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Clifford Chance

Clifford Chance

Tech

Understanding the challenges tech presents for business

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.

Artificial Intelligence

Our relationship with AI: friend or foe? Summary of our global study

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.

Impact of the new EU AI regulation on financial sector firms

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 future of AI regulation in Europe and its global impact

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

Lloyd v Google: How the supreme court judgment closed the door on Lloyd's £3.3bn data claim

In a landmark case, Lloyd (Respondent) v Google LLC (Appellant) [2021] 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 National Security and Investment Act: What is the impact?

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?

Digital Assets

The role of tech in trade policy and climate change

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.

Digital Developments in the Capital Markets – Summer 2021

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.

Central Bank Digital Currencies and the Theory of Money

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 Digital Future of Syndicated Loans 2021

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.

OFAC risk isn't virtual for Digital Currency Payment Processors

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.

Payments trends 2021: what will the new year mean for regulation and enforcement?

There has been a renewed focus on the payments sector and its regulation. COVID-19 and its impact on spending habits and the Wirecard scandal are two of the contributing factors. But what’s next? We explore five themes likely to drive regulatory change for payments, as well as shape the enforcement policies of global regulators over the next 12 months. Read more about Payments trends 2021: what will the new year mean for regulation and enforcement?

EU Digital Services Act and Digital Markets Act: What are the implications?

The debate about how to regulate and ensure “digital” competition and guarantee a fair market is a global one. Jurisdictions around the world are grappling with how to handle the new tech environment – which includes the tricky issue of how to regulate the tech giants. Europe has decided to be a pioneer in the regulation of digital platforms and marketplaces with a proposed digital package – the first major overhaul of EU rules for online players for two decades. Read more about EU Digital Services Act and Digital Markets Act: What are the implications?

Fintech

The New Italian Fintech Sandbox Opens

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.

Chambers Global Practice Guide 2021: Fintech – UK: Law and Practice

We are delighted to have authored the UK Law and Practice chapter in the Chambers 2021 Global Practice Guide on Fintech. The chapter provides an invaluable introduction to the fintech market and its regulation in the UK for fintech start-ups and scale-ups, as well as more established firms. We consider a host of fintech business models and sectors, ranging from specific technologies such as blockchain and the use of artificial intelligence for robo-advice and algorithmic trading, to considering the outlook for funds, payments providers, online lenders, market places and exchanges. Originally published by Chambers and Partners. Read more about Fintech – UK: Law and Practice.

Fintech in 2021: Five Trends to Watch

The COVID-19 crisis has brought technology use to the fore in the financial sector and beyond, with businesses seeing two or three years’ expected progress compressed into two or three months last year. The pandemic's impact on fintech businesses and regulatory agendas is ongoing, coupled with pressure from both consumers and businesses to get tech regulation right. What does this mean for global fintech in 2021? From sustainable fintech and CBDC developments to greater scrutiny of data and increased antitrust enforcement, we predict five developments for key fintech areas including AI, data, payments and crypto. Read more about Fintech in 2021: Five Trends to Watch.

Smart Contracts

Legal considerations around smart contracts: Contracts between computer programs

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.

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