Commercial
Debt
With the ongoing economic downturn facing the country, together with high energy costs and the cost of living crisis, consumers are likely to enter 2024 with a tighter hold on their disposable income.
A likely drop in turnover, coupled with the impact of increasing costs, will also impact businesses. Retailers are reminded that managing their debtors is a significant step they need to be on top of.
Whilst the UK isn’t yet in a recession, a continuing economic downturn is likely to cause that eventuality and with a recession comes an obvious increase in debtor insolvency. The more companies that are on the front foot of the debtors, the less likely they are to be impacted significantly by debtors becoming insolvent should the recession materialise.
ESG
ESG – Environmental Social Governance – are non-monetary factors that can be considered when looking at the value of a business. How sustainable is the business? How fair is the business? Is the organisation actively achieving the goals it publicly claims to hit?
Litigation in the ESG sphere is becoming increasingly stringent, and there are more charities and lobbying groups willing to fund such claims.
ESG-related disputes generally fall into two categories; cases that are brought with the intention of changing conduct or policies, and cases brought with the intention of reaching financial redress for damages associated with climate change or other alleged wrongdoing.
Greenwashing claims are those challenging inaccurate narratives or misleading promotion. In the UK, 90 and 90A of Financial Services and Markets Act 2000 (FSMA) gave investors the right to sue public companies if they’ve suffered a loss as a result of relying on untrue or misleading statements, or omissions from prospectuses or other information published. These group claims are expected to rise.
Artificial intelligence
Whilst not exactly a new phenomenon, the noise surrounding AI has gathered momentum in the last 12 months. It’s easy to think that AI will rapidly bring about efficiencies and save costs, and whilst in many cases this will be the case, there are significant risks that come with it.
The output from an AI system is only as good as the input it receives, and there will be occasions where algorithms are incorrect, and the end results are not sufficiently stable to provide the desired solution or to protect the business as it hoped.
By way of example, requesting a set of Terms and Conditions for a website might seem to be the ideal request for an AI system to generate a document and save legal fees, but the resultant wording may not be robust enough to protect in the case of breach or default meaning a short-term saving could result in a much larger cost.
Fixed recoverable costs
The extended Fixed Recoverable Costs (FRC) regime came into effect on Sunday 1 October 2023. Applying to claims valued between £25,000 and £100,000, the rules introduce a new intermediate track to the existing court system and provide a framework of fixed costs that litigants will be entitled to recover from their opponent if they’re successful in pursuing or defending their claim.
FRC don’t just apply to professional advisors. Successful litigants in person are entitled to recover their costs up to two thirds of the set rates, which is likely to encourage more aggrieved consumers to pursue formal litigation proceedings against retailers.
As the FRC rules are so new, they’ve yet to be properly tested by the courts so we need to wait and see how they’re interpreted. They could encourage litigation – one stated purpose of the FRC rules was to encourage access to justice by putting disputing parties on a more even footing and providing greater certainty when it comes to financial liabilities. Whether the FRC rules achieve that aim is a matter of watch this space.