UK Common Law Research Articles

The creditor duty post Sequana: lessons for legislative reform

ABSTRACT UK common law recognises that directors owe a fiduciary duty to consider creditors' interests when a company is insolvent or in financial difficulty. However, the scope of this duty remains unclear, particularly the degree of financial difficulty necessary for it to arise. In 2022, in BTI v Sequana, the Supreme Court did little to resolve these uncertainties, retaining a context first approach, where the duty's triggering point is based on the facts and the risk borne by creditors in the specific case. In contrast, Ireland codified its creditor duty in 2022, setting out a series of legislatively defined financial situations where the duty applies and what the duty entails. This article argues that while a search for complete doctrinal certainty in this area is misguided, a degree of certainty over and above the position in Sequana can be achieved and that Ireland's codification offers valuable lessons for future UK reform.

ESG and corporate financial performance: the mediating role of green innovation: UK common law versus Germany civil law

PurposeThe purpose of this paper is to investigate the direct and indirect links between environmental, social and governance (ESG) practices and financial performance using the mediate role of green innovation.Design/methodology/approachTo test the current study hypotheses, the authors applied linear regressions with a panel data using the Thomson Reuters ASSET4 and Bloomberg database from a sample of 115 UK and 90 Germany companies selected from the ESG index over the period 2005–2019.FindingsThe results show that the strengths ESG increase the firm value and the weaknesses decrease it. In addition, the authors find that green innovation fully mediates the relationship between ESG practices and financial performance in UK and Germany.Practical implicationsThe findings provide interesting implications to academics practitioners and regulators who are interested in discovering ESG score, financial performance and green innovation. The results also provide insights to regulators and the board of directors on future growth opportunities for the company and the country.Originality/valueThis study is unique in examining the mediation effect of green innovation on the relationship between ESG practices and financial performance.

The United Kingdom has spoken: The receding impact of European jurisprudence on the UK interpretation of the common VAT system

Post-Brexit, UK law conforming to Directives of the European Union such as the value added tax (VAT) Directive will remain in effect and UK courts will be permitted to consider decisions of the Court of Justice of the European Union (CJEU) when interpreting that law. How UK common law courts, steeped in the tradition of the doctrine of precedent, will use CJEU judgments in the post-Brexit era has been the subject of much speculation. This article considers the question in the context of a case study, looking at the application by UK courts of CJEU decisions in an important area of VAT law, the treatment of customer loyalty plan benefits. The evidence suggests that, even prior to Brexit, UK courts had started to pursue a separate path, declining to follow CJEU precedents that yielded clearly inappropriate policy outcomes. If the results of the case study are replicated more widely in UK rulings, it can be expected that the influence of CJEU judgments may taper off where formalistic and literalist CJEU interpretations have led to outcomes inconsistent with the recognized policy intent of UK law.

The mediating role of corporate social responsibility on the relationship between governance and tax avoidance: UK common law versus French civil law

PurposeThe purpose of this paper is to investigate the direct and indirect links between corporate governance and tax avoidance using corporate social responsibility (CSR).Design/methodology/approachThis study is based on a sample consisting of 300 UK and 200 French firms over the period 2005-2017. This study is motivated by structural equations and system models that specify both a direct link and an indirect link between corporate governance and tax avoidance.FindingsThe results show that CSR fully mediates the relationship between corporate governance and tax avoidance in UK firms. In addition, in French firms, CSR partially mediates the relation between corporate governance and tax avoidance.Practical implicationsThe findings may be of interest to the academic researchers, practitioners and regulators who are interested in discovering corporate governance score, tax avoidance and CSR. Regulators must evaluate their actual corporate governance mechanisms and their country’s legal system before mandating additional governance mechanisms for firms in their country.Social implicationsThis study proved empirically that firms with a higher level of social responsibility are better positioned to obtain more transparency through reducing tax avoidance.Originality/valueThis paper extends the existing literature by examining the mediation effect of CSR on the relationship between tax avoidance and corporate governance.

The Trade Secrets Directive – consistency of approach required, with or without Brexit

A year ago, when I agreed to write this editorial once the new Trade Secrets Directive (the Directive) had entered in to force, I thought that I would be discussing a harmonisation of approach to trade secrets across the EU including the UK. Well, despite the result of the UK’s Brexit referendum, harmonisation still looks likely, even if it’s only at a commercial level in the UK. The Directive will affect all businesses operating across Europe; any business with employees and research and development in multiple European states, with people and product concepts moving between states in the course of employment/development, will want to apply a consistent approach to the protection of its trade secrets and knowhow. This will now be made easier by virtue of the Directive. In fact, the UK will still be a member of the EU on the date by which the Directive must be implemented (2 years from coming into force on 5 July 2016) and so, if political will allows, the UK may even implement the Directive prior to ‘Brexit’ in any case. In any case, the minimum harmonisation required by the Directive equates to a position so similar to the current protection accorded to confidential information by the UK common law including the approach taken by the UK courts that it was always questionable whether this measure would change UK law significantly. The UK may instead find itself with no implementation but a sufficiently similar legal position that businesses can feel comfortable sharing trade secrets across borders, even if those become EU/ non-EU borders in due course. Ironically perhaps, the main tenets of the UK’s approach to the protection of confidential information have effectively been exported to the rest of the EU via this Directive, just at the moment that the UK has decided to leave. A key differentiator between the new Directive and the UK common law has been said to be in the definition of a “trade secret”. The Directive defines a trade secret as information that is secret (not generally known among or readily accessible to, persons within the circles that normally deal with this kind of information), has commercial value because it is secret, and has been subject to reasonable steps under the circumstances by the person lawfully in control of the information to keep it secret. In its assessment of whether information should be accorded protection, the UK common law considers the quality of the information and the circumstances in which it was disclosed. On closer inspection however, much of the detail of the assessments applied to confidential information under UK common law mirror those under the new Directive. If anything, UK law may be more generous in its application of the status of confidential to information being allegedly misused. Another aspect of the new Directive of particular note is the protection that will now be given to trade secrets that are revealed in the course of court proceedings. The lack of sufficient protection within the EU currently has meant that businesses are hesitant, at the very least, about initiating any court actions by virtue of which such revelations might be made. The Directive will ensure that the confidentiality clubs and redaction common in UK litigation will be made available EU-wide. The Directive introduces the concept of trade secretinfringing goods, i.e. those whose design, characteristics, functioning, production process or marketing “significantly benefits” from trade secrets unlawfully acquired, used or disclosed. The production, offering or placing on the market of infringing goods or the importation, export or storage of such goods for those purposes will be unlawful where the person carrying out such activities knew, or ought under the circumstances to have known, that the trade secrets were used unlawfully (acquired unlawfully or in breach of confidentiality agreement or other duty not to disclose or in breach of a contractual duty or duty to limit the use of the trade secret). However, these are not intellectual property rights as such and are not subject to the IP Enforcement Directive

Rediscovering the Contract of Employment for Non-Standard Workers in the UK Common Law

The central concept underlying access to employment rights is based on a binary divide between contract of service (the employee) and contract for services (independent contractor). New classifications of work relationships have however been added over time. These new categories do not sit comfortably with the binary classification system. New ways of working may undermine what we traditionally understand as working relationships. As such the usefulness of this system has been questioned. Yet contract remains central. In view of the lack of any practical alternative it is worth considering whether the interpretation of contract law itself is capable of development. The modern law of contract has the potential capacity to redefine the binary divide so that only those who are truly self-employed are excluded from statutory protection. To do this the meaning of 'contract of service' would need to reflect the reality of labour market contracting and take account of the impact of exploitative bargaining strength. This reinterpretation could potentially expand the classification of contract of service to encompass more non-standard workers within the remit of full employment protection in the UK. Such a possibility depends on how far the employment tribunal and courts have incorporated a contextual framework into their interpretation of contract and how far any context incorporates wider social values consistent with public law standards of fairness and reasonableness. This paper contends that there needs to be explicit acknowledgement by the judiciary that the contextual interpretation of contracts needs to include the economic, political and social imperatives that informed the statutory environment. By seeing the employment relationship in this wider context the pragmatic judge may truly take a purposive stance.

The Magnetism of the Human Rights Act 1998

Anthony Lester QC discusses the impact of the UK Human Rights Act 1998 ('UK Act') in the United Kingdom and compares its aspects to the New Zealand Bill of Rights Act 1990. The article begins with an overview of constitutional developments in the United Kingdom, and a brief political background to the UK Act. The author discusses section 3 of the UK Act, which imposes a duty on courts and tribunals to strive to avoid incompatibility between domestic legislation and the European Convention on Human Rights ('Convention'), and section 4, which empowers the Court to make a declaration of incompatibility as a last resort. The article also explores the principle of proportionality, the impact of the UK Act on private law relationships, and section 19 of the UK Act which requires the Minister in charge of Bills to show declare whether a new bill is consistent with the Convention. The author concludes that the UK Act weaves Convention rights into the very fabric of UK common law and legislation, and the judiciary will have a key role in developing the constitutional principles of public law in both the UK and New Zealand

Historical Pollution: A European Prospective

Examines the development of UK and European environmental law. The Treaty of Rome has been amended to provide for assessment of new EC laws in terms of environmental impact. The draft Directive on Civil Liability for Waste threatens a strict liability approach for pollution. The inadequate state of UK common law is reviewed together with the proactive powers of waste regulation authorities and the establishment of contaminated land registers. The conclusion is that liability for pollution is widening and adverse publicity is more likely with greater public access to information.