Archive for October, 2014
Welcome to the Autumn MH Update. There are a number of very topical subjects covered in these articles.
Since our last publication the domestic market has seemed more lively and each of our practice groups is seeing higher levels of activity than for the same time last year. I hope this is reflected in your own business.
Recent activity, for the first time in a while, has included M&A, private equity, property and public markets all being active at the same time. We have gained British Land as a client, floated The Fulham Shore PLC on AIM and Katherine de Souza and Wayne Cadogan chalked up a notable employment tribunal success for the Brazilian Embassy including, crucially, arranging for live video evidence to be given to the tribunal in London from a link in Saudi Arabia.
I am delighted to report that, since the last MH Update, David Bettis has qualified as a solicitor and is now working in the Corporate Department. We also have a new trainee Sive Ozer who started with us on 1st September and Lindsey Armstrong will be joining, also as a trainee, on 1st November.
Sadly, however, we will be losing Peter Curnock who retires in March after approximately 10,000 days at Marriott Harrison. We will miss his practical advice (and his practical jokes).
Other highlights for us have been a good smattering of international work and increasing involvement in Primerus which is the international network of which we are a member and which now includes correspondents in 39 jurisdictions. The members are generally firms with boutique practices like Marriott Harrison but, like us they have lawyers with big firm backgrounds who can operate at a senior level. Most recently David Bennett has been working with the Primerus firm in Poland and Peter Curnock was contacted by the Malta firm for assistance on a litigation case. If you have needs overseas then we would be happy to assist in finding the right firm to help.
I hope you enjoy reading our Update. If there are questions arising from the articles then please contact the relevant author.
As well as that, your feedback on us, on the work we do for you and on what more we could do for you, is extremely important. Please feel free to discuss any aspect of this with your contact at the firm or with me.
The recent Court of Appeal decision in Smithton Ltd (formerly Hobart Capital Markets Ltd) v Naggar and others  EWCA Civ 939 is a reminder about the points of general practical importance for identifying de facto and shadow directors.
The definitions of de facto director and shadow director have been determined by statute and case law. Without ever having been formally appointed as a director, a person may become a de facto director if they have performed the functions of a director, or become a shadow director if they are able to persuade the directors of a company to act in a certain way. The question which arose in this case, and which often arises in practice given the substantial duties (and potential liabilities) imposed on a company director, is whether a director of the holding company of a group of companies has become a director of its subsidiaries.
The appellant joint venture company (“Hobart”) brought proceedings against Mr Naggar (“N”), a director of its former holding company (“D”) and other group companies, to recoup losses which it incurred allegedly as a result of transactions with clients which were directly and/or indirectly owned by N and introduced to Hobart through N. The first part of the claim by Hobart was that whilst N was not a duly appointed director of Hobart, he was a director of D and a de facto or shadow director of Hobart and had breached his statutory duties.
The judge in the first instance, Rose J, approached the matter on the basis that N had a “hat” for each office he held and it was necessary to decide which “hat” he was wearing at any particular time by looking at what he actually did. Although important decisions were taken by N outside formal board meetings, N had not been formally appointed as a director, did not attend board meetings and did not hold himself out as a director. Further, Hobart did not hold N out as being a director of it. N was not appointed as a director under the joint venture agreement (the “JVA”), which set out the terms for the corporate governance of Hobart, and Hobart was authorised by the FCA but it had never reported to the FCA that N was one of its directors. Accordingly, Rose J held that N was not acting as a director of Hobart. His involvement did not extend beyond that of a major shareholder and client; in fact, he had been expressly excluded as a director under the JVA and in Hobart’s reporting to the FCA.
The Court of Appeal dismissed the appeal finding that there was no basis for interfering with Rose J’s findings of fact, and held that N was neither a de facto nor a shadow director of Hobart. Rose J focussed on the evidence for assessing in what capacity N had performed “directorial” acts and in doing so, had made no error of principle; the evidence suggested that N was acting as a director of D.
The Court of Appeal also offered guidance for future cases. Whilst there is no definitive test to determine whether a person is a de facto or shadow director, a court should consider whether the person forms part of the corporate governance of the company and has assumed the status and function of a director. In answering this question, a court should consider the factors in the leading case of HMRC v Holland  1 WLR 2793, including whether a person has assumed responsibility to act as a director irrespective of that person’s motivations and beliefs and whether the company holds a person out to be a director.
This decision sets out useful guidance on the test used to determine whether a person is acting as a de facto or shadow director, including the use of “hat identification” and highlights the importance the courts place on the context in which a person makes particular decisions. Groups of companies should consider the role that directors of the parent company play in the corporate governance of its subsidiaries.
In the recent case of Heritage Oil and Gas Ltd & Anor v Tullow Uganda Ltd  EWCA Civ 1048, the Court of Appeal reinforced the importance of using clear language when drafting a provision that is intended to operate as a condition precedent.
The appellant, Heritage, argued that Tullow could not bring a claim under an indemnity because, amongst other things, it had failed to comply with the notice provisions requiring it to give Heritage 20 business days’ notice of any tax claim.
The Court of Appeal, in dismissing Heritage’s claim on this point, held that:
- While a condition precedent may provide clarity, it can also have the effect of depriving a contractual party of a right because of a trivial breach which has little or no prejudicial effect.
- The words “condition precedent” are often expressly used in notification of claims clauses, and indeed had been used in other clauses of the sale and purchase agreement. The parties in this case had not expressed that the right to the indemnity was dependent on compliance with the notice provisions.
- The use of the words “subject to” does not make the provisions following those words conditions.
This case highlights both the importance of the need for clear, consistent legal drafting and the reluctance of the Courts to hold that a condition precedent can be implied into a contract. If the parties intend a clause to operate as a condition precedent, they need to ensure that this is expressly stated and that the obligations on the parties are made clear from the outset.
We are often asked by companies wishing to raise money how they may do so lawfully. They may have entered into an agreement with a third party which agrees to procure finance for them. This is a heavily regulated area, with significant consequences for breaching the law. It is commonly referred to as the Financial Promotion Regime. Below, I summarise some of the key points which arise out of the regime and their consequences in an equity fund raising scenario. I do not address here any potentially overlapping issues arising from the Markets in Financial Instruments Directive.
Under section 19(1) of the Financial Services and Markets Act 2000 (“FSMA”), the most important starting point in relation to regulated activities, it provides:
“No person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is:
(a) An authorised person; or
(b) An exempt person.
A breach of the so-called “General Prohibition” set out above is a criminal offence under section 23(1) FSMA. Further, an agreement made by a person in the course of carrying on a regulated activity which is unenforceable against the other party under section 26(1) FSMA – the other party also being statutorily entitled to recover, under section 26(2) FSMA, any money or other property paid or transferred by him under the agreement and compensation for any loss sustained by him for having parted with it. Further applying this principle, section 27 FSMA provides that an agreement made by authorised persons as a consequences of anything said or done by a non-authorised party is unenforceable on the same basis. There are provisions in section 28 FSMA which entitle the Court to hold that an agreement is enforceable, or money or property be retained, in circumstances where it is just and equitable to do so.
What is a regulated activity? Section 22(1) FSMA provides:
“An activity is a regulated activity… if it is an activity of a specified kind which is carried on by way of business and –
(a) Relates to an investment of a specified kind; or
(b) In the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in regard to property of any kind.”
The principal statutory instrument which applies is the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 – commonly known as the RAO. One of the regulated activities is “Arranging deals in investments” – Article 25 and Articles 25A-E). Article 25 provides:
1) Making arrangements for another person (whether as principal or agent) to buy, sell, subscribe for or underwrite a particular investment which is –
(a) A security,
(c) An investment of the kind specified by article 86, or article 89 so far as is relevant to that article,
is a specified kind of activity.
2) Making arrangements with a view to a person who participates in the arrangements buying, selling, subscribing for or underwriting investments falling within paragraph (1)(a), (b) or (c) (whether as principal or agent) is also a specified kind of activity.”
A “security” is widely construed and covers shares in a company and debt securities.
There is some judicial guidance on the application and extent of Article 25. In Re Inertia Partnership, Crow J found that merely introducing a potential issuer of shares to one of the so-called “boiler room” companies outside the UK was, “too nebulous and too remote to fall within the concept of “making arrangements” within RAO Art 25.” Further, “Such an introduction is not an “Introduction” in any meaningful sense for two reasons. First, because it does not result in anything further happening as between [the two parties introduced], let alone between any consumers and [the two parties]; and secondly because any further steps that might be taken following the introduction were not within [the introducer’s] power to effect or direct. As such, the introduction did not involve [the introducer] in any violation of the general prohibition under FSMA s.19.”
So far as “arranging” is concerned, Holroyde J in Watersheds v DaCosta and Gentleman found that an arm of an accountants’ practice which expressly marketed its services in helping company clients to obtain funding, for which it was separately remunerated by the client, was still not a breach of the General Prohibition. The services included assistance with the preparation of business plans, introducing the client to sources of funding and participating in discussions involving the client and potential funders. The Judge found that even if Watersheds were in breach of the General Prohibition, he would nevertheless exercise his discretion under section 28 to permit enforcement. However, the Judge still found that the introductions and activities did not amount to regulated activity under Article 25(2). He was helped in this decision by the contents of the FSA’s (as it then was) Perimeter Guidance Manual. The FCA is of the view that Article 25(2) RAO does include certain types of arrangements for making introductions. We believe there must be some doubt as to the judgment in this case as if introductions of this nature are outside the scope of the “arranging” activity then there would be no need for the specific exemptions contained in the RAO (Articles 33 and 33A) as to introducing activities.
Accordingly, companies wishing to raise finance, or which are offered advisory, arrangement and/or introduction services in the UK, must be sure to verify the legitimacy of the arrangements to ensure that they are not made in breach of the General Prohibition.
The Small Business, Enterprise and Employment Bill (the “Bill”) had its second reading in the House of Commons on 16 July 2014, and shall soon be timetabled to continue its march towards royal assent.
The rationale underpinning the Bill is the frequently resurrected (although seemingly never-ending) goal of cutting bureaucracy to stimulate enterprise, or, as it is more windily described in Research Paper 14/39, “[to] reduce regulatory burdens and facilitate the inception, financing and growth of business”.
The Bill’s scope includes addressing the transparency of company ownership, which has led to proposals for the abolition of the type of security known as ‘bearer shares’. As it is not easy to identify the owner of a bearer share, their existence has long been demonised as a dark corner of the UK’s otherwise bright and open regime of company ownership.
The conceptual difference between a bearer share and an ordinary share is a bit like the difference between money in a bank account and cash in hand. The proof of ownership of an ordinary share is the entry of the owner’s name in the publicly available register of members of the company which issued the shares, whereas the proof of ownership of a bearer share is in the possession (or the bearing) of the bearer certificate itself.
The identity of a holder of an ordinary share in a UK company must be entered into the company’s public register of members, whereas the identity of the holder of a bearer share need not be (only the existence of the bearer share must be entered). That means the owner of a bearer share is not readily identifiable.
There are significant advantages to being a holder of a bearer share. For example, a bearer share can be transferred freely without the need to amend the ownership details on the company’s register of members, which provides the holders with a great deal of flexibility. Also, the anonymity provided by bearer share ownership may insulate the identity of the owners of a company involved in controversial activities such as animal testing and research from the personal ire of those who disagree with the company’s aims.
The extent of bearer share ownership in UK companies, however, is miniscule. The number of companies to which the reforms relating to bearer shares will apply is remarkably small both in numerical and percentage terms. Approximately 900 out of 2.5 million companies trading in the UK have issued bearer shares, so their proposed abolition will affect merely 0.05% of active companies.
Despite the significant advantages accruing to a holder of bearer shares (and the extremely limited number of companies which have bearer shares) the Department for Business Innovation & Skills has opined that the potential for misuse open to those who retain anonymity “for the purpose of tax evasion or other criminal activity” outweighs those advantages, and that the recommendation of the Global Forum on Transparency and Exchange Information for Tax Purposes that the UK should “. . . eliminate such shares” should be adopted.
The Bill proposes to “eliminate such shares” initially in two ways. First, the Bill amends the Companies Act 2006 by preventing any further issues of bearer shares by companies. Secondly, the Bill establishes a statutory ‘surrender period’ during which every holder of a bearer share is required to surrender it for cancellation. Anyone surrendering bearer shares in this way shall benefit from a corresponding right to be issued with a new share certificate, and shall have their identity entered into the issuing company’s register of members. It is further proposed that a company will be required to undertake the expense of making a court application to effect the cancellation of any bearer shares which are not surrendered during the ‘surrender period’.
In order to ensure the implementation of the mechanisms outlined above, a number of statutory duties are to be imposed on companies and their officers. Should a company fail to comply with those statutory duties, an offence will be deemed to have been committed by every officer of the company who is in default.
For those reasons, any company that has issued bearer shares should seek early advice about the proposed statutory duties associated with their impending abolition.
The ECJ’s recent judgment in the case of Google Spain SL and Google Inc v AEPD and Mario Costeja González raises serious concerns over the potentially censorial effect of the “right to be forgotten” on search engines.
The applicant, Mr. Gonzaléz, lodged a complaint against Google Spain and Google Inc. in relation to the appearance of an auction notice for his repossessed home among search results based on his name. The case eventually made its way to the ECJ, and in May 2014, the court delivered its ruling.
The ECJ held that, firstly, even if the physical server of a company processing data is located outside Europe, EU rules apply to search engine operators who set up a branch or subsidiary in a Member State, if they promote and sell advertising space, and their activities target people, within a Member State. Secondly, the ECJ held that search engines could constitute “controllers” of personal data within the meaning of the Data Protection Directive (the “Directive”) and, further, that the finding, publishing, indexing, automatic storing and making available to internet users of information placed on the internet by third parties would constitute the “processing” of personal data within the meaning of the Directive. Finally, the ECJ held that, if the conditions in either Article 12(b) or Article 14(a) of the Directive were met, then, upon receipt of a request from a data subject, a search engine must remove from search results based on the data subject’s name links to third party webpages which contain the offending information.
Article 12(b) of the Directive provides that data subjects may obtain from a controller the rectification, erasure or blocking of data the processing of which does not comply with the provisions of the Directive, particularly where data is incomplete or inaccurate. Article 14(a) provides that data subjects may object, on compelling legitimate grounds, to the processing of data relating to a data subject. The ECJ said that these Articles required a balance to be struck between, on the one hand, an applicant’s rights and interests (most importantly, its right to privacy) and, on the other hand, the interests of internet users in having access to the relevant information. As a general rule, the former would override the latter, although the balance could be swayed by factors such as the nature and sensitivity of the information, and whether or not the applicant had a role in public life. Interestingly, the ECJ suggested that these principles may also apply to information which is true, or which was lawfully published, if that information becomes irrelevant, inadequate or excessive over time.
The importance placed by the ECJ on a data subject’s right to privacy in this context is somewhat alarming and, arguably, could have a chilling effect on search engines. As of 18 July 2014, Google received more than 91,000 removal requests involving more than 328,000 URL (including 12,000 requests made under English law). Google confirmed that it removed around 53% of URLs in respect of which removal requests were made. Only 32% of requests were rejected (further information was required in respect of 15% of requests). This is a significant number of removals in a short space of time. Google has indicated that it has put in place procedures for assessing requests; however, smaller search engines may not have such resources at their disposal, and could instead decide to err on the side of caution by immediately removing material without engaging in a proper analysis of the interests that are at stake. If this is the case, then there is a certain truth to the House of Lords’ recent pronouncement that the decision “does not reflect the current state of communications service provision, where global access to detailed personal information has become part of the way of life“.
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“Regulations”) came into force on 13 June 2014 and replace the Distance Selling Regulations and the Doorstep Selling Regulations for consumer contracts made on or after that date. The Regulations implement the Consumer Rights Directive aimed at harmonising consumer protection rules across the EU increasing the information that consumers should receive from traders and the rights that consumers have as part of a consumer transaction. The Regulations also introduce the concept of digital content in consumer law.
Subject to certain exceptions the Regulations cover three types of contract:
- “off-premises” contracts where the consumer and trader are, or have been, present together at a location other than the trader’s business premises (for example, the consumer’s home);
- “distance” contracts where the consumer and trader are not present together at a location and the contract is made by distance communication methods such as telephones, email or a website (for example, purchasing goods through a website); and
- “on-premises” contracts where the consumer and trader contract at the trader’s premises.
Whilst the information that is required to be given by the trader varies between the three types of contract, there are some requirements that apply to all contracts within the scope of the Regulations:
- consumers must give express prior consent before additional payments are taken – pre-ticked boxes are no longer allowed;
- where a delivery date is not specifically agreed, goods must be delivered within 30 days;
- a ban on the use of premium rate telephone lines for contacting the trader about an existing contract; and
- a ban on excessive payment surcharges (i.e. charging the consumer excessively for the cost the trader incurs for processing the consumer’s payment).
For on-premises contracts, the Regulations introduce a list of required pre-contract information which includes prices, complaint handling procedures and, for digital content, any applicable technical or hardware requirements. The provision of this information is not required for every day transactions, which are performed immediately or where the information is readily apparent from the context of the contract, for example the price is clearly displayed on the product.
Traders entering into distance and off-premises contracts must provide the information set out in schedule 2 of the Regulations, which is much the same as the information required for on-premises contracts and the information which was required under the Distance Selling Regulations. However, there are some additions such as the requirement to provide any relevant codes of conduct and, more importantly, information about the consumer’s right to cancel the contract.
The right to cancel
A cancellation period of 14 days now applies to both distance and off-premises contracts and runs from the day on which the trader provides to the consumer a valid notice of its right to cancel, regardless of how long this is after the conclusion of the contract. Failure to do so will see the cancellation period extended by up to a further 12 months from the beginning of the initial 14 day cancellation period and, in the case of an off-premises contract, may expose the trader to criminal liability. If a consumer cancels a contract, then typically the goods must be returned within 14 days and traders are now permitted to withhold a refund until this happens. Traders may also deduct an amount from any refund in respect of any diminished value.
The Regulations establish the concept of digital content in English consumer law for the first time and may be the forerunner of legislation distinguishing between contracts for physical and digital goods and services. Where a consumer purchases digital content not on a tangible medium the Regulations stipulate that the supply (the download) must not begin before the end of the 14 day cancellation period unless the consumer gives express consent and acknowledges that they will lose the right to cancellation. Given the inherent attraction of the instantaneous delivery of a digital product it seems unlikely that any consumer would ever withhold such consent.
The Regulations increase the responsibility of traders to fully inform their consumer customers, especially when entering into distance or off-premises contracts. Now could be a prudent time for all traders to assess their existing terms and conditions and practices used when dealing with consumers.
The recent case of Comau UK Limited v Lotus Lightweight Structures Limited  EWHC 2122 (Comm) is an interesting decision from the Commercial Court in which the Court found against Comau UK Limited (“C“) which was seeking summary judgment of its claim for an award for loss of profit from a repudiatory breach of contract by Lotus Lightweight Structures Limited (“L“). The Court instead found that L had a real prospect of successfully defending the claim. The Court held that while C was entitled to seek damages for amounts due under a contract, where that contract permitted L to perform its obligations in different ways, the least onerous way would be applied and C would not therefore be able to get a better deal than it had bargained for.
C is part of the Fiat group, and had entered into a contract with L whereby C agreed to supply goods to L relating to the installation of a new product line. The agreement provided for L to pay by instalments over a period of time, which it failed to do in the amounts or on the dates specified. In February 2012, C served notice on L of the unpaid amounts and threatened to suspend service, pursuant to the terms of the agreement. L paid some of the amounts in March 2012 but further sums remained due and performance was suspended.
By August 2012, C had run out of patience and wrote to L giving notice of material breach of contract and requiring rectification within 30 days, failing which C would terminate. When L ignored this letter, C terminated the agreement on 8 October 2012. In the proceedings that ensued, L readily accepted liability for the unpaid invoices which led to termination of the agreement. However, the issue which came before the Court was whether L, by repeatedly failing to pay, had also committed a common law repudiatory breach of the agreement and whether C had a right to expected profits over the intended full length of the agreement.
While this was only a summary application, and therefore will be tried in detail in the coming months, the judgment outlined some useful practical applications of the law. The Court found that C had contractually terminated but had not proven a repudiatory breach and, as the agreement allowed L to terminate at will, this limited C’s proper expectation of profits under that agreement.
The Court noted that it was open to C to make it clear in its correspondence with L that it considered L’s failure to pay to be a repudiatory breach. C had failed to do so and its notices had merely dealt with contractual termination. The correspondence from C had gone as far to say “we reserve our right to recover these costs and losses incurred by us as a result of Lotus’s breach…” and “all our rights remain reserved” but this was deemed to be insufficient. This should sharpen the focus of any party intending to terminate a contract as to what its heads of claim should be as this case makes it clear that a claim for repudiatory breach must be expressly made.
C also claimed that it had an “expectation interest” to profits over the life of the agreement. However, the agreement contained a “termination for convenience” clause in favour of L which, in essence, provided that L could terminate the contract at any time during which it was not itself in breach. The Court held that this meant that, whatever C’s expectation, L had a contractual right to end that expectation.
As the circumstances were such that L could perform its contractual obligations in a number of ways, the Court followed the approach in Abrahams v Herbert Reiach Ltd  1 KB 477, that it is the least onerous way in which a party could perform its obligations which must be used as the measure of damages to be awarded. Accordingly, C would only be entitled to the amount it could have made until L terminated the agreement. This approach was applied even though L was not at the time of termination by C in a position to terminate the agreement itself, as it was in breach of its payment obligations.
This is a useful case that looks both at how a party should approach terminating an agreement and what damages a party may expect to be able to claim on termination in a situation where an agreement allows performance in differing ways. The final judgment should make interesting reading.
The recent case of Emirates Trading Agency LLC v Prime Mineral Exports Private Limited  EWHC 2104 (Comm) demonstrates the approach of the Court to dispute resolution clauses which require the parties to enter into good faith discussions to resolve their disputes.
Emirates Trading Agency LLC (“E”) had agreed to purchase iron ore from Prime Mineral Exports Private Limited (“P”) under the terms of a Long Term Contract dated 20 October 2007 (“LTC”). In the event, E failed to lift all of the iron ore expected to be taken up and P sought liquidated damages from E pursuant to the terms of the LTC. The next year E failed to lift any iron ore and, on 1 December 2009, P served notice of termination of the LTC and claimed $45,472,800 in respect of liquidated damages. P stated that if the claim was not paid within 14 days they reserved the right to refer the claim to arbitration in accordance with clause 11.2 of the LTC.
Meetings between the parties took place in Goa on 1 December 2009, 2 December 2009, 25 February 2010 and 9 March 2010. The claim was referred to arbitration by P in June 2010. E made an application to the Commercial Court in London, pursuant to section 67 of the Arbitration Act 1996, for an order that the arbitral tribunal lacked jurisdiction to hear and determine the claim brought P.
Clause 11.1 of the LTC provided that “In the case of any dispute or claim arising out of or in connection with or under this LTC… the Parties shall first seek to resolve the dispute or claim by friendly discussion. Any party may notify the other Party of its desire to enter into consuLTCtion [sic] to resolve a dispute or claim. If no solution can be arrived at in between the Parties for a continuous period of 4 (four) weeks then the non-defaulting party can invoke the arbitration clause and refer the disputes to arbitration”.
E submitted that clause 11.1 required a condition precedent to be satisfied before the arbitrators would have jurisdiction to hear and determine the claim and that this condition was not satisfied. E argued that the condition precedent was “a requirement to engage in time limited negotiations” and that this had not been satisfied because there had not been a continuous period of 4 weeks of consultations to resolve the claims. P submitted that the “condition precedent” suggested by E was unenforceable as it constituted an agreement to negotiate but that, if it were enforceable, it had been satisfied and the arbitrators did therefore have jurisdiction.
The Court held that on a proper construction of clause 11.1 of the LTC, there was a requirement to resolve a claim by friendly discussion and the use of the word “shall” demonstrated that this was intended to be mandatory. The friendly discussions were a condition precedent to the right to refer a claim to arbitration. However, the clause did not provide that the friendly discussions must last four continuous weeks but that if no solution could be found for a continuous period of four weeks then the arbitration could be invoked.
The issue for the Court then to decide was whether clause 11.1 was enforceable. The Court held that a dispute resolution clause in an existing and enforceable agreement, which required the parties to seek to resolve a dispute by friendly discussions in good faith and within a limited period of time before a dispute could be referred to arbitration, was enforceable. The reason for this was that such an agreement was neither incomplete nor uncertain and provided an identifiable standard, namely, fair, honest and genuine discussions aimed at resolving a dispute. The Court further stated that enforcement of such an agreement was in the public interest, first, because commercial people expect the Court to enforce obligations which they have freely undertaken and, secondly, because the object of such an agreement is to avoid expensive and time consuming arbitration.
The Court held that in this instance friendly discussions had taken place between E and P in good faith and with a view to resolving P’s claim and the arbitral tribunal did have jurisdiction to decide the dispute between the parties.
The Government is introducing a new concept of statutory shared parental leave and pay into the existing statutory maternity and paternity leave and pay regime. It is intended to inject more flexibility into how parents choose to structure initial childcare arrangements and to assist in shifting any entrenched view of the mother as the primary carer.
The new right will be introduced on 1 December 2014 and will apply to children expected to be born or adopted on or after 5 April 2015.
Currently eligible mothers are entitled to 52 weeks’ statutory maternity leave, of which 39 weeks are paid. Eligible fathers can take up to 2 weeks’ paid statutory paternity leave. There is also a right for fathers to take additional statutory paternity leave in certain circumstances but this right will be replaced by the shared parental leave right.
The new shared parental leave scheme will allow mothers and fathers to take up to 50 weeks’ shared parental leave between them, instead of the mother’s statutory maternity leave, in the first year of the child’s life and to be entitled to statutory shared parental pay, rather than statutory maternity pay or allowance, for up to 37 weeks.
An eligible mother will be able to end her maternity leave, pay or allowance early and she and the child’s father will be able to opt for shared parental leave instead of maternity leave and pay. The parents will need to meet certain qualifying requirements. The mother will need to be an employee with 26 weeks’ continuous service and her partner will need to have been employed or self-employed in 26 weeks of the 66 weeks before the expected date of birth and to meet certain earning levels. They will need to decide how they divide their total shared parental leave and pay entitlement between them. The leave can be taken by the parents concurrently.
The shared parental leave can be taken in one continuous block or in up to three discontinuous blocks. The employee will have to give their employer at least 8 weeks’ notice before the beginning of a period of leave. Employers have some discretion to refuse or suggest alternatives to an application for discontinuous leave.
The shared parental leave right applies to adoptive parents in the same way as to birth parents.
Pregnant employees are already entitled to paid leave for ante-natal appointments. From 1 October 2014, fathers will also be entitled to unpaid leave to attend up to two ante-natal appointments.
Employers will need to start reviewing their existing maternity, paternity and family leave policies and provisions and to be ready to deal with any requests for shared parental leave that will be made.
The Government is hopeful that the new right will encourage flexibility and reduce gender bias and pay gaps. The soon to be replaced additional paternity leave right had very little take up by fathers and so it remains to be seen how popular and effective the new shared parental leave will be.