City Uni law grad Sammar Masood explores the viability of ESG clauses in commercial contracts

Our planet’s environmental state is at an all-time high level of concern. With the recent approval of the EU Corporate Sustainability Due Diligence Directive (CSDDD) in May 2024, it is clear that our most powerful institutions are beginning to take corporate entities’ impact on the environment seriously.

 The CSDDD, Corporate Sustainability Reporting Directive (CSRD), and emerging national counterparts are encouraging regulatory frameworks that impose binding obligations upon businesses to conduct due diligence on environmental, social, and ethical risks in their activities and supply chains.

These businesses will be large with high global turnovers and therefore multiple, complex, and multi-jurisdictional supply chain agreements. Along with this, it is known that the majority of a business’s emissions are produced in its supply chains. Therefore, it is widely acknowledged that the most powerful tool to enforce ESG due diligence requirements is the use of ESG clauses in commercial contracts. However, the reality of turning a contract ‘green’ to include such binding obligations, is easier said than done.

What exactly are ESG clauses?

Long and short, ESG clauses guarantee that suppliers adhere to ESG standards, whether these standards are derived from internal net-zero company policies or, as is most likely the case moving forward, from regulatory obligations included in the CSDDD. For the latter, the EU Commission is due to publish further guidance on what may be seen in such clauses. Moreover, the Commission has confirmed that it will introduce voluntary model contractual clauses for businesses. These clauses can take the form of conducting due diligence, compliance, monitoring, or disclosure. Depending on the sectors, industry, and variety of products or services involved, these actions can be required in areas including greenhouse gas emissions, modern slavery, waste disposal methods, and enforcing net zero standards for suppliers.

For smaller companies that may not fall under the jurisdictional or monetary scope of the CSDDD or any other corporate sustainability regulations, the Chancery Lane Project provides contractual clauses under English law which are ready to implement into a potential agreement. These clauses are tailored to the type of contract and certain climate-related aims.

Additionally, ESG warranties have been common practice in mergers and acquisitions. Warranties are contractual promises which, if breached, can result in damages. For example, a seller in a merger or acquisition may warrant that it has not fallen foul of any environmental legislation or does not have any ongoing investigations into its environmental conduct. If these claims are found to be untrue, damages and indemnity clauses can trigger action. The latter can establish which contracting party can hold the other responsible for breaching ESG clauses.

So, there is plenty of regulatory development and social awareness that permits the drafting and incorporation of ESG clauses into commercial and corporate contracts. However, when these clauses are attempted to be enforced, several problems start to appear.

Disputes, disputes, and more disputes?

There is no doubt that ESG clauses are relatively novel. They are also particularly complex because they will need to be increasingly based on multi-jurisdictional, legally binding obligations rather than flexible internal business ESG charters and commitments. Supply chain contracts will be particularly challenging to overhaul as they often span multiple developing jurisdictions, many of which do not prioritise or even have any processes in place for environmental protection or sustainability. For companies to delve into their supply chains and make each supplier aware of new ESG clauses or regulations, will be time-consuming and not easy.

As a result, it makes sense that lawyers and academics alike agree that the sheer size of this task will inevitably lead to more disputes relating to the enforceability and interpretation of ESG clauses in commercial contracts.

Firstly, this is because ESG is dependent on many factors beyond the commercial world. A new government after an election can have a vastly stricter or relaxed approach to environmental policies compared to its predecessor. One supplier may be based in an unstable country with many geopolitical tensions. Generally, the state of the global economy may be fragile, causing businesses to care more about profits rather than maintaining expensive sustainability obligations. This, paired with the fact that ESG clauses are relatively new and that companies may not want to damage relationships with some of their longest suppliers by imposing specific environmental obligations upon them, can result in broadly drafted ESG clauses which do not contain precise, measurable obligations via numerical metrics that can be objectively verified. Examples of a broad approach include general indemnity clauses or unilateral termination clauses. While some may argue flexibility is necessary when dealing with such a fast-evolving regulatory landscape when it comes to the interpretation of ESG clauses, increased flexibility can likely lead to interpretational ESG disputes.

Secondly, businesses have intricate, expansive supply chains, and suppliers frequently have independent subcontracts with third parties. So how far would due diligence obligations extend in these circumstances? Would these third parties be subject to rigorous due diligence requirements? Under the CSDDD, supply chain obligations are imposed on “lasting” and “not ancillary” relationships with business partners. Official examples of how far down the supply chain this provision can cover have not yet been introduced. Moreover, if a third party were to commit environmental abuse, this raises questions if the contracting parties decide to escalate the matter to arbitration proceedings. Arbitration proceedings tend to be more popular as they can be conducted behind closed doors as opposed to open litigation. Typically, arbitration proceedings possess a lack of jurisdiction when it comes to non-parties to the original agreement. The third-party deciding to initiate simultaneous proceedings can also complicate matters. Considering the current rise in litigation regarding claims that companies possess a duty of care to those who are affected by a third party’s actions in the supply chain, this issue will remain important.

Are contract law principles making ESG clauses harder to implement?

Conventional contract law principles should also be questioned, even though the new and evolving nature of ESG clauses and the introduction of corporate sustainability regulations are undoubtedly factors that are making it harder to practically enforce necessary ESG clauses without numerous roadblocks.

To begin with, English common law has been criticised for having a formalistic approach to contract law. This approach maintains the idea that contracts should be drafted and interpreted based on the plain structure of the words. Social and economic, or in this case environmental context, should not be embedded into the contract or its interpretation. So, while contemporary ESG clauses are being drafted to suit the needs of private regulation, English contract law is arguably not suited to interpret these clauses in the accommodating context that is required.

Additionally, contractual remedies may rely on proving loss. Therefore, if the breach of an ESG clause leads to harmful environmental impact, a company may be required to prove whether activities by a supplier caused the specific harm alluded to in a claim. Environmental damage or human rights abuses are not simple matters to prove. Chemical testing, soil samples, and even blood testing may be needed to verify a supplier’s activities were the direct cause of any abuses. Potential solutions might be to include a lump-sum indemnity payable if there is breach of an ESG clause or requiring the breaching supplier to perform a certain obligation in kind or make a donation to a recognised climate change organisation, though this, in turn, raises issues regarding the enforceability of a specific performance obligation.

A company may try to prove damage to its reputation as a result of breaches or abuses conducted by its suppliers. In the current economic climate containing increased awareness of ESG, investors are more cautious about investing in companies associated with ESG abuses. Therefore, a company must prove financial loss and damage to reputation as a result of their supplier’s actions or breaches, if it wishes to obtain damages in this manner. However, with larger, multinational companies, financial loss as a direct cause of a supplier’s actions will be hard to prove considering the multiple revenue streams companies are involved in at once.

Final outlook…

Overall, ESG clauses have the potential to completely transform the way commercial supply chains operate. Mandatory due diligence and monitoring with quantifiable commitments as essential contract clauses attached to robust remedies are the way forward if ESG clauses are to have their intended effect. However, fear of the new, the desire not to disturb long-lasting supplier relationships, and the added pressure and contractual processes for a company by potentially bringing claims against its supplier for breach of the newest type of contract clause, all make ESG clauses seem less attractive to parties. With the dawn of the CSDDD in December 2024, it will be interesting to see whether the EU will be able to truly turn contracts green. But for now, it seems as if the commercial world and contract law norms will be in a constant state of gradual adjustment and adaptation to ensure the right balance is met between commercial interests and ESG.

Sammar Masood is a recent LLB graduate from City, University of London. She has a keen interest in the intersection of environmental and commercial law, along with commercial dispute resolution. 

Hannah Sinclair, Bristol Uni law grad and aspiring barrister, charts the developments following Philipp v Barclays Bank

In the early 1990s, statutes failed to keep pace with “radical and multifarious advances in the use of modern technology” to commit fraud offences. Within this landscape of heightened economic crime and few statutory protections, the judiciary held that banks owe a duty to their customers not to action the customer’s instructions if the bank has reason to suspect the instruction is a result of Authorised Push Payment (APP) fraud. This offence occurs when a fraudster persuades the victim to instruct their bank to transfer funds into an account controlled by the fraudster. This article examines the creation and evolution of this duty, dissects the Supreme Court’s recent decision in Philipp v Barclays Bank UK PLC [2023] UKSC 25, and reviews regulations expected in 2024.

Creation of the Quincecare duty of care

The duty was created by the Court in Barclays Bank Plc v Quincecare Ltd [1992] 4 All E.R. 363. In this case, Barclays loaned Quincecare £400,000 to purchase chemists’ shops, making Quincecare Barclays’ customer. Quincecare’s chairman instructed Barclays to transfer nearly the entirety of the loan into accounts which were then misapplied for dishonest purposes.

The Court held that Quincecare could recover their losses from Barclays because an ordinary and prudent banker in Barclays’ circumstances would suspect the chairman’s instructions were an attempt to misappropriate the funds, and therefore, Barclays owed Quincecare a duty not to execute the instructions. Thus, the “Quincecare duty” was created.

The evolution of the duty

From the early 90s to the late 10s, the Court heard very few cases in which the Quincecare duty arose. However, by 2016, 850 million remote banking direct credits were made per year in the UK, compared with 100 million in 2006. The increase in bank transfers predestined an increase in APP fraud and consequential legal disputes; between 2019 – 2022 the Quincecare duty was considered by the Court four times.

The most relevant case in respect of the issues in Philipp v Barclays Bank UK PLC [2023] UKSC 25 was Singularis Holdings Ltd (in liquidation) v Daiwa Capital Markets Europe Ltd [2019] UKSC 50, in which the Court developed the Quincecare duty such that it was no longer solely a negative duty to refrain from executing the payment but also a positive duty to make the reasonable enquiries.

Philipp v Barclays Bank UK PLC [2023] UKSC 25

Mrs Philipp instructed Barclay’s to transfer two payments totalling £700,000 into an account held by a fraudster in the United Arab Emirates. Mrs Philipp delivered her instructions in-person and confirmed via telephone. Once the funds were misappropriated, Mrs Philipp sued Barclays, and argued that the Quincecare duty applied regardless of the fact that she, as opposed to an agent, provided the instructions.

When determining this case, the Supreme Court took the opportunity to re-write the logic of the Quincecare duty.

First, banks have a primary duty to their customers to act with reasonable care and skill when executing their instructions. This duty must be strictly adhered to and is not in conflict with any of the bank’s other duties.

Second, there is a distinction between the agent’s actual authority and apparent authority. Actual authority is granted by the customer for the sole purpose of the agent undertaking actions which they honestly believe will advance the customer’s best interests. When the agent acts otherwise than to undertake such actions yet feigns to others that they are doing so, the agent acts beyond the scope of their actual authority. Therefore, the agent merely has apparent authority.

As it is inconceivable that a customer would authorise their agent to defraud the customer, when the agent seeks to do so, the agent creates the façade of having actual authority but in fact has apparent authority. Once the bank suspects the agent is acting outside the scope of their actual authority, the façade is broken, the apparent authority ceases to exist, and the bank is on notice that the agent has no authority. In such circumstances, the bank’s primary duty requires the bank to make enquiries to ascertain whether the agent’s instructions are actually authorised by the customer.

Lastly, if the bank is on notice or has reasonable grounds for suspecting the customer lacks the mental capacity to manage their financial affairs, the bank is not to execute the customer’s instruction until enquiries regarding the customer’s authority have been made.

In applying the above logic to the facts in Philipp v Barclays, the Supreme Court found against Mrs Philipp because she unequivocally gave her instructions to Barclays, and so the bank was not required to make reasonable enquiries or refrain from executing the instructions.

 Following this case, the scope of the Quincecare duty is refined and specific: the duty only arises in circumstances where an agent has acted beyond the scope of the actual authority granted to them by the customer and a reasonable banker would have cause to suspect this. Consequentially, the Supreme Court’s judgement removes the possibility for individual customers to recover their lost funds from the bank, save for a caveat of protection for individuals who lack mental capacity.

Predictions

The Court’s reluctance to impose a detailed regime of bankers’ duties means the task has been passed onto Parliament, regulators and government.

Parliament has explicitly delegated the task to the Payment System Regulator (PSR) by virtue of section 72 of The Financial Services and Markets Act 2023 which obliges the PSR to prepare and publish policy regarding requirements for reimbursement in respect of cases in which customers would have previously sought to rely upon the Quincecare duty.

In June 2023, the PSR prepared and published a Policy Statement which describes their proposal to impose a system of mandatory reimbursement. Under this system, banks will be obliged to reimburse a “consumer, microenterprise, or charity” who was incited by APP fraud to transfer funds under the Faster Payments Scheme (FPS), a service which actions payments of up to £1 million within 2 hours.

The PSR states that FPS was used in 97% of APP fraud payments. However, this does not mean that 97% of the funds acquired through APP fraud were done so using FPS because this scheme limits transactions to £1 million.  Therefore, higher values that were obtained through APP fraud were done so using different payment systems. This highlights the problem with the PSR’s mandatory reimbursement system: customers who have been defrauded of larger values will be excluded from protections.

Fortunately, the Bank of England (BoE) has indicated it will implement similar measures of reimbursement for consumer payments made under a different transfer scheme which is not capped at £1 million. Although, the BoE have indicated an upper limit will be set, they have not stated figures.

Whilst the PSR has proposed that the liability for the reimbursement be divided 50:50 between the bank which sent and which received the funds, the BoE’s measures will provide the customer with additional security by imposing an obligation on the sending bank to reimburse the customer within a specified timeframe. The sending bank may then separately seek to recover an appropriate proportion of the costs from the receiving bank.

Both the PSR and BoE have indicated the mandatory reimbursements systems will come into force in early 2024. Nevertheless, until then, individuals will have no viable option to recover their misappropriated funds in transactions exceeding £1 million. Additionally, the PSR’s, and most probably the BoE’s, systems will not apply to international transactions – hence, the protections do not fully reflect the realities of APP fraud. Therefore, a potential negative consequence is that the Supreme Court’s decision and the mandatory reimbursement systems may encourage fraudsters to use international accounts and demand higher payments.

Conclusion

 Since the creation of the Quincecare duty, the Courts have increasingly narrowed the circumstances in which it may apply; Philipp v Barclays Bank demonstrates this. Whilst bankers will welcome the Supreme Court’s decision, their celebrations will be short lived as the PSR’s and BoE’s systems of mandatory reimbursement will be operational in early 2024.

Hannah Sinclair is a first-class law graduate from the University of Bristol and an aspiring barrister. She is currently working as a paralegal.

Cardiff University law student Sophia McKenna takes on the struggle with access to justice and explores how we can develop effective solutions

Reflecting on the recent events of Covid-19, the Russia-Ukraine conflict and UK inflation creating uncertainty and vulnerability, it seems appropriate to consider the issue of access to justice.

It has been over ten years since The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) was implemented, which cut legal aid provided by the government. The Law Society has highlighted how 61% of their member solicitors have been concerned recently about LASPO’s impact on access to justice.

Solicitors have a duty of care towards their clients which requires them to act with ‘reasonable care and skill’ to provide a high quality service. The professional standard is outlined by the Solicitor Regulation Authority in a Code of Conduct and through seven key principles (administration of justice, public trust, independence, honesty, equality/diversity/inclusion, act in the best interests of each client).

Given these regulated professional and ethical standards for solicitors to their clients, should they also have a duty to share their legal knowledge with those who cannot afford legal advice in order to uphold access to justice?

Although the profession recognises the issue with access to justice, The Legal 500 Future Lawyers emphasises that law firms are businesses which need to prioritise client work. Solicitors cannot give full attention to pro bono work and therefore mandatory pro bono is not the most efficient or long term solution.

The Post-Implementation Review of Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 explains that legal aid cuts aimed to create a ‘sustainable’ approach to legal aid as the £2 billion per annum given to legal aid in 2013 could not be continued. As a result, the focus shifted to balancing taxpayer contributions alongside the needs of the most vulnerable people. However, this has resulted in strict eligibility requirements for legal aid which leaves some people cut out from the justice system depending on their type of case.

The Law Society recognised these ‘legal deserts’ and campaigned for a change. This resulted in an agreement for a civil legal aid review report to be published in 2024. These multiple reviews since the implementation of LASPO show that change is needed, and that the approach to providing access to justice has to be monitored. Michael Gove’s (former Justice Secretary) previous suggestion of mandatory pro bono work as a ‘professional duty’ is not a realistic solution as solicitors already have a heavy workload and the government still needs to do their part in maintaining access to justice.

Hence, at this juncture, it is important to assess the future direction and the key contributors to access to justice. Students, solicitors, law firms, charities and the government have to unite in their efforts to ensure there is a comprehensive approach to access to justice.

Student participation in pro bono

Student participation in pro bono, rather than mandatory pro bono for solicitors, would be a fair and sustainable way to create a stable future for access to justice. By universities encouraging pro bono, not only would law students further their legal career development and learn new skills — genuine, generational, and widespread societal commitment to ensuring access to justice could be firmly established.

This is a realistic solution, with LawWorks encouraging student pro bono participation. Students would be able to assist with cases that do not qualify for legal aid and this would be ‘an integral way of instilling the ethos of pro bono work’ in future solicitors. It could be argued that this may be difficult to facilitate widely in all areas impacted by legal aid cuts as insurance and qualified lawyers acting as supervisors would be needed in order to comply with The Pro Bono Protocol. But this is not necessarily the case – consider, as an example, the New York Bar’s requirement for applicants to undertake fifty hours of pro bono work. This demonstrates that large scale pro bono can be implemented successfully.

The implication is that student pro bono initiatives could be encouraged on a national scale, across the UK, by universities and the government. A more structured and centralised student pro bono system, supported by the government, could be formed to make efficient use of student contributions. This would make a bigger impact on and be targeted towards access to justice, in addition to university specific pro bono projects. Creating a passion for pro bono in students could increase the amount of future solicitors who would want to participate in pro bono to ensure access to justice, without needing to force a regulated pro bono requirement.

In addition, the Solicitors Qualifying Examination (SQE) could potentially facilitate a rapid improvement in access to justice as pro bono can be used towards the Solicitors Regulation Authority requirements of qualifying work experience. This is significant as it demonstrates a step towards embedding access to justice into legal training and solicitor qualification in an incremental manner; with the ability for aspiring solicitors to train at charitable organisations.

Alongside the involvement of charities in qualifying work experience, charities also aim to facilitate some funding for access to justice organisations.

Charities

The Law Society ‘Spotlight on: Access to Justice Foundation’ explores the important role that the charity plays in ensuring access to justice. The charity raises funds and shares them between organisations to support access to justice. For example, pro bono cost orders ‘must be paid to the Access to Justice Foundation’ when the party that had free representation succeeds in civil proceedings. However, raising funds may be an unreliable way to provide legal aid as there will be variation in resources amongst organisations. This means that a consistent standard of legal support may not be provided in all access to justice cases.

The lack of resources is evident from 92% of the Citizens Advice Bureaux in 2014 struggling to be able to refer people for ‘specialist legal advice’. This shows that charities may be able to help with initial advice but progressing and resolving a case can be difficult with delays. Access to justice is reliant on the amount and range of solicitors who can volunteer, in their spare time, for charitable organisations. For example, volunteer solicitors are a great support to Citizens Advice who can provide a list of free solicitors to people who cannot afford legal advice, to law centres and to LawWorks or the National Pro Bono Centre by undertaking pro bono opportunities.

Although charities contribute to access to justice, they are not the most secure or full solution. It could be argued that a professional duty for solicitors to do pro bono would guarantee solicitor contribution to charities that help those without legal aid. However, this would put immense pressure on solicitors, so instead, a balanced solution is needed. More resources and time is needed to create a stable commitment to access to justice which law firms could provide under their corporate social responsibility.

 Law firms and their corporate social responsibility towards pro bono

As BBC News highlighted in 2013, the government wanted ‘to see fewer but bigger organisations providing legal aid’. This supports the idea of law firms providing opportunities and dedicated time for pro bono work targeted towards access to justice, either through law firm pro bono projects or charities. This would enable solicitors who value access to justice to work for law firms that share this goal within their corporate social responsibility instead of a mandatory pro bono requirement.

Law firms are increasingly alive to their moral obligations, as demonstrated by most firms closing their offices in Russia in 2022 due to the Russia-Ukraine conflict and sanctions. Therefore, law firms are likely to also understand how pro bono opportunities for their solicitors are an important way to contribute to access to justice and make a valuable community contribution.

Although law firms may believe pro bono reduces time and focus given to their client work, this is not necessarily the case. Law Works suggests ‘A Business Case for Pro Bono in Law Firms’ which explores the idea that pro bono and business can ‘complement’ each other.

Law firms can benefit from pro bono initiatives by solidifying their corporate social responsibility and ‘attract value-matched clients’ whilst solicitors are given more specific time through paid or volunteer opportunities to contribute to pro bono cases in order to improve access to justice. This would enable a suitable compromise which would allow solicitors to work for access to justice cases without being overburdened with mandatory pro bono requirements.

Law firms encouraging pro bono contributions from their trainees and solicitors would enhance their skills as it would provide strong ‘training and professional development’. Furthermore, LawWorks refers to a 2016 study which found that 75% ‘of millennials would take a pay cut to work for a socially responsible company’ and 76% of millennials would ‘consider a company’s social…commitments before deciding where to work’. Therefore, it is important for law firms to incorporate pro bono for access to justice causes into their working culture in order for them to remain a strong contender ‘in a market where the competition for legal talent…can sometimes be fierce’.

It is important for law firms to further embrace pro bono which would allow solicitors who are passionate and willing to contribute to access to justice to do so, rather than imposing a mandatory pro bono requirement.

Now is a great time for law firms to strengthen access to justice within their corporate social responsibility. With recent and future developments in AI and technology, it will assist solicitors with their work and give them more free time. Law firms can distribute this extra time towards optimising their client work and incorporating access to justice cases into their working culture.

Overall, it is evident that access to justice involves a range of elements with students, charities and law firms contributing to access to justice. This demonstrates that the narrow approach of mandatory pro bono for solicitors is not the solution. Unless the government makes significant changes to legal aid following their 2024 review, it remains that a wide approach involving key contributors must be taken.

Sophia McKenna is a third-year law student at Cardiff University. She is a Legal Cheek Campus Ambassador 2023/24 and a pro bono student volunteer at Cardiff University.

Linklaters associate Charlotte Beardsworth reflects on her career so far

Fresh back from a seven-month secondment with a large player in the gaming industry, Linklaters associate Charlotte Beardsworth sits down with Legal Cheek Careers to discuss her career so far, the gaming sector and the ever-increasing reach of regulation in the tech field.

Having made an early decision to pursue a legal career, the St Andrews grad decided to first explore a philosophy degree at University. “Law was something that I really felt would suit my natural attributes” Beardsworth recalls, “and I decided that I could pursue a career in law after my undergraduate degree through a conversion course. I didn’t want to limit my career options from the outset, and instead I picked something I knew I loved doing and tried to learn what I could about getting a training contract whilst studying”, she explains.

During university, Beardsworth completed a vac scheme with the Magic Circle firm and hasn’t looked back since. “I really enjoyed my experience at the firm during my vacation scheme; the work was interesting and I felt very welcomed by the people I was with. In fact, I met some of my best friends today on that vacation scheme!”, she remarks. “And of course, you get an amazing variety of work across all of the different departments at Linklaters which meant I felt I would have the opportunity to sit in various groups and find out what really interested me!” The decision just made sense; she says, “Linklaters felt like a great place to start my career.”

Not an avid gamer herself, Beardsworth notes how she developed her interest in the digital space during her training contract.

“I found that I really enjoyed competition law; I did a six-month seat during my training contract and found learning about different markets and how competition takes place and is regulated in those markets fascinating. And these days, working as a competition lawyer naturally includes a great deal of work across the tech sector” , she says. The constant innovation, development and progression of the tech space has made it an interesting sector to work in, as law is constantly chasing technology.
Gaming has become a really large and diverse industry within the entertainment sector, and I was keen to learn more about it. So, I was very excited to have the opportunity to go on secondment and understand the industry from within one of Linklaters’ clients”.

Beardsworth continues: “What I also find particularly interesting is that the tech sector, of which gaming is a big part, has such a massive and increasing impact on all of us, every day  -even when you aren’t aware of it!. Everything we experience from search engines to social media, games, fitness apps, online shopping platforms, adverts on billboards, films and music all rely on “tech.”.

Also, tech develops and changes every day – the experiences and capabilities you can have within a game these days, for example, are hugely different from just a year ago – and the devices on which you can play a game are different too! For example, there are constant developments in cloud gaming, virtual reality headsets, Esports and mobile gaming – to name just a few! It’s this blend of rapidly developing digital markets and the scale of impact that the work has which appealed to me then, and still appeals now.”

Speaking of this varied work, Beardsworth assures me that there is never a boring day within the competition team; the variety of tasks and spread of different industries, companies, and questions from clients bringing a new challenge each day. These factors, Beardsworth says, are what ultimately helped her decide to qualify into the Antitrust & Foreign Investment group, where she has remained for the last four years.

Reflecting on her recent secondment, she says: “The opportunity to go on secondment is amazing, and something that I think is pivotal to your development and learning as a lawyer. I had the opportunity to do an international secondment during my TC with Linklaters’ Singapore office which was so great, both personally (there were lots of great travel opportunities!) and professionally. After that experience, when I was asked whether I would be interested in going on a client secondment, I jumped at the chance. Not only was it super interesting and an enjoyable time, but it’s definitely made me a better lawyer.”

Speaking more on this latter point, the associate notes the twofold benefit of having the opportunity to work directly with a client. “Having seen where my work product goes and how it’s used, I’m now able to better understand what the client needs, and tailor my product to address that.”

This is something, she says, is useful industry-wide, and not just in relation to a particular client. As for the second benefit, Beardsworth notes how being embedded in the client’s operation, “you really get to understand the business, how it operates and its products are, and how the industry is developing”. As a result, she’s returned to the Linklaters’s snazzy London office with fond memories, a wealth of new industry knowledge, and an understanding of how her team’s work is used, and therefore how to make it more efficient and effective.

Moving towards the end of our chat, Beardsworth offered some advice for those looking to apply for a training contract: “I think, these days, it’s much easier to keep up-to-date with anticipated changes in the law and have an idea of what a law firm is doing day-to-day because there are so many more blogs, tweets and online updates out there than a few years ago. They’re digestible, accessible, short, current, and often, you can quite easily subscribe to them. The students who arrive for vac schemes and are able to talk about some of the things our team has been up to or are aware of developments in the law definitely stand out from the rest,” she explains.

This isn’t to say, however, that an encyclopaedic knowledge of all things legal or tech is required. “What commercial awareness is about is not knowing everything that a firm is doing, that’s obviously impossible, but following something you’re genuinely interested in (such as gaming) and understanding how changes in the law or developments in cases might affect law firms, their clients and ultimately, consumers. It’s much easier to demonstrate that you are passionate and enthusiastic about a career in law when the legal developments you’re talking about directly relate to a sector or industry you’re naturally interested in.

It’s also worth noting, the associate says, that commercial awareness isn’t just something vacation scheme applicants need to be aware of, but it is very much part of one’s career as a lawyer. “Even now, whenever I see the news, I’m thinking how this will impact the law, what issues or opportunities might clients face, and how the broader industry or consumers will be affected”, Beardsworth explains.

Beardsworth rounds off with a poignant reiteration. “It really isn’t about knowing everything about law, or every recent case or piece of regulation that’s emerging”, she says. Have a look at what firms are doing, see what you find interesting, and then build from there to develop a greater understanding and awareness. Whether your interest is sport, music, gaming, or fashion, every industry is directly impacted by developments and changes in the law, and if you can show your enthusiasm and willingness to learn about a whole range of types of law through a sector you’re interested in, you’ll do well.”

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Lawyers Ria Das and Sia Das explore the pressing problem of biopiracy of indigenous knowledge

Indigenous people are seeking to protect their indigenous knowledge and practices from commercial exploitation. With rapid advancements in science and technology, there is increased interest in appropriating indigenous knowledge for scientific and commercial purposes. There are instances where big pharmaceutical companies have patented traditional medicinal plants even though indigenous peoples have used such plants for generations. In many cases, these large companies do not recognise the right of indigenous peoples’ traditional ownership of such knowledge and deprive them of their fair share in the economic, medical or social benefits that accrue from the use of their indigenous knowledge or practices.

Biopiracy: The corporate hijacking of indigenous knowledge

Traditional knowledge includes indigenous and local community knowledge, innovations, and practices. It refers to skills and practices that have developed through a trial-and-error method, and passed on from generation to generation within a community.

Biopiracy occurs when genetic resources and indigenous knowledge is taken from biodiverse developing countries without permission. This knowledge is then used to patent related inventions without sharing the resulting commercial profits. The original knowledge holder receives no gains from the use and is likely barred from obtaining a patent.

Commercialisation of resources used by indigenous people is a booming business. Many of the products incorporating indigenous know-how are protected by patents that profess the products’ “novelty” and “innovativeness.” Giant commercial enterprises are using intellectual property rights to patent indigenous medicinal plants, seeds and genetic resources.

Without any legal protection for indigenous knowledge, biopiracy is often a shortcut to gain massive profits without having to provide a fair share of compensation to the local and indigenous communities.

The value of the market for medicinal plants found by indigenous and local communities has been estimated to be around $50 million – and this figure is just for the USA. Obtaining indigenous knowledge increases the efficiency of the screening process for plants with medicinal properties by more than 400%, which is why indigenous peoples’ knowledge is so valuable.

Hurdles to patent protection of indigenous knowledge

A patent is an exclusive right that is granted for an invention. This can either be a product or a process that generally provides a new way of doing something, or offers a new technical solution to a problem.

Patent law requires that the invention should meet three criteria before a patent protection is granted: (1) new or novel, (2) non-obvious, and (3) useful. All inventions which meet these criteria are legal but the problem arises when patenting of (often spurious) inventions based on biological resources and/ or indigenous knowledge are extracted without adequate authorization and benefit sharing from other countries.  These resources are the result of years of hard work and investment of indigenous and local communities which goes unacknowledged and unrewarded.

Under the existing regime, indigenous knowledge and invention is not fit to get patent protection as a result of two factors.

The first element assessed under an application for a patent requires that an invention must be new and innovative. These indigenously developed products are arguably neither new nor innovative, as use of these resources has been developed based on existing indigenous knowledge of the natural world, often held among indigenous communities and local farmers.

The newness criterion is difficult to prove for indigenous peoples because indigenous knowledge is passed down from generation to generation and it is difficult to determine who is first to discover the knowledge. This indigenous knowledge is neither written nor documented anywhere. As long as there is no public written record, a foreign company can go into another foreign country and use this knowledge handed down by indigenous peoples to obtain a patent.

The second element assessed under an application for a patent requires that an invention be non-obvious. The indigenous peoples have already discovered the plants, assessed their healing and medicinal properties and cultivated them for their use. This knowledge, however, is not considered on par with western standards because the indigenous peoples are not looking to profit from the knowledge.

The elements of newness and non-obviousness under patent law operate under the premise that a particular invention should provide certain incentives to the inventor and without it, inventions will not be made. This way of thinking is generally derived from business economy, establishing that without personal monetary benefits no one will create or invent. Alternatively, inventions from indigenous knowledge allow for mutual benefits for the sake of the community without the need for any personal monetary rewards or profits. Unlike in indigenous communities, the western view doesn’t see community rewards as an end result. Rather the prevailing belief is that if a person is given an incentive to invent, the community will be ultimately benefitted from it.

Existing international legal mechanisms to combat biopiracy

At the international level, the most important multilateral agreement on intellectual property is the TRIPS (Agreement on Trade-Related Aspects Intellectual Property Rights) and includes protection for different varieties of plants. However, there is no recognition in the TRIPS agreement for prior informed consent from the indigenous communities for use of their knowledge and genetic resources.

The Convention on Biological Diversity (CBD) was the first move towards international dialogue on the protection of biodiversity and indigenous knowledge protection (Ministry of Environment, Forest and Climate Change 2019). However, it is confined only to genetic resources. Subsequently, the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) 2007 provides indigenous peoples “the right to maintain, control, protect and develop their intellectual property over their cultural heritage, traditional knowledge, and traditional cultural expressions”.

Additionally, the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA) was adopted by the FAO in 2004 and allows citizens of signatory countries to use the resources, provided they use them for non-commercial purposes and do not acquire IP rights over the same.

Another highly significant international agreement is the Nagoya Protocol on Access and Benefit Sharing to the Convention on Biological Diversity (CBD) — this may help resolve some of these ambiguities, but it too has fallen short on protection of rights of indigenous people. These agreements deal with very limited subjects of indigenous knowledge i.e., genetic resources and biodiversity to the exclusion of others and therefore, do not cover all the intellectual property issues.   The current international patent regime is incapable of recognizing or rewarding the indigenous knowledge of local communities as many countries are not signatories to these treaties and therefore, these international bodies offer little protection.

Instances where indigenous knowledge has been patented for profits

Big corporations like Bayer-Monsanto, Syngenta, Dow/Corteva and others have been generating profits by patenting indigenous seeds and control more than half of the global seed market. Unfortunately, this is without the knowledge and consent of Indigenous communities. Other well-known instances are:

The Ayahuasca case

Lorren Miller was granted an US patent over B Caapi Mort. He named it as ‘Da Vine’ and stated that it had certain medicinal properties.

In 1999, the CIEL (Center for International Environmental Law) on behalf of the Coordinating Body of Indigenous Organizations of the Amazon Basin (COICA) and the Coalition for Amazonian Peoples and Their Environment (Amazon Alliance), filed a legal opposition against the US patent on “Ayahuasca” vine on the ground that it is sacred to indigenous Amazon groups and has been used for medicinal and ceremonial purposes for generations.

In November 1999, the US Patent and Trademark Office (PTO) withdrew the patent granted upon reexamination. The PTO accepted the petitioners’ contentions to the extent that the plant variety was not distinct or novel as it was used for generations. However, the PTO did not take into account the arguments that plants’ religious value can prevent a patent grant.

However, in 2001, the inventor was successful in convincing the PTO. So, the original claims were reconfirmed, without giving any opportunity to CIEL, COICA and Amazon Alliance to present their opposing views. The patent rights were restored to the owner, Lorren Miller for the remaining two years of its patent period.

The Hoodia Case

The indigenous San people, who are one of the oldest and most marginalised communities on the African continent, have long been using the succulent plant “Hoodia” to stave off their hunger and thirst. In 1995, the CSIR (Council for Scientific and Industrial Research) patented the active ingredient of the plant and stated it was a remedy for anti-obesity. Later in 1997, it was patented to Phytopharm, a British biotech firm, which then sold the license to produce and sell it as an obesity treatment to Pfizer.

The San people came to know about the exploitation of their traditional knowledge and in 2001, they initiated legal proceedings on the ground of biopiracy against CSIR and pharmaceutical industries.  It was contented that CSIR had stolen their traditional knowledge and failed to comply with the CBD (Convention on Biodiversity) provisions which required them to take prior informed consent from all stakeholders, including discoverers and users.

In March 2022, an agreement for benefit sharing was reached between the parties and it was decided that the San community would receive a share of future royalties.

The way forward: Protecting indigenous communities’ traditional knowledge

At the national level

• A database for indigenous people’s traditional knowledge can be created. An authenticated database including the list of traditional formulas, herbal preparations, seed variety etc., would be available to all the patent authorities and systems. This will ensure that there are no false claims of novelty and distinctiveness. India provides an example of where traditional knowledge of local communities is compiled and registered in such a database and this is updated in accordance with local needs, knowledge and laws.
• Local units can be set up at each district/region to support communities to develop protocols that will guide local communities and outsiders (corporations, researchers) in discussions about informed consent, benefits sharing, conservation benefits and access to indigenous knowledge and biological resources.
• In addition to international recognition of the right of indigenous peoples, a framework needs to be developed by states that recognises the relationship between indigenous knowledge and customary law and provides a safe space for the operation of indigenous legal systems. This will protect the traditional knowledge from misappropriation and misuse and will further provide additional benefits to indigenous communities that flow from the recognition of ownership.

At the international level

• Patent applications can be made more conditional by adding requirements as to origin disclosure of traditional knowledge/resources and evidence of informed consent and fair benefit sharing. A proper identification system should be developed for each case before the patent office.
• Regulatory gaps need to be closed in the international laws and conventions. The Nagoya protocol has several lacunae. For instance, it does not have a forum for adjudicating indigenous peoples’ biopiracy claims and also has a weak penalty regime. As a result, the disincentive against biopiracy is not sufficiently potent.

Concluding thoughts

Development of national level mechanisms and legal provisions is the need of the hour to prevent the corporate hijacking of indigenous knowledge. At the core of this concern is the need to share biodiversity benefits equitably and fairly, and to safeguard rights to food and biodiversity, promote environmental justice and health equity for all. Through our suggestions, we aim to address biopiracy and provide economic aid to indigenous communities, allow companies to responsibly develop and use traditional knowledge and resources from these communities, and promote local and global well-being. Unfortunately, till now, no inclusive and coherent efforts have been made internationally to address this concern.

Ria Das and Sia Das are lawyers in the Delhi High Court in India. They act in a variety of matters including socioeconomic issues, environmental law and criminal law, and also carry out international law and policy research.

Exeter Uni law student Dara Adefemi explores the complexities of competition law

On January 18, 2022, Microsoft announced its intention to acquire Activision Blizzard for $95 (£76) per share in an all-cash transaction valued at $68.7 billion (£55.4 billion). If successful, the deal will transform Microsoft into the third-largest gaming company by revenue.

Background

By nature, an acquisition of this scale is bound to meet resistance from regulators worldwide. Regulators are always apprehensive about endorsing deals with a high risk of producing a ‘monopoly’ (a company whose product dominates an entire industry) and significantly eliminating competition or disadvantaging consumers. Therefore, it is important for deals of this nature to be approved by regulators worldwide to ensure there is a global agreement that competition within the market is not being significantly harmed. A global endorsement is important to Microsoft to avoid the risk of being unable to conduct business in disapproving countries.

Allies and foes

Microsoft is involved in, what I would describe as, the first ever regulations world war. Regulators across the world are standing either beside Microsoft or against them. Microsoft’s allies, who hold that its acquisition of Blizzard will not reduce competition, total over 37 countries, including China (the world’s largest gaming market), New Zealand (the most recent addition) and the European Commission (who first stood as a foe but were converted to allies in May 2023 after Microsoft provided them with a list of 10-year licensing commitments). From this, it can be seen that Microsoft stands in a very strong position as it has significant backers behind the deal.

However, standing as foe are two of the most powerful regulators in the world: The Competition and Markets Authority (CMA) and the Federal Trade Commission (FTC).

In December 2022, the FTC sued to block Microsoft’s acquisition of Blizzard. They went as far as to request a restraining order in June 2023, requesting to completely immobilise the merger during the duration of the lawsuit. This was successful. However, in July 2023, the courts denied the FTC’s request to extend the restraining order,  on the grounds that they had not sufficiently proved that the deal will lessen competition. Relentlessly, the FTC appealed this decision the following day. This appeal was denied. The denial of the FTC’s appeal ended Microsoft’s regulatory struggles in the US and served as a victory by default as it rendered the FTC’s disapproval powerless.

In January 2023, the CMA provisionally opposed the deal. In March, they released a statement stating that Microsoft had addressed one of its key concerns by providing evidence. Based on this announcement, the UK believed that the CMA’s approval was imminent. However, in April 2023, the CMA took the UK by surprise by vetoing the deal because of the ‘consequences it will have on the cloud gaming market’ to which Microsoft’s solution was rejected. Microsoft and Blizzard have appealed and, alongside the world, await the results.

Some thoughts on the matter

Though I am a big supporter of the deal, it is important to understand why the FTC and the CMA are taking such a strong stand against Microsoft and its allied forces.

Microsoft owns Xbox, the second most popular gaming console after PlayStation, making them direct competitors to Sony and other large gaming companies like Tencent. It is therefore a possibility that Microsoft are acquiring Blizzard, who own leading games such as Overwatch and Call of Duty, to grant themselves a competitive advantage by making Blizzard games exclusive to Xbox.

In doing this, regardless of preference, if a consumer wanted to play a Blizzard game, they would have to purchase an X-box instead of a PlayStation, thus eliminating Sony’s chance to compete. Therefore, it is entirely possible that the deal would unfairly eliminate competition. However, such is the case with any mega-merger and acquisition — which is why I believe it is important to focus on the intention of both parties.

Microsoft has explicitly stated their intention is “to bring the joy and community of gaming to everyone, across every device”. Their apparent intentions are to create better games and increase the accessibility of these games amongst niche devices. Objectively, the deal is an effective business move for both companies to grow and increase revenue, as are all mega-mergers. However, this is not as selfish an objective as it seems, as it will better equip the companies to meet their consumer’s needs.

Take, for instance, the decision of Vodafone and Three to merge, which will allow customers to enjoy greater internet coverage and reliability. Think also about JustEat and Grubhub’s merger which gave consumers more restaurant options to choose from. I think the ultimate goal of a mega-merger is to better meet consumer needs. This, I believe, is the intention of Microsoft and Blizzard.

Through producing a list of 10-year licensing commitments, they’ve demonstrated that their main objective is to meet consumer needs rather than reduce competition, so it is unlikely that they will take any anti-competitive actions. Seen through the fact that the CEO of Blizzard is set to remain in position after the deal, there are no signs of Microsoft intending to dampen innovation at Blizzard. Therefore, I view the CMA’s and FTC’s adamant resistance towards the deal as unfounded.

I believe competition in the gaming industry will continue to boom and insinuating otherwise underestimates the strength of Microsoft’s competitors. The concerns of the FTC and CMA would be greater justified if Microsoft stood at number 1 in its industry which, presently, is not the case.

Conclusion

It remains Microsoft’s best course of action to reach an amicable agreement with the CMA as, to win they appeal they are burdened with the difficult task of proving  the CMA’s  decision to veto the original deal was wrong. Their best course of action would be to come to an amicable agreement with the CMA by agreeing to a set of demands. The CMA’s continued rejection of Microsoft’s proposals makes this a near impossible task.

Importantly Microsoft’s agreement to license call of duty to Sony forced the CMA to re-evaluate the deal due to a change of the original terms.

Due to the CMA’s relentless rejections of Microsoft’s proposals, reaching an amicable agreement seemed unlikely. Nevertheless, after a tumultuous battle, Microsoft’s victory against regulatory constraints appears imminent as the CMA now hold that Microsoft have addressed their concerns. By agreeing to transfer Activision games streaming rights from the cloud to Ubisoft for 15 years, Microsoft have relinquished control of Activision games which is a significant deterioration from their original deal that likely affects the value for money Microsoft are receiving. Despite this, the new term has paved a path for UK approval though we still await a final decision from the CMA.

Dara Adefemi is a second-year law student at the University of Exeter. She is an aspiring commercial solicitor with an interest in M&A, ESG and competition law.

University of York law student Phoebe Parker explores the implications of unexpected events in today’s rapidly changing world

How do you define an act of God? At first glance, this question doesn’t appear to have much to do with law. In contract law, however, the existence of the force majeure clause means that contracting parties are forced to answer that question.

Setting the scene

A force majeure clause allows for the suspension or termination of a contract if its performance is heavily delayed or made entirely impossible by an event so far beyond the control of either party that it can be considered an “act of God”. Via a handful of current examples, this article demonstrates how the perhaps seemingly niche clause can be a point of contention, due to an increase in drastic world events. Moreover, this clause can also boost fairness in the competitive world of commercial law, allow the law to protect weaker stakeholders and allow contracting parties to effectively mitigate risk.

Case study one: Pfizer and pilfered supplies

The Covid-19 pandemic was an uncontrollable act of God which delayed, frustrated and otherwise kiboshed hundreds of thousands of contracts, resulting in terminations and suspensions on a global scale.

One recent, and perhaps ironic, example, occurred in late 2022, when Poland claimed force majeure against Pfizer due to the pandemic subsiding unpredictably and uncontrollably. They have since refused to accept or pay for vaccines.

Pfizer acquired a contract with the 27 member states of the European Union (EU) for billions of vaccines in 2020, before they had even been approved for production. Now, as interest has plummeted and supplies have amassed, it faces contention from contracting parties like Poland. It is difficult to argue that the pandemic’s end is any more or less predictable than its beginning and it is unlikely that this will be the last time force majeure is evoked on this basis.

Most recently, in June 2023, the European Commission came to an agreement with Pfizer, but Poland continues to refuse to do so. The Polish Health Minister, in an interview with the Polish Press Agency, stated that the country “continued to believe that the conditions negotiated by the Commission… with Pfizer are completely inadequate”.

Case study two: Wildfires and withholding refunds

A type of event often incorporated into force majeure clauses is natural disasters, such as the 2023 Greek wildfires which started in July. The extent of the fires is certainly unpredictable and devastating but holiday operators are still attempting to mitigate their losses.

An article in the Financial Times noted that while some operators are offering refunds to those due to travel before 31 July, those who do not wish to risk it after this date may find themselves shouldering the cost. Equally, no Foreign, Commonwealth & Development Office (FCDO) warning has been issued against travel to the areas affected, further limiting the scope of refunds and rebooking. Travel insurance policies typically require FCDO travel advisories to have been issued before they will consider trip cancellation and interruption claims. Therefore, the lack of a formal advisory in the current circumstances leaves travellers with no contractual grounds on which to make claims.

As our climate continues to change, it is likely that there will be more events like this. The force majeure clauses present in contracts between holiday operators, travel insurers, holidaymakers and other key parties are, therefore, likely to be of increasing interest. A balance will have to be struck between financial surety for businesses and the facility for individuals to be reimbursed for loss over which they had no control.

Fairness and Laissez-Faire

The world of business, especially in the United Kingdom, is often defined as laissez-faire, with contracting parties being, in many ways, free to set their own standards of fairness. It is a key concept of contract law that the law will not necessarily quash a clause because it is unreasonably detrimental to one party.

In force majeure clauses the same emphasis applies, with good drafting being key to the clause benefiting both parties. An example of where a force majeure clause could be used to enforce fairness or morality is a business extracting itself from Russia due to the conflict in Ukraine. Armed conflict can and has been included in definitions of an act of God. The war in Ukraine has taken an incalculable toll on the country and businesses can withdraw from Russia as an act of moral activism on the basis that it is entirely beyond their prediction or control.

As force majeure has no intrinsic meaning in English law, it is a concept which can be manipulated to best serve contracting parties. This type of clause, therefore, is a key example of the law adapting to serve those it governs.

AI and adapting employment contacts

Much like climate change, artificial intelligence (AI) continues to develop at a rapid rate and will have immeasurable, unpredictable consequences. This is especially the case when it comes to employment.

Even within the legal field, there is much talk of the administrative work often left to trainees being entrusted to AI instead. While this may sound a plot line from The Matrix or a vision from a dystopian future, a quick conversation with Google’s AI programme Bard, or OpenAI’s ChatGPT, will demonstrate that this is very much reality.

I asked ChatGPT what it thought of the premise of this article and within a few seconds it gave me a comprehensive 200-word answer, raising points around Covid-19 without any prompting. Force majeure clauses, then, could be used in the future to protect employees from unfair dismissal as a result of AI being able to carry out their jobs.

It is inevitable that AI will develop to fulfil certain roles far more cheaply and efficiently than human beings, but individuals having their jobs usurped in this way is not particularly fair and high levels of unemployment rarely contribute to a prosperous, lawful society.

Force majeure clauses in employment contracts could be drafted to include the advancement of AI as an unforeseeable act of God, beyond the control of the employee, thereby disallowing any termination of such contracts on this basis. This expansion of the concept of force majeure would protect the weaker contracting party in the face of an unimaginable event.

Concluding thoughts

Force majeure clauses are a staple of contract law. They require a logical consideration of the nebulous, perhaps philosophical, concept of what can be defined as an “act of God.”.

Due to an apparent increase in unpredictable events, like the start and end of the Covid-19 pandemic and climate change events like the Greek wildfires, this type of clause will continue to be a point of contention. The flexibility of the term, however, allows it to be manipulated to enforce fairness in the law. Looking to the future of the concept means that it can, and hopefully will, be expanded to protect vulnerable parties, like those employees who might be replaced by AI.

Phoebe Parker is a second-year law student at the University of York. Her research interests lie in corporate law, particularly in insolvency and interbank lending.