Dear all,
Belgravia Law’s November Newsletter highlights recent updates and key legal news from the UK and other jurisdictions. It includes the latest legal developments, firm activities, case law analysis and additional insights beyond the legal world.
We hope this is both useful and of interest to you and your colleagues.
Kind regards
Belgravia Law
Arbitration is often seen as a quicker and more flexible alternative to litigation, but it is not without its challenges. One issue that can arise during arbitration proceedings is a jurisdictional challenge - where one party disputes arbitration tribunal’s authority to hear the dispute.
Under the English Arbitration Act 1996 (“AA 1996”), jurisdictional challenges can delay proceedings, incur significant costs and even lead to the annulment of awards. Understanding the common issues that give rise to jurisdictional disputes and the options available to parties is critical for navigating arbitration efficiently.
What Is a Jurisdictional Challenge?
A jurisdictional challenge arises when a party challenges whether the arbitral tribunal has the competence to resolve a particular dispute. The tribunal’s jurisdiction derives from the existence of a valid arbitration agreement.
Jurisdictional challenges can arise in several forms:
Invalid Arbitration Agreement: For example, the arbitration clause may not be properly incorporated into the parties’ contract.
Improper Tribunal Constitution: The tribunal may not have been properly appointed or may be unqualified or fail to meet agreed-upon criteria.
Scope of Disputes: The tribunal’s jurisdiction is limited to the disputes provided for in the arbitration agreement. If claims or disputes are raised that fall outside the original scope, a jurisdictional challenge can occur.
The AA 1996 provides a framework for resolving these challenges, but the process can be complex and has significant legal and financial implications for parties.
Why Jurisdictional Challenges Matter
If a tribunal lacks jurisdiction, any award it issues is not legally binding and can be contested in court. An award issued by a tribunal without jurisdiction may be declared a nullity, meaning all related proceedings and costs could be rendered void. Thus, jurisdictional challenges can result in significant delays and costs.
How to Address Jurisdictional Challenges
When faced with a jurisdictional challenge, the first step is to carefully review the arbitration agreement in the contract, as well as the applicable arbitration rules. Many arbitration rules outline specific procedures for raising jurisdictional issues. Next, parties must decide whether the tribunal or the court should address the jurisdictional issue.
This decision depends on the circumstances, the arbitration rules and the urgency of resolving the dispute. Another important consideration is whether to participate in the arbitration solely for the purpose of challenging jurisdiction. Participating allows a party to directly engage with the tribunal, while choosing not to participate may preserve the right to challenge jurisdiction before the court.
The Role of the Court in Jurisdictional Challenges
If a tribunal asserts that it has jurisdiction but a party disagrees, the decision can be contested in court under Section 67 AA 1996. This allows the court to re-examine the issue, and in some instances, it can lead to the annulment of the tribunal’s decision. The AA 1996 also permits the court to address jurisdictional issues directly, particularly if there has been a failure to comply with procedural requirements. However, such a ruling may result in a stay of arbitration, potentially delaying the resolution of the substantive dispute.
Strategic Considerations for Addressing Jurisdictional Issues
When addressing jurisdictional issues, parties should carefully consider several factors. Timing is critical, as delaying a jurisdictional challenge could result in the forfeiture of the right to object. The choice of whether to challenge jurisdiction through the tribunal or the court will also have financial implications, with challenges before the tribunal often being quicker and less expensive than those brought to court.
Reform of the Arbitration Act 1996
The Law Commission’s review of the AA 1996, which began in 2022, suggests potential reforms to streamline the process for addressing jurisdictional challenges. These amendments aim to reduce the likelihood of full rehearings in court, encouraging more efficient decision-making by tribunals.
Conclusion
Jurisdictional challenges under the AA 1996 are complex but pivotal to the arbitration process. Understanding the grounds for these challenges, the available strategic options and the potential implications for costs and timelines can help parties navigate arbitration more effectively. As reforms to the AA 1996 continue to evolve, staying informed of changes in the legal landscape is essential for making informed decisions when confronted with jurisdictional issues.
The UK government has recently published an advisory warning of attempts to evade the oil price cap, highlighting the use of fabricated and falsified certificates of origin (“CO”) as a key method of circumvention. This guidance is part of the UK's ongoing efforts to ensure compliance with regulations governing oil exports. It provides important details on red flags businesses should look for and how to assess the validity of a CO to prevent fraudulent activities related to the price cap.
The Oil Price Cap
In response to global economic pressures, the UK, along with its international partners, has implemented an oil price cap aimed at limiting the financial impact of oil exports, while maintaining global market stability. The price cap is designed to restrict the financial benefits that can be gained from oil trade, ensuring that markets continue to function efficiently without escalating global prices.
However, there have been reports of evasion strategies, where parties attempt to manipulate documentation to bypass the price cap. One such method involves the falsification of COs, which are used to track the source of oil shipments to ensure compliance with international regulations.
Key Red Flags Indicating CO Fabrication
The latest advisory highlights a range of red flags that suggest potential fabrication or falsification of COs. These warning signs can help businesses and regulators identify attempts to bypass the price cap. Key red flags include:
Unusual Origin Country: If the CO lists a country that does not typically produce or export oil, this could indicate the document is fraudulent.
Discrepancy Between CO and Vessel Tracking: If the CO lists the product as being from a non-producing country, but vessel tracking data indicates the oil came from a different region, this is a red flag. Modern tracking technologies allow for easy verification of shipment details against the declared origin.
Voyage Irregularities: Irregularities such as ship-to-ship transfers, where oil is transferred between vessels in non-standard locations, are often used to hide the origin of the oil. This practice can be an indicator of attempts to disguise the chain of custody.
Multiple Versions of a CO: The presence of different versions of a CO for a single shipment, with inconsistent details, signals potential manipulation. This could involve alterations to shipment details such as quantity, origin or destination.
Inconsistencies Across Documents: If the CO is inconsistent with other shipping documents, such as cargo manifests or transaction records, this is a strong indicator that the CO may not be authentic.
Mitigating Measures and Best Practices
To combat these evasion tactics, businesses should implement proactive measures to verify the authenticity of COs and other related documents. Recommended measures include:
Enhanced Due Diligence: Companies involved in the trading, shipping or receiving of oil should conduct thorough due diligence to verify the origin of oil shipments. This includes cross-checking the CO with other supporting documents like cargo manifests, vessel tracking data and prior transaction history.
Third-Party Verification: Using third-party verification services that specialise in authenticating certificates and documents can help detect discrepancies early in the transaction process, offering an extra layer of security.
Internal Training: Training staff to recognise the red flags associated with falsified COs is essential. Regular updates and training on the latest evasion tactics will strengthen internal controls and reduce the risk of non-compliance.
Reporting Suspicious Activity: Any suspicious activity, including potential CO manipulation, should be reported to the appropriate regulatory bodies. Prompt reporting allows regulators to investigate and take necessary actions against those attempting to bypass the regulations.
Conclusion
The UK’s advisory on oil price cap evasion serves as an important reminder of the risks associated with global oil trade and the need for vigilance in ensuring compliance with international regulations. By understanding the red flags of CO falsification and adopting robust mitigation strategies, businesses can better protect themselves from inadvertently facilitating evasion. For further information on the oil price cap and additional guidance, please visit the UK Government’s website.
The UK government has recently introduced changes to sanctions legislation through the Sanctions (EU Exit) (Miscellaneous Amendments) (No.2) Regulations 2024, laid before Parliament on 14 November 2024. These amendments are designed to enhance the enforcement of financial sanctions, improve compliance monitoring and clarify existing legal uncertainties.
Key updates include the extension of reporting obligations to additional sectors such as high-value dealers, art market participants, insolvency practitioners and letting agents. These sectors will now be required to report suspected breaches of sanctions, with new guidance provided for each sector. Additionally, a new requirement for UK persons holding assets owned or controlled by a designated person (“DP”) to provide an annual report to the Office of Financial Sanctions Implementation (“OFSI”) has been introduced.
Other notable amendments cover the licencing provisions in sanctions legislation, including the creation of new exceptions for insolvency proceedings and required payments, as well as enhanced civil monetary penalty powers for breaches related to land prohibitions. Changes have also been made to clarify the definition of a DP and the scope of the Treasury’s functions in relation to sanctions.
These changes are set to come into force on 5 December 2024, with some provisions, such as the extension of reporting obligations to certain sectors, becoming effective on 14 May 2025. OFSI has updated its guidance documents to reflect these changes, providing further clarity on upcoming obligations for businesses.
This comprehensive update aims to streamline the implementation of financial sanctions and strengthen OFSI's ability to monitor compliance effectively. For further information on the amendments and additional guidance, please visit the OFSI’s website.
On 14 November 2024, the Ministry of Justice (“MoJ”) released its Annual Report and Accounts for the 2023-2024 financial year, offering an in-depth look at the department's activities, governance and performance. The report, which covers the year ending 31 March 2024, is prepared in compliance with the HM Treasury’s Government Financial Reporting Manual and consolidates results from the core department, its executive agencies and relevant arm's length bodies.
Key Highlights from the 2023-2024 Report
The Annual Report and Accounts provide a comprehensive summary of the MoJ's efforts to meet its strategic objectives, illustrating how the department has used its resources and worked towards improving the justice system. The document outlines progress on a range of policy areas, including criminal justice reform, digital transformation in the courts, access to justice and efficiency in the legal system.
Governance and Resource Utilisation
The report sheds light on the MoJ’s governance structures and how its resources have been managed and allocated. A key focus is on the department's ongoing efforts to ensure that funds are used efficiently and responsibly, with an emphasis on transparency and accountability in its financial operations.
The document outlines how the MoJ’s resources - both human and financial - are allocated across various programs and services, ensuring that the department meets its operational objectives while maintaining fiscal responsibility.
Strategic Objectives and Achievements
The MoJ highlights several strategic objectives for the year, including:
Improving the efficiency of the justice system: This includes ongoing efforts to reduce court backlogs, enhance case management processes and improve the overall experience of those interacting with the judicial system.
Strengthening access to justice: The MoJ continues to work on ensuring that the justice system is accessible to all, regardless of financial or social status, through initiatives such as legal aid reform and support for vulnerable populations.
Digital transformation: The shift towards digital services and modernisation of the justice system remains a priority. The report showcases how the MoJ has advanced in its digital initiatives, including the roll-out of online court systems and improving the accessibility of legal services through technology.
Financial Overview
The financial summary within the report provides a breakdown of the MoJ’s funding and expenditure for the year. The MoJ continues to allocate significant resources to maintain and enhance services across the justice sector, while also addressing the challenges presented by inflation and increasing demand for legal services. The report emphasizes that the MoJ has managed its finances prudently to ensure the long-term sustainability of key services.
Looking Ahead
Looking to the future, the MoJ outlines several priorities for the upcoming year, including further progress in its digital transformation agenda, improving the efficiency of the criminal justice process and ensuring fair access to justice for all. The department also aims to continue its work in improving the legal system's ability to adapt to emerging challenges, such as the impact of AI and technology on the legal profession.
Conclusion
The MoJ Annual Report and Accounts for 2023-24 offers a detailed and transparent account of the department’s performance, governance and resource utilisation over the past year. The MoJ’s work reports to be enhancing the UK’s legal system and delivering on its key objectives. As the MoJ continues to address the evolving challenges in the justice sector, this report provides a needed insight into its ongoing efforts and future direction.
In a significant move to update the European Union’s product liability framework, the EU has adopted a new Product Liability Directive (“PLD”), set to replace the existing 1985 Directive. This shift, which comes after years of deliberation, aims to better address the evolving challenges posed by new technologies, including artificial intelligence (“AI”) and interconnected products. The PLD, approved by the EU Council on 10 October 2024, introduces several changes that businesses need to be aware of to ensure compliance.
A Shift Towards Consumer Protection
A notable change in the PLD is its focus on strengthening consumer protection. While the previous Directive sought to balance risks between businesses and consumers, the PLD adjusts the balance in favor of the latter. This can be seen in the updated definitions within the PLD and the introduction of new presumptions in favor of the claimant, making it easier for consumers to hold producers accountable for defective products.
Changes to the “Product” Definition
The PLD broadens the definition of what constitutes a "product". Products now include not only physical items but also software, including AI systems. This extension means that businesses manufacturing or integrating AI or software into their products must be aware that defects in these components can now lead to liability under the PLD. This also covers digital manufacturing files used in 3D printing and other related services that are integral to the functionality of a product.
Redefining “Defectiveness”
While “defectiveness” remains defined as “a product failing to provide the expected level of safety”, the PLD adds specific criteria. For example, products will be considered defective if they fail to meet EU or national safety standards. The revised directive highlights that businesses must account for not only the product’s physical properties but also its interaction with other products and its ability to evolve over time.
AI and Interconnectivity: Special Considerations
The PLD introduces provisions specifically aimed at new technologies such as AI and the Internet of Things (“IoT”). It considers how products that learn or acquire new features after being placed on the market could be deemed defective. Similarly, the interconnectivity between products, such as smart home devices, is now part of the defectiveness assessment. Manufacturers will need to ensure their products cannot evolve into dangerous versions once they are in the market, a challenge for many businesses working with AI or IoT.
New Obligations for Defendants
Another significant change is the disclosure obligations imposed on defendants. Under the PLD, manufacturers and other defendants must provide relevant evidence when requested, even if the claimant is still in the early stages of proving their case. This is a departure from the current regime and will place additional burdens on businesses to maintain thorough records and documentation.
Presumptions in Favor of Claimants
The PLD also introduces rebuttable presumptions of defect and causation, making it easier for consumers to establish liability. If a product fails to meet mandatory safety requirements or if a manufacturer refuses to provide evidence requested by the claimant, the product may be presumed defective.
Compensation for New Types of Damage
The PLD expands the types of damages for which consumers can seek compensation. In addition to physical damage, the directive now allows for compensation related to the destruction or corruption of data, as well as medically recognised psychological damage. Businesses will need to consider these new forms of liability when assessing their product risks.
Extended Time for Claims and Longer Liability Periods
Another notable change is the longer limitation periods for claims. The PLD extends the long-stop period for claims to 25 years in cases of latent personal injury, where the symptoms appear years after the product is in use. For businesses, this means they will need to keep records and insurance coverage in place for a longer period.
Implications for UK Businesses
Although the UK is no longer part of the EU, the PLD will still impact businesses that operate within the EU, including those that sell products in the European market. Further, the UK may eventually update its own product liability regime, particularly in light of the government's Product Safety and Metrology Bill, which is set to modernise the UK’s product safety laws. The PLD could influence how the UK approaches product liability, especially as it continues to align with global standards.
Preparing for the Change
Businesses affected by the PLD need to take proactive steps to ensure compliance. This includes reviewing product safety standards, updating risk assessments and preparing for possible changes in the legal landscape. Companies must also be ready to handle increased consumer claims, as the consumer-friendly nature of the new directive is expected to lead to more litigation in the coming years.
Conclusion
While the revised Product Liability Directive represents a step forward in protecting consumers, it also introduces new challenges and responsibilities for businesses. With changes to product definitions, defect assessments and liability presumptions, companies need to adapt to ensure they are not exposed to increased risks. The shift towards consumer protection is clear, and businesses must stay ahead of these developments to mitigate their exposure and comply with the new regulations.
This article discusses the case of Google LLC v Nao Tsargrad Media, in which the English High Court addresses cross-border enforcement issues. It focuses on the use of anti-enforcement injunctions to block the enforcement of Russian court orders imposing substantial Astreinte penalties.
This article reviews the judgment in Columbia Pictures Corp Ltd v Wanda Kids Cultural Development Co. Ltd, where the English High Court confirmed that serving a claim form and particulars of claim at a company’s registered office in Hong Kong is valid under CPR r.6.40(3) and Hong Kong law. The case provides clarity on the validity of foreign process service and its implications for cross-jurisdictional legal proceedings.
Artificial Intelligence is transforming industries at an unprecedented pace, unlocking vast opportunities for businesses that can effectively leverage its capabilities. However, the complexities of AI governance, compliance and integration require expert legal guidance to navigate successfully.
At Belgravia Law, we are pleased to offer strategic legal support on AI regulation to businesses and startups, empowering them to thrive in the rapidly evolving AI landscape. Our expert team of AI Regulation professionals provides tailored legal solutions, helping organisations navigate regulatory complexities and unlock AI’s full potential with confidence.
We aim to assist both developers and users by guiding them through the AI governance and compliance process, ensuring that AI is integrated responsibly and aligned with regulations in the UK, EU, and US.
Our Core Service Offerings
We offer a comprehensive suite of services designed to guide businesses through the process of integrating, monetising and governing AI. Our strategic services include:
AI Governance Framework Development
We assist organisations in developing and implementing AI governance frameworks that align with industry standards and regulatory requirements. Our approach includes:
Designing custom AI governance structures to meet organisational goals
Integrating AI governance within existing compliance frameworks
Providing guidance on regulatory compliance across key jurisdictions (UK, EU, US)
Developing clear, actionable policies and guidelines for AI governance
EU AI Act Compliance Consulting
Staying compliant with AI regulations is crucial for businesses operating in the EU. We provide expert consulting services to help organisations navigate the EU AI Act, including:
Risk assessments and categorisation of AI systems
Sector-specific advice (e.g., healthcare, finance, transportation)
Developing actionable roadmaps for compliance, such as policy development
Generative AI Usage Support
As generative AI technologies become more prevalent, we provide strategic support for their integration. Our services focus on:
Ensuring compliance with regulatory frameworks
Addressing ethical considerations and risk management
Offering actionable guidance to responsibly integrate generative AI into business operations
Contract Law Support for AI
We ensure that AI-related contracts meet legal standards and address key considerations, including:
Drafting agreements between developers, licensors and users
Addressing complexities such as risk allocation, intellectual property and data privacy
Customising contracts, terms and policies to align with AI regulations and best practices
Documentation and Compliance
We help businesses stay compliant by offering comprehensive documentation and compliance services, including:
Developing AI governance policies and procedures
Assisting with the preparation of compliance documentation, including audit trails
Conducting regular audits to ensure ongoing compliance with evolving standards
Why Choose Us?
At Belgravia Law, we are committed to helping organisations integrate AI technologies in a way that is compliant, ethical and aligned with global best practices. By partnering with us, businesses can leverage the full potential of AI while minimising risks and ensuring long-term success.
AI holds immense potential to transform industries and societies, creating new opportunities while also raising significant challenges. As AI technologies rapidly evolve, regulating their development and use has become critical for governments, regulators, policymakers and civil society worldwide.
Understanding and addressing the risks and ethical concerns associated with AI is essential to ensure its safe and responsible deployment. Governments are working quickly to implement regulations and laws that will govern AI, ensuring that it benefits society while minimising its potential harms.
In this post, we explore how AI regulation is taking shape in the United Kingdom, European Union, United States and through international efforts.
Regulating AI in the UK
The UK has adopted a flexible, technology-neutral approach to AI regulation, focusing on adapting existing frameworks to suit the evolving nature of AI. In the UK, the regulatory approach to AI follows a sector-specific model, in contrast to the comprehensive, centralised framework seen in the EU.
In the UK, there is presently no single, overarching AI regulation. Instead, AI is regulated through various existing sector-specific regulators, each of which is tasked with ensuring that AI use within its area of responsibility adheres to core principles of fairness, transparency, accountability and safety. These regulators interpret and enforce AI practices within the context of their respective industries, making the UK’s approach highly flexible and adaptable to sector-specific needs.
For example, the Financial Conduct Authority oversees AI in the financial sector, while the Information Commissioner’s Office is responsible for overseeing data protection in AI systems, particularly with regards to privacy and how data is used by AI. These regulatory bodies are empowered to ensure that AI technologies comply with existing laws such as data protection, consumer protection and antitrust regulations.
An important piece of this strategy is the AI White Paper, published in March 2023 by the Department for Science, Innovation and Technology. This document outlines principles to guide AI governance, promoting innovation while ensuring safety and accountability. The UK's approach allows sector regulators to tailor their policies according to the specific needs of different industries, providing flexibility while addressing sector-specific challenges.
Additionally, the Digital Regulation Cooperation Forum (“DRCF”), established in 2020, brings together UK regulators to create a cohesive approach to digital regulation. The DRCF is expected to focus increasingly on AI in the coming years, particularly as the AI Safety Summit in the UK in November 2023 highlighted the importance of safety measures in AI system development.
Five Key AI Principles in the UK
The UK government has established a set of core principles that serve as the foundation for AI regulation. These principles are intended to guide the development and use of AI across all sectors:
Fairness: AI systems must be designed and used in ways that are fair and do not discriminate against individuals based on protected characteristics.
Transparency: There must be transparency in how AI systems operate, particularly in terms of decision-making processes and their potential impacts on individuals and society.
Accountability: Developers and users of AI must be accountable for the decisions and outcomes produced by AI systems, including ensuring that AI systems can be explained and understood by relevant stakeholders.
Privacy and Data Protection: AI must be developed and used in a manner that respects privacy rights and adheres to data protection laws, particularly under the General Data Protection Regulation (GDPR).
Robustness and Safety: AI systems should be designed to be secure, reliable and resilient, minimising the risk of harm to individuals, the environment, and society at large.
The UK’s flexible and technology-neutral approach avoids the potentially burdensome compliance requirements that might arise from a broad, one-size-fits-all regulatory framework. By working within the existing legal and regulatory structures, the UK aims to strike a balance between encouraging technological advancements and maintaining public trust in AI systems.
The EU's Approach to AI Regulation
The EU has adopted a harmonised, risk-based approach to AI regulation with a focus on human rights and safety. The EU AI Act, proposed in 2021, is the world’s first comprehensive framework to regulate AI, categorising AI applications based on their level of risk, from unacceptable uses (which will be banned) to high, medium, and low-risk applications. The Act mandates that developers take measures to mitigate risks associated with each category.
The AI Act was officially published in the Official Journal of the European Union on 12 July 2024. This serves as the formal notification of the new law. On 1 August 2024, The European Union’s AI Act officially entered into force, marking a significant milestone in global AI regulation, with full applicability set for 2 August 2026.
At this stage, the requirements outlined in the AI Act do not take immediate effect; instead, they will be implemented gradually over time. This phased approach allows for a smoother transition as stakeholders adapt to the new regulations and ensure that adequate mechanisms are in place to support compliance.
One significant aspect of the EU AI Act is its extraterritorial reach, meaning that businesses in the UK and US must consider how their AI practices will be impacted if they operate in the EU market. The European Commission's DG CONNECT plays a central role in shaping the digital and technology policies, including AI regulation, with the European AI Office focusing on ensuring the development and deployment of trustworthy AI.
The US Approach to AI Regulation
The US approach to AI regulation focuses on sector-specific rules and ensuring that citizens' rights are protected throughout the AI development process. Although there is currently no comprehensive federal AI law, various state-level regulations have emerged, especially concerning AI's use in facial recognition and algorithmic accountability. States like California, Washington, Illinois and New York have proposed or enacted legislation regulating AI applications.
The Federal Trade Commission has also taken a leading role in addressing AI-related issues, such as bias, discrimination and deceptive practices. However, debates continue in the US over the extent of federal AI regulation, with differing opinions on how to balance innovation with risk mitigation. These ongoing discussions will likely shape the future of AI governance in the US.
International AI Regulation Efforts
In addition to regional regulations, there are growing international efforts to ensure that AI development is ethical, secure and sustainable. In March 2024, the UN General Assembly adopted a resolution focusing on “Seizing the opportunities of safe, secure, and trustworthy AI systems for sustainable development”. While not legally binding, this resolution emphasizes the importance of AI being developed in a way that supports human rights and addresses global challenges.
The International Organization for Standardization (ISO) has also published standards on AI risk management, such as ISO/IEC 42001 and ISO/IEC 23894:2023, offering best practices for businesses to responsibly develop and deploy AI technologies.
Conclusion
As AI technology continues to evolve, regulatory frameworks in the UK, EU and US are adapting to manage both its benefits and risks. These regions are pursuing different regulatory models, but common themes, such as human rights, safety, and transparency, run through all their approaches. As businesses look to harness the power of AI, staying informed on the evolving regulatory landscape will be crucial to ensure compliance and effectively navigate the challenges ahead.
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