UK Disputes Round Up - May 2022 from Bird & Bird's UK Dispute Resolution Team
Written By
This newsletter contains updates and developments in case law and legislation that will be of interest to in-house counsel. In this edition we are pleased to include the following updates:
- Why unduly onerous obligations within STC’s should be fairly and reasonably drawn to your counterparty’s attention,
- HMRC's revised UK VAT treatment of payments made to terminate a contract,
- Force Majeure clauses and sanctions, and
- The On-Line Safety Bill - what your business needs to know
You will find a find full index of all the topics covered below.
Please get in touch if you have any questions or would like further information on these topics.
In this newsletter:
Contracts
English Commercial Court judgment is a reminder not to bury onerous terms within standard Terms & Conditions even in B2B contracts
By Victoria Hobbs and Louise Lanzkron
Many businesses contract using standard Terms & Conditions (STC’s) because it is simple and minimises risk. However, the case of Blu-Sky Solutions Limited v Be Caring Limited [2021] EWHC 2619 (Comm) is an important reminder that businesses should revisit their contractual processes to ensure that any unduly onerous obligations within their STC’s are fairly and reasonably drawn to their counterparty’s attention at the time the contract is signed. The judgment also considered whether the onerous term in question in the STC was incorporated into the contract, and if so, was the term void because in effect it was a penalty rather than a charge to cover administrative expenses.
Revised HMRC policy on VAT treatment of early termination fees and compensation payments
By Victoria Hobbs and Caroline Browne
HMRC has at last published its revised policy on the UK VAT treatment of payments made to terminate a contract. The long-awaited new policy should result in fewer payments being subject to VAT than under HMRC’s previous policy, although may result in more uncertainty for borderline cases that will be determined by reference to their specific facts.
Reasonable Endeavours in a force majeure clause did not require a party to accept non-contractual performance
By Jonathan Speed, Louise Lanzkron and Dragana Vukadin
Force Majeure clauses are again in the spotlight as sanctions are made against businesses with Russian ties resulting in non-performance of commercial contracts. In a timely judgment, relating to sanctions imposed on Russia in 2018, the Commercial Court, in MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm), has recently confirmed that the requirement to use reasonable endeavours to overcome the effects of a force majeure event did not extend to requiring a party to a contract to accept non-contractual performance in order to be able to
rely on the force majeure clause.
Smart Contracts – Recognising and Addressing the Risks
By Jeremy Sharman and Prashant Kukadia
Smart contracts, where some or all of the contractual obligations are defined in and/or performed automatically by a computer program, are expected to have a significant impact on the way business is done. Whilst already being deployed for relatively straightforward transactions, such as facilitating transfers on cryptocurrency exchanges, with the technology underpinning smart contracts becoming more sophisticated, they are increasingly being considered as an alternative way to do business when compared to the traditional paper contract.
Digital Rights & Assets
Bird & Bird successfully advises on Tulip Trading Ltd v Bitcoin Association for BSV and others judgment
Bird & Bird has successfully advised on today’s Tulip Trading Ltd v Bitcoin Association for Bitcoin SV (BSV) and others judgment.
The judgment in Tulip Trading Ltd v Bitcoin Association for BSV and others is of significant importance for the cryptocurrency and blockchain space. The result of the judgment is fundamental to how the underlying technology works within the law. The Bird & Bird team led by partner Sophie Eyre and supported by associate Priyan Meewella, acted for 12 of the successful defendants. James Ramsden QC was counsel.
Smart Contracts – Recognising and Addressing the Risks
By Jeremy Sharman and Prashant Kukadia
Smart contracts, where some or all of the contractual obligations are defined in and/or performed automatically by a computer program, are expected to have a significant impact on the way business is done. Whilst already being deployed for relatively straightforward transactions, such as facilitating transfers on cryptocurrency exchanges, with the technology underpinning smart contracts becoming more sophisticated, they are increasingly being considered as an alternative way to do business when compared to the traditional paper contract.
Collective Actions
Collective Redress in Europe – The Current State of Play
By Bryony Hurst, Harry Arnold and Louise Lanzkron
The new mechanism to enable consumers and those protecting their interests to bring collective or class actions in European countries is on its way. Just over a year ago, on 24 December 2020, Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (the “Directive”) entered into force. Whilst it does not have the catchiest of names, it did herald a new era for consumer collective redress in Europe. The Directive will allow collective actions to be brought against businesses if they breach EU law in a broad range of areas, such as data protection, travel and tourism, financial services, energy and telecommunication, with the aim of making collective redress more uniformly available to consumers across the EU. It is advisable for businesses to become familiar with the Directive and how it will be implemented in each EU member state.
Read more here
On-Line Safety Bill
Time for a redraft – Parliamentary Committee recommends changes to the Online Safety Bill
By Bryony Hurst
Online Safety Bill presented to Parliament
By Bryony Hurst and Theo Rees-Fallow
Follow our commentary as the On-line Safety Bill reaches its final stages in the Parliamentary process.
Read more here
Arbitration
English Commercial Court dismisses s.67 challenge to GAFTA award holding that it is the substance of the Notice to commence arbitration, not its form, that matters
By Nick Peacock, Louise Lanzkron and Nia Lewis
In LLC Agronefteprodukt v Ameropa AG [2021] EWHC 3474 (Comm), the English Commercial Court dismissed a challenge under s.67 Arbitration Act 1996 (AA) to a GAFTA award and held that a single Notice of Arbitration was valid to initiate two separate arbitrations. The Claimant, LLC Agronefteprodukt (the ‘Sellers’) had submitted that a single Notice of Arbitration was not effective to commence two arbitrations. On the specific facts before it, the Court disagreed.
Read more here
Applications under section 9 of the Arbitration Act 1996 – when will a party to an arbitration agreement be debarred from applying for a stay of court proceedings?
By Nick Peacock, Louise Lanzkron and Francesca Budd
In Fairpark Estates Ltd and others v Heals Property Developments Ltd [2022] EWHC 496 (Ch), the English High Court sets out useful guidance regarding when a party to an arbitration agreement will have lost their right to apply to stay court proceedings in favour of arbitration and will be found to have elected the court’s jurisdiction. Parties seeking to rely on arbitration clauses should consider carefully whether any decisions taken in relation to court proceedings at the pre-action stage may cross this threshold. The judgment also helpfully reiterates that parties do not have to apply for a stay of court proceedings in relation to all matters in dispute covered by the arbitration agreement if they are content for some to be resolved in court, rather they can make an election as to which dispute/s they require still to be decided by arbitration.
Read more here
Past Events
Dissecting Disputes series “Arbitration Essentials - What in-house lawyers need to know when choosing arbitration and drafting arbitration clauses”
On 8 March 2022 we held the latest webinar in our Dissecting Disputes series “Arbitration Essentials - What in-house lawyers need to know when choosing arbitration and drafting arbitration clauses”. In the webinar our panellists, Nick Peacock, Prashant Kukadia and Megan Curzon took a fresh look at arbitration best practice in light of events over the past couple of years, discussing:
- what you need to know when selecting arbitration as your dispute resolution method of choice
- what you need to think about when drafting your arbitration clause
- how to ensure that your clause will operate effectively, and
- how it interacts with other clauses in your contract.
Our panellists offered practical tips to help you understand what questions you should be asking when considering arbitration, the crucial points to remember at the drafting stage and
what points may be traded in negotiations.
If you would like to view a recording of the webinar, please click here. A copy of the slides can be accessed here. The 'Short guide to international arbitration' that was discussed can be found here.