Tech presents new challenges for businesses - including regulation, growing competition from start-ups and ethical issues raised by artificial intelligence. It affects all aspects of the law.
Our experts provide joined-up advice on the impact of technology on antitrust and data; M&A and investments; intellectual property and litigation; AI and fintech; cyber and regulatory investigations.
In the near future, AI will drive our cars, allocate public resources, screen job candidates, scan our faces and restock our fridges. Sometimes it already does these things. But as it’s use grows, so will regulation. While policy makers in the UK, Germany, France and the US are convinced about the need for new rules, there is no consensus on the approach they should take, or how effective regulation might be, according to a survey of 1000 tech policy experts carried out by YouGov on behalf of Clifford Chance and Milltown Partners. Read more about our relationship with AI: friend or foe? Summary of our global study.
The recently proposed EU regulation on artificial intelligence (AI Act) will impose new regulatory requirements on firms across the financial sector when they use, provide, import or distribute computer software for biometric identification, human capital management or credit assessment of individuals. It will also prohibit the deployment of software exploiting subliminal techniques or vulnerabilities due to age or disability and impose transparency obligations on providers and users of other software. Firms' compliance with the new requirements will be challenging because of the difficulty of determining what software will be treated as an 'artificial intelligence system' subject to these requirements and which entities within a financial sector group will be subject to obligations under the AI Act, especially given its extraterritorial application. Read more about the impact of the new EU AI regulation on financial sector firms.
The European Commission has introduced its proposal for the first-ever harmonised legal framework on artificial intelligence (AI), confirming the EU's role and ambition as a pioneer in the regulation of tech. We consider what this means for businesses, as well as how global regulators are responding. The AI Act, which was released on 21 April 2021, attempts to strike a difficult balance between two key objectives: promoting innovation and harnessing the benefits of AI, on the one hand; and addressing key risks and fears AI gives rise to, on the other. In so doing, it seeks to address some of the main concerns levelled at a general, horizontal framework, favouring a riskbased approach and taking account of specific sectoral issues. Read more about the future of AI regulation in Europe and its global impact.
Data and Privacy
"Greenwashing" – the making of unsubstantiated claims about the sustainability of an investment product – is high on regulators' agendas for 2022 and it is crucial that ESG capital markets are transparent for the benefit of both issuers and investors. Technology and innovation have an important role to play in addressing these risks and ensuring the continued growth of the sustainable finance market, which has surged in recent years and is worth in excess of US$3 trillion. Read more about how data and DLT can accelerate sustainable finance.
In a landmark case, Lloyd (Respondent) v Google LLC (Appellant)  UKSC 50 ("Lloyd"), the Supreme Court has ruled that claimants can only obtain compensation for breaches of their statutory data privacy rights if they can evidence material damage or distress – loss of control of personal data alone is not sufficient. The case is likely to have implications for other class action-style claims against companies accused of breaching data privacy law. However, a focus on claims where actual damage has been suffered is the right outcome for all businesses, and not just for big Tech. Read more about Lloyd v Google: How the supreme court judgment closed the door on Lloyd's £3.3bn data claim.
The UK government, like many others around the world, is focusing on the perceived threat of hostile investors owning or controlling critical businesses or infrastructure and, as a result, enacted the National Security and Investment Act (NSI) in May 2021. When the regime becomes effective later this year, it will give the UK government very broad powers to block inward investment on national security grounds. In this briefing we assess the impact of the new Act on a wide variety of investments and financing transactions. Read more about The UK National Security and Investment Act: What is the impact?
The Digital Markets Act (DMA) ushers in a new era for the digital sector in the EU, as compliance will require some of the most influential digital companies to make unprecedented, far-reaching changes to the way they operate and interact with their customers, even going as far as to rethink aspects of their business models. Read more about the Digital Markets Act: A new era for the digital sector in the EU.
A broad range of services – from digital and telecommunications services to engineering, cloud storage and artificial intelligence (AI) – will play an integral role in the transition to net zero. But for businesses to reach their emissions targets, the global trading system has to adapt, say business leaders in a report from Clifford Chance and the World Economic Forum (WEF). Read more about the role of tech in trade policy and climate change.
Blockchain and distributed ledger technology (DLT) have the potential to transform how securities are issued, traded and settled. However, the adoption of technology in the capital markets has not matched take-up in other areas of finance and trade and, so far, is used for enhancing existing elements of theprocess rather than replacing it with something new. In this briefing we explore the reasons for this and share our experience of some of the developments in this area and other uses of technology in the capital markets. Read more about Digital Developments in the Capital Markets.
The development of Central Bank Digital Currencies (CBDCs) – a digital representation of fiat money issued by a central bank – has been accelerated by COVID-19 and the resulting shift to digital payments. In this briefing, we consider the different approaches being taken by central banks globally, including the digital euro, renminbi and dollar, what practical adoption of CBDCS may look like, the legal structures that might be employed and the consequences for businesses. Read more about Central Bank Digital Currencies and the Theory of Money.
The outbreak of coronavirus or Covid-19 in late 2019 and 2020 has been an accelerator for digitalisation for many aspects of our lives. Is this the case for the syndicated loan market?
In recent years, there has been significant focus on the development of technological solutions (such as distributed ledger technology (DLT) and smart contracts) for the syndicated loan market with the aim of improving the negotiation, execution, administration and trading of loans – ideally through the adoption of single platform solutions. In practice, it appears that the syndicated loan market is adopting technology step by step by investing in various technological solutions which address specific points in the loan life cycle.
A survey conducted in November 2020 by the Loan Market Association (LMA) on the outlook for the syndicated loan market in 2021 shows that 17.7% of the members surveyed is using or looking to use blockchain (a type of DLT) and smart contracts. However, 60.4% of members surveyed are using or looking to use electronic platforms for document negotiation and/or transaction management. These statistics are also largely consistent with an earlier LMA Fintech survey conducted in May 2020. Interestingly, this is not dissimilar to the adoption of DLT by businesses – according to a 2020 Forbes Insights report, only 36% of businesses surveyed are using or exploring the use of DLT, this being the lowest compared to the use or exploration of the use of other technologies but this could also indicate greater room for growth as out of 36%, only 7% are currently using this technology.
Notwithstanding this, financial institutions are using or trialling a range of technology tools in all phases of the loan life cycle, from origination to secondary trading, and in key functions such as loan servicing and risk management. In this article, we explore the benefits and opportunities, as well as the legal, regulatory and practical challenges, of some of the potential technical solutions for the syndicated loan market under consideration. Read more about The Digital Future of Syndicated Loans.
On February 18, 2021, the US Department of the Treasury's Office of Foreign Assets Control announced a settlement of apparent US sanctions violations by Atlanta, Georgia-based BitPay, Inc. involving its provision of digital currency payment processing services to purchasers of goods and services located in Crimea, Cuba, Iran, North Korea, Sudan and Syria.
The case highlights the sanctions risks for US companies that provide services in connection with digital currency payments and indicates sanctions compliance controls that may be appropriate to mitigate such risks. BitPay did not voluntarily self-disclose the apparent violations, but OFAC determined that they were not egregious and therefore assessed a base penalty of $2,255,000. OFAC then reduced the final penalty to $507,375 based on a number of mitigating factors including BitPay's cooperation with OFAC, remedial measures and compliance enhancements. Read more about OFAC Risk Isn't Virtual for Digital Currency Payment Processors.
We are delighted to have authored the UK Law and Practice chapter in the Chambers 2022 Global Practice Guide on Fintech. Originally published by Chambers and Partners. Read more about Fintech – UK: Law and Practice.
With the COVID-19 pandemic ongoing, technology continues to revolutionise financial services at a rapid pace. Following the bold predictions we made last year, we highlight the five key trends for fintech in 2022. Read more about Fintech in 2022: Five Trends to Watch.
The Italian securities exchange regulator, Consob; central bank, Banca d'Italia; and insurance regulator IVASS, on 1 October 2021 announced the term during which applications can be filed for admission to the regulatory "sandbox" governed by Ministerial Decree 100/2021, which came into force in July 2021 (the "Sandbox Decree"). The regulatory sandbox is a controlled space that allows financial intermediaries and operators in the fintech sector to experiment with high-technology innovation in the banking, financial and insurance sectors, benefiting from a temporarily simplified legislative framework. Read more about the new Italian Fintech Sandbox opening.
Difficult legal issues arise when computer software purports to enter into a contract. Electronic contracting is not a new concept. However, the rise of artificial intelligence and smart contracting means that these issues will become more important. They therefore deserve analysis. In this note, we consider two questions around capacity to contract and reversibility of performance which arise where two computer programs contract directly with each other, in circumstances where there is no separate written natural language contract and where there is no overarching contractual framework governing the interaction. While this is not a common scenario at present, it is likely to be seen more frequently as the use of electronic contracting becomes more common. These issues arise whether or not DLT is a feature of the underlying platform or software. Read more about Legal considerations around smart contracts: Contracts between computer programs.
What will the future of the healthcare sector look like? What will be the key drivers and which market segments are expected to grow? We provide an outlook on the HealthTech trends for 2022. Read more about HealthTech Trends 2022.
As a growing number of tech companies invest heavily in the metaverse – which allows users to live, work and play in alternative virtual worlds – we explore the legal issues that it may give rise to, including data security and privacy, IP, copyright, and antitrust. Read more about the Metaverse: What are the legal implications?