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LEGAL AND COMMERCIAL UPDATE 2012 Thursday 5 July 2012 Side Bar Title.

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Presentation on theme: "LEGAL AND COMMERCIAL UPDATE 2012 Thursday 5 July 2012 Side Bar Title."— Presentation transcript:

1 LEGAL AND COMMERCIAL UPDATE 2012 Thursday 5 July 2012 Side Bar Title

2 BEST PRACTICE CONTRACTING TOOLKIT Best Practice Contracting Toolkit Legal and Commercial Update Dr Sam De Silva FCIPS Partner - Head of IT & Outsourcing CIPS Global Board of Trustees

3 BEST PRACTICE CONTRACTING TOOLKIT Agenda Limitations and Exclusions of Liability IPR Indemnity Step-In Rights Audit Rights Due Diligence Benchmarking Change Control Process Technical and Operational Schedules

4 BEST PRACTICE CONTRACTING TOOLKIT Limitations and Exclusions of Liability (1) Framework for a "best practice" liability clause –Losses which can't be excluded by law –General financial cap –Different financial caps for different categories of loss e.g. damage to property –Categories of loss where no limit applies e.g. breaches of confidentiality, data protection breaches, IPR indemnity, PCI DSS compliance –Customer's liability to service provider Liability cap Indirect / consequential losses – GB Gas Holdings (Centrica) v Accenture [2010] Deeming certain categories of loss as direct losses

5 BEST PRACTICE CONTRACTING TOOLKIT Exclusion of liability for data loss Ensuring exclusion for consequential / indirect losses is appropriate – devil is in the detail Example 1 "The Supplier excludes indirect losses, consequential losses, loss of profit, loss of revenue, loss of business …" Example 2 "The Supplier excludes indirect losses, consequential losses including loss of profit, loss of revenue, loss of business …" Limitations and Exclusions of Liability (2)

6 BEST PRACTICE CONTRACTING TOOLKIT IPR Indemnity Purpose Issue with proviso wording Scope of indemnity Exclusions to indemnity

7 BEST PRACTICE CONTRACTING TOOLKIT Step-In Rights Originally seen in public sector contracts Principle = avoid the nuclear option of contract termination Key issues –What is the trigger? –How long does step-in last for? –Charges during the step-in period? –What if something goes wrong during the step-in period? –Third party support for step-in?

8 BEST PRACTICE CONTRACTING TOOLKIT How can the effect of step-in rights be minimised for Service Provider Services affected by trigger event Not managing service providers personnel Competitor of service provider Service levels of affected services Step-out triggers Customer acting reasonably / mitigating losses Customer indemnifying service provider for losses

9 BEST PRACTICE CONTRACTING TOOLKIT Balanced Audit Rights Compliance with suppliers security, H&S policies Minimise disruption Frequency Scope of audit Notice of audit (NB. regulated industries) Competitors of supplier

10 BEST PRACTICE CONTRACTING TOOLKIT Due Diligence Not only relevant for corporate transactions Supplier given opportunity to carry out due diligence No warranties Objectives –transfer of risk of operating service to supplier –give supplier access to information required to tender Approach if not practicable –Clearly defined pricing assumptions –Process to vary pricing if assumptions are incorrect and have material impact on original pricing

11 BEST PRACTICE CONTRACTING TOOLKIT Benchmarking Principle = compare like with like to ensure deal continues to match what the market can offer Key issues –How often? –By whom? –What is being compared? –Normalisation –What happens if there is an adverse result? –Degrees of permitted variance? –Cost?

12 BEST PRACTICE CONTRACTING TOOLKIT Change Control Process Change impact reports –feasibility –cost implications –consequential changes to agreement Pricing principles Suppliers obligation to undertake change Unreasonable grounds for refusing change –demanding unreasonable changes –imposing unreasonable conditions –refusing to accept change although within scope of contract

13 BEST PRACTICE CONTRACTING TOOLKIT Technical and Operational Schedules Just as important as "front-end" legal provisions Precedence / priority clause To serve purpose –sufficiently wide in scope but avoid uncertainty –enforceable obligations What makes enforcement difficult? –ambiguous –agreements to agree

14 BEST PRACTICE CONTRACTING TOOLKIT How to Avoid: Ambiguous Drafting with Technical and Operational Schedules Use active language "The System will be tested before it is used in the production environment to ensure that it is working in accordance with the Specifications." "The Service Provider must test the System before it is used in the production environment to ensure that it is working in accordance with the Specifications." Only use capitalised terms for proper nouns or defined terms "[Party X] must ensure that all Software supplied by it is free of any viruses." Review by asking questions – Who performs obligation? – When must they perform? – How often must they perform? – To what standard? – And so on …

15 BEST PRACTICE CONTRACTING TOOLKIT How to Avoid: Problems caused by Agreements to Agree 2 stage process –identify –remedial drafting Steps for identification –look for the use of the word "agree" –look for any reference to obligation in a document which is not yet agreed –look for an obligation for the parties to engage in "good faith negotiations" (or similar wording) Remedial drafting: agreements to agree usually a problem unless –some objective way of resolving failure to agree –both parties have sufficient incentive to agree –obligation which requires agreement to agree is of relatively low importance

16 BEST PRACTICE CONTRACTING TOOLKIT Any questions? Dr Sam De Silva Email: DDI: +44 (0) 1865 813 735

17 THE BRIBERY ACT2010 The Bribery Act 2010 and the Procurement Environment Chris Shelley Partner Head of IP, IT & Commercial Practice


19 The new bribery offences Procurement of services: preventing bribery by service providers Corporate hospitality Penalties: debarment from public contracts The compliance challenge – are you doing enough? Agenda

20 THE BRIBERY ACT2010 Section 1 –offering, promising or giving a bribe Section 2 –requesting, agreeing to receive or accepting a bribe Section 6 –bribing a foreign public official Section 7 –failing to prevent bribery by an associated person The Four New Bribery Offences

21 THE BRIBERY ACT2010 The key elements of a bribe for the purpose of Sections 1 and 2 are: a financial or other advantage... in relation to a relevant function or activity... which is performed improperly Functions and activities span the public and private sectors and include: any function of a public nature any activity connected with a business Sections 1 and 2 set out 6 different cases each of which has a subtly different requirement of intention or knowledge Note that the Section 6 offence does not require improper performance - merely an intention to influence a foreign public official plus an intention to gain business or a business advantage The Key Elements of a Bribe

22 P offers, promises or gives R requests, agrees to receive or accepts In anticipation or in consequence of R requesting, agreeing to receive or accepting 6 a financial or other advantage to another person 1, 2 and intends the advantage and knows or believes the acceptance of the advantage 1 2 intending that 3 which itself constitutes 4 as a reward for 5 in consequence 3 to induce a person in to reward a person for 1 1 would constitute 2 the improper performance of 1 1 2 3 a relevant function or activity 1, 2 the improper performance by R (of) 4 5 4 or another of 5 5 will be performed by R or another person 3636 at Rs request or with Rs assent or acquies- cence 6 6 Section 1 (active bribery) Case 1. Case 2. Case 3. Case 4. Case 5. Section 2 (passive bribery) Case 6. The Section 1 and 2 offences: the 6 cases In cases 1 and 2 P is guilty of an offence. In cases 3 to 6 R is guilty of an offence. In cases 4, 5 and 6 it does not matter whether R knows or believes that the performance of the function or activity is improper. In case 6 where a person other than R is performing the function or activity it does not matter whether that person knows or believes that the performance of the function or activity is improper.

23 THE BRIBERY ACT2010 An individual or company can be liable under sections 1, 2 or 6 if the act or omission: –takes place in the UK; or –takes place outside the UK if the individual or company concerned has a close connection to the UK (as defined in section 12(4)) A company will only be liable under sections 1, 2 or 6 if the offence is committed by a person who is the directing mind and will of the company If the offence is committed by a company with the consent or connivance of a senior officer, he/she can also be personally liable for the offence (section 14) Sections 1, 2 and 6: Jurisdictional Reach

24 THE BRIBERY ACT2010 Offence: A relevant commercial organisation (C) is guilty of an offence if a person associated with C bribes (within the meaning of Sections 1 and 6) another person, intending to obtain or retain business or a business advantage for C Defence: C has a defence if it can show that it had in place adequate procedures designed to prevent bribery The Section 7 Offence

25 THE BRIBERY ACT2010 A body or partnership incorporated or formed in the UK irrespective of where it carries on a business; An incorporated body or partnership which carries on a business or part of a business in the UK irrespective of the place of incorporation The key concept is one of carrying on a business Relevant Commercial Organisations

26 THE BRIBERY ACT2010 A person (A) is associated with C if A is a person who performs services for or on behalf of C The capacity in which A performs services for or on behalf of C does not matter – so it could be: an employee; a contractor or supplier; an agent or distributor; or a subsidiary If A is an employee, it will be presumed (unless the contrary is shown) that A is a person who performs services for or on behalf of C Whether someone is an associated person will be determined by reference to all the relevant circumstances, not simply the nature of the relationship Associated Persons

27 THE BRIBERY ACT2010 MoJ has provided statutory guidance on adequate procedures The Guidance advises that the adequate procedures put in place by commercial organisations should be informed by six principles Case studies are provided to illustrate the application of the principles for small, medium and large organisations The Ministry of Justice Guidance

28 THE BRIBERY ACT2010 Proportionate procedures – but it is not all about size of the organisation Top level commitment – this might be the Board or owner- managers Risk assessment – general or stand alone? Due diligence – in respect of associated persons Communication (including training) Monitoring and review – involvement of top-level management These principles should be applied to scenarios where there is a risk of bribery The Six Principles

29 THE BRIBERY ACT2010 A supplier of services to a company is a person associated with that company for the purposes of Section 7. Key tools for preventing bribery: –risk-based due diligence –anti-bribery contractual terms and conditions – contractual control –asking (or requiring) counterparties to adopt similar terms and conditions Can you draw the line at direct contractors? Procurement of services: preventing bribery by service providers


31 Corporate hospitality and promotional gifts can constitute bribes, but: The Government does not intend that genuine hospitality or similar business expenditure that is reasonable and proportionate be caught by the Act, so you can continue to provide bona fide hospitality, promotional or other business expenditure… You can continue to provide tickets to sporting events, take clients to dinner, offer gifts to clients as a reflection of your good relations, or pay for reasonable travel expenses in order to demonstrate your goods or services to clients if that is reasonable and proportionate for your business. - Ministry of Justice Quick Start Guide, March 2011 Corporate Hospitality

32 THE BRIBERY ACT2010 Transparency Internationals view is that good practice permits such expenditures where they are transparent, proportionate, reasonable and bona fide. Crucial are the key provisions of the Acts offences – particularly the intention to bring about improper performance (section 1) or to influence (section 6) It is for individual organisations… to establish and disseminate appropriate standards for hospitality and promotional or other similar expenditure. (Ministry of Justice guidance, March 2011) Prosecution guidance says that the more lavish the hospitality, the greater the inference of intention to bring about improper performance or influence What is lavish? Corporate Hospitality

33 THE BRIBERY ACT2010 SFO Guidance Key factors are whether: the company has issued a clear policy on gifts and hospitality; the scale of the expenditure in question is within the limits set out in the policy and, if not, whether the person making it asked a senior colleague for special permission to make it; the expenditure was proportionate (based on who received it); there is evidence that that company recorded the expenditure; the recipient was entitled to receive the hospitality under the law of the recipients country. Any inference that gift or hospitality expenditure was intended as a bribe would be strengthened if: there was any unjustifiable add-ons, for example to travel or accommodation; the expenditure is related in time to some actual or anticipated business with the recipient, particularly where some form of competitive process is involved. Corporate Hospitality

34 THE BRIBERY ACT2010 Sections 1 and 6 offences: mandatory exclusion under Reg. 23 of Public Contracts Regulations Applies to company and its directors and any other person who has powers of representation, decision or control Applies where contracting authority has actual knowledge of conviction Very limited discretion to disregard: overriding requirements in the general interest Can lead to permanent exclusion Penalties: Debarment from public contracts

35 THE BRIBERY ACT2010 Sections 2 and 7 offences: exclusion is discretionary under Regulation 23(4) (Ministerial Statement, 30 March 2011) Applies only to conviction of the bidding company Penalties: Debarment from public contracts

36 THE BRIBERY ACT2010 Mixed response reflects risk-based approach Awareness of new laws still patchy Inconsistent approaches to corporate hospitality Are compliance programmes effectively embedded? The compliance challenge – are you doing enough?


38 Thank you

39 TUPE: recent cases Daff Richardson Partner Employment Law Team TUPE: recent cases

40 Overview Service Provision Changes Change of location Changing terms and conditions of employment Companies in administration TUPE: recent cases

41 Service Provision Change Activities cease to be carried out by a person (a client) on his own behalf and are carried out instead by another person on the clients behalf (a contractor) Activities cease to be carried out by a contractor on a clients behalf … and are carried out instead by another person (a subsequent contractor) Activities cease to be carried out by a contractor or a subsequent contractor on a clients behalf… and are carried out instead by the client on his own behalf TUPE: recent cases

42 Service Provision Change Contractor includes sub-contractors There must be an organised grouping of employees situated in Great Britain before the change that has as its principal purpose the carrying out of the relevant activities on behalf of the client A single employee can be an organised grouping TUPE: recent cases

43 Service Provision Change Does not apply where the contract is for the supply of goods for the clients use Does not apply where the activities are in connection with a single specific event or task of short-term duration TUPE: recent cases

44 Recent Cases Organised grouping of employees needs more than happenstance: Eddie Stobart Ltd -v- Moreman & Others Seawell Ltd -v- Ceva Freight (UK) Ltd and another TUPE: recent cases

45 Recent Cases Factors to consider in determining when there is a service provision change : Argyll Coastal Services Ltd -v- Stirling and Others TUPE: recent cases

46 Recent Cases Define the activity – does it transfer? Johnson -v- Campbell and another TUPE: recent cases

47 Change of Location and ETO Reasons Change of location does not entail a change in the workforce and may give rise to automatic unfair dismissal claims: Abellio London Limited -v- Musse and Others Tapere -v- South London and Maudsley NHS Trust TUPE: recent cases

48 Changing Terms and Conditions of Employment Are the changes related to the transfer? Enterprise Managed Services -v- Dance and Others Smith and Others -v- Trustees of Brooklands College TUPE: recent cases

49 Changing Terms and Conditions of Employment Practical issues: Reason for change: is it connected with the transfer (sole or principal reason) Ring fencing Promotion/restructure = new jobs? Dismiss and re-engage? Public sector: no two-tier workforce TUPE: recent cases

50 TUPE and Insolvency Regulation 8(6) non-terminal proceedings: TUPE applies (apart from certain debts) Regulation 8(7) terminal proceedings: TUPE does not apply TUPE: recent cases

51 TUPE and Insolvency A pre-pack administration will always be a relevant insolvency procedure: TUPE applies Key2Law (Surrey) LLP -v- DeAntiquis TUPE: recent cases

52 TUPE and Insolvency Pre-transfer dismissals can be automatically unfair even if transferee not identified: Spaceright Europe Ltd -v- Baillavoine and another TUPE: recent cases

53 Managing Procurement Litigation – Strategies for Winners David Pritchard Head of Litigation


55 Procurement Process going Wrong Everybody concerned covers their backs Signs of real aggression in correspondence Clam shuts tight Open communication stops completely Pre-Litigation Manoeuvres

56 What should you do in those circumstances? Find Contractual Documents Check Dispute Resolution Procedure Escalation Process applies? Pre-Litigation Manoeuvres

57 First Inkling of a Dispute Avoid the impulse to clam up Pre-Litigation Manoeuvres

58 Without Prejudice Privilege Heading only an indication of contents Do not undermine your credibility by using the heading in the wrong place… Pre-Litigation Manoeuvres

59 Attempt to Resolve a Dispute Two correspondence tracks The Operational Track – Purely Administrative Without Prejudice Track – Be as frank as need be Pre-Litigation Manoeuvres

60 How does this work? Make concessions if necessary Suggest a Solution If not accepted by your contracting counterpart, then bank the offer Pre-Litigation Manoeuvres

61 Without Prejudice save as to Costs Double whammy impact on costs Pre-Litigation Manoeuvres


63 When do you have the choice? Bring action in the jurisdiction that offers the best outcome: Law Process Convenience Forum Shopping

64 How do you choose the right forum? Contract may prescribe Different remedies available (triple damages) Costs sometimes not recoverable (US) Forum Shopping

65 What is the role of an Expert? Gives expert advice to the Court on non- legal matters relevant to the case Their personal opinion counts – it should be tested in advance Advice is privileged, but beware the joint expert Choice of Expert

66 How are Experts selected? Case Management Conference determines need Consider retaining a number of key Experts to block out opponents Ask for recommendations – case hardening Choice of Expert


68 What is disclosure? Obligation placed on parties Standard disclosure, but may be more onerous Securing the Evidence

69 What is e-disclosure? Extension of the disclosure obligation Includes electronic documents Documents stored on servers, back-up systems or metadata Securing the Evidence

70 The CPR – e-disclosure principles Specific Directions Efficient document management Use of technology Proportionality Securing the Evidence

71 Points worth mentioning Must preserve all disclosable documents Discuss the use of technology Conduct a reasonable search Securing the Evidence

72 What if you get it wrong ? 2009 case (Earles v Barclays Bank PLC [2009] EWHC 1 (Mercantile)) Be prepared! Securing the Evidence


74 Number of different settlement processes May be contractually stipulated Can also be reached by agreement between the parties Settlement at what Price ?

75 Statistics on Court Settlement at what Price? Technology and Construction Court 1 Summary caseload statistics, 2006-2010 Number of actions 20062007200820092010 Received Claims and originating summonses issued in Registry337376 341495465 By transfer5333 253328 Total390409366 528493 Disposed of Tried3233 394951 Struck out, settled or discontinued153160 140173192 Transferred27 658 Default judgments entered516 131719 Total192216198244 270 Number of Interlocutory Applications heard 2 454397 374483566

76 Who won? Burchell v. Bullard Settlement at what Price?


78 Why is this better? Order for damages or specific performance only remedies available from Court Procurement disputes often require something more innovative However… the aggregating process means that very strong cases may be unsuitable Mediation


80 Controlling Costs estimates Solicitors fees budgets Disbursements Settlement offers Risk sharing Insurance But REMEMBER Proportionality Controlling Costs

81 Recovery Risks Credit Risk Loser normally pays most of winners legal costs Winner rarely takes all Controlling Costs

82 Finally…. Attempt early ADR/Settlement but at all times present yourself as being eager to get to trial! Winners are those who lose least… Controlling Costs

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