesses with that brush.
“The current experience of the FTX story shaking confidence in cryptocurrencies generally is also quite understandable. Any asset, any currency is subject to market sentiment in the end, and we are seeing a natural spike in scepticism that these are real assets with real value.
“A wave of public stories about NFTs also plays into that difficult moment for this industry.
“Stepping back for a moment, what is absolutely real and true about crypto assets is that they are risky for an investor who does not understand them (or, worse, who wrongly thinks that they do), precisely because they are (generally) divorced from the sovereign and corporate ‘establishment‘ in a way that appeals to many.
“Part of the answer is better regulation, which the UK is belatedly getting round to as we speak. And part is law enforcement that is better resourced and works better across borders than ever before. Done properly, these will help both to catch those who are misusing the industry and to protect its reputation from collapsing altogether.”
LEGAL APPOINTMENTS OF THE WEEK
ARC PENSIONS LAW
Beth Brown (left) is joining Arc Pensions Law, the national specialist pensions law firm, as a partner in its London office. Formerly with DAC
Beachcroft, Brownhas 14 years experience advising both trustees and employers on all aspects of pensions law. She has also had experience on secondment to the Pension Protection Fund and has a particular focus on the insolvency, finance and governance aspects of pensions This has included advising trustees on employer insolvencies and transition to the Pension Protection Fund, sponsor refinancings and de-risking including an innovative £1.6 billion buy-in.
“We are delighted to welcome Beth to the firm, in what is another step towards developing the next generation at Arc Pensions Law.,” commented Rosalind Connor, the Managing partner. “Her top-flight experience across a broad range of pensions matters makes her an excellent addition to our team.. The firm’s long-standing motto, ‘For the Future’, encapsulates the proactive and visionary approach Arc Pensions Law takes towards the industry, and Beth’s joining is a tangible example of this motto in action.”
Edward Holmes (left) is joining A&O as an M&A partner in its Infrastructure and Energy practice based in London. Previously with CMS as a partner, Holmes had trained and qualified at Clifford Chance where he was an associate. His specialism is in M&A transactions with a particular focus on energy and infrastructure transactions where he has has represented a wide range of financial sponsors and corporates on their acquisitions and disposals, minority investments, takeovers, joint ventures, IPOs and restructurings.
“We’re looking forward to welcoming Ed onboard to help us continue to deliver innovative solutions for clients this year and beyond,” said Dominic Morris, Head of M&A/Corporate at A&O, London. “We anticipate a busy year of energy and infrastructure deal-making as a result of the global energy crunch and bringing Ed onboard with his impressive experience in the Infrastructure sector will ensure we can continue to provide world-class service to our clients across the globe.”
David Lee, Partner and Chair of the firm’s Global Projects, Energy, Natural Resources and Infrastructure (PENRI) board, added, “Our clients are investing in an unprecedented way in the new, decarbonised economy and we know the drive to net zero will continue to present opportunities on a scale that we have never seen before.”
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