The Court held that banks do not owe this duty to customers deceived into instructing their banks to transfer money to fraudsters.

By Nell Perks and Callum Rodgers

On 12 July 2023, the UK Supreme Court handed down its highly anticipated judgment in Philipp v. Barclays Bank UK PLC [2023] UKSC 25, allowing the appeal brought by Barclays Bank UK PLC (Barclays).

The Court’s decision, which resolved longstanding questions about the nature of the Quincecare duty, clarified that the Quincecare duty only arises in cases in which there is fraud by an agent acting for the customer. As a result, it cannot apply in circumstances in which the relevant payment was authorised by the bank’s customer directly, so it has no application in APP fraud cases. The Court overturned the decision of the Court of Appeal, which had expressly held that that it is “at least possible in principle” that the Quincecare duty could apply to a “victim of APP fraud” on the basis that the Quincecare duty “does not depend on the fact that the bank is instructed by an agent of the customer of the bank”. [1]

UK regulator continues to raise concerns that current market practices could lead to systemic risk.

By Victoria Sander

The Prudential Regulation Authority (PRA) has issued another communication, the latest of a series related to reinsurance arrangements for the UK life insurance sector. Charlotte Gerken, Bank of England Executive Director, Insurance Supervision and chair of the PRA’s main executive committee, issued a letter on 15 June to Chief Risk Officers (CROs) communicating the PRA’s insights from its recent schematic review of funded reinsurance.

The PRA has identified reinsurance arrangements, which UK annuity providers use extensively, as an area of potential risk, including potential systemic risk due to increasing exposures to a limited number of longevity reinsurance providers to the sector. The latest missive focuses specifically on reinsurance under which the insurer transfers both asset and investment risk as well as the longevity risk to a particular reinsurer — a form of reinsurance increasingly popular for annuity providers writing large amounts of bulk pension annuity business.

The Reform will extend tenors and reduce borrowers’ fees to encourage commercial bank lending into energy transition projects.

By Tom Bartlett, JP Sweny, Alexander Buckeridge-Hocking, and Samuel Burleton

The Organisation for Economic Co-operation and Development (OECD) has agreed a landmark deal to modernise the Arrangement on Officially Supported Export Credits (the OECD Arrangement), which is a welcome update for commercial banks, borrowers, and export credit agencies (ECAs) alike.

After several years of negotiation, the participants (Australia, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland, Turkey, the United Kingdom, and the United States) reached an agreement on 31 March 2023, to provide incentives and more favourable terms for financing energy transition projects.

In this article, we summarise the main changes to the OECD Arrangement and how they will benefit project financings and the wider energy transition.

With the recent UK “Green Day” announcements confirming the government’s support for CCUS, interest in UK CCUS projects is expected to continue to grow. While there are significant opportunities for investors, careful consideration will be needed to navigate a number of industry specific issues to achieve a successful CCUS project.

By Beatrice Lo, JP Sweny, Simon J. Tysoe, Evelyne Girio, James Richards, and Alexander Leighton

As governments and businesses around the world have committed to decarbonisation and achieving net zero by 2050, there has been growing activity in the development of, and investment in, carbon capture, usage and storage (CCUS) technologies. As the UK has one of the greatest carbon dioxide storage potentials of any country in the world (the UK Continental Shelf in the North Sea, accounting for approximately 85% of Europe’s carbon dioxide storage potential and able to safely store 78 billion tonnes), CCUS is a key focus for the government’s decarbonisation ambitions.

The regulator would introduce a licensing system for clubs, increase scrutiny of directors and owners, and aim to equalise funding.

By Patrick Mitchell, Katie Henshall, and Stewart Robinson

The UK government has published a White Paper which outlines its plans to establish a new statutory independent regulator (the Regulator) for English men’s elite football. The White Paper follows the previously published “Fan-Led Review of Football Governance”, led by Tracey Crouch CBE MP, and the government’s response to the proposed European Super League.

The White Paper raises a number of questions for football’s key stakeholders, including fans, clubs, the Premier League, the Football Association (FA), the English Football League (EFL), and others with interests (financial or otherwise) in and around the sport.

A consultation that will remain open until 11 April 2023 offers further clarity on the proposals to regulate buy-now-pay-later products.

By Rob Moulton, Becky Critchley, Ella McGinn, and Dianne Bell

On 14 February 2023, HM Treasury published its consultation and accompanying draft legislation on the regulation of buy-now-pay-later (BNPL) lending. The consultation follows the proposals in HM Treasury’s prior publications released in October 2021 and June 2022, since the government announced its intention to bring currently unregulated BNPL products within scope of the regulatory perimeter. This latest consultation provides some welcome clarity on the approach to this upcoming sea change for firms operating in the BNPL space.

The key changes will be effected by amending the current fixed-sum interest-free credit exemption in Article 60F(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO). BNPL lending usually falls within this exemption as such agreements meet the conditions as interest-free loans repayable in under 12 months and in 12 or fewer instalments. Article 60F(3), which provides an exemption for running-account credit, will remain unchanged.

The FCA has reviewed firms’ progress to embed the Duty into their businesses, providing good and poor practice examples for firms to improve and direct their implementation work.

By Nicola Higgs, Becky Critchley, Jaime O’Connell, and Dianne Bell

The Consumer Duty (Duty) rules (as set out under the FCA’s Policy Paper (PS22/9) and guidance document FG22/5) come into force at the end of July 2023. On 25 January 2023, the FCA published feedback on firms’ current implementation progress via its Multi-firm review: Consumer Duty Implementation Plans. While the FCA notes a number of positives, the overall impression is that firms need to do more and do it quickly.

Warranty and indemnity insurance may remain a staple of European private equity, but are buyers changing course?

By Neil Campbell, Tom D. Evans, Sebastian Pauls, Maximilian Platzer, David J. Walker, Edward Coates, and Catherine Campbell

Warranty and indemnity (W&I) insurance has become an important component of European PE transactions in recent years. However, changing market dynamics and challenging macro conditions (which have cooled deal flow) mean that PE buyers are now more critically evaluating the merits of W&I insurance. The Eighth edition of the Latham & Watkins Private Equity Market Study indicates that the overall uptake of W&I insurance is beginning to plateau, having increased significantly between 2016 and 2019. From a high of 35%, overall usage of W&I insurance in European deals has dropped in the past two consecutive years.

As W&I insurance has matured and PE buyers have become more experienced consumers of the insurance (and of low or nominal liability caps for warranties), the emerging picture is one of a product with a nuanced value. Increasingly, deal-specific characteristics, structures, and issues are playing a role in the demand for and success of W&I insurance, including appetite for stapled policies.

PE acquirers should view unions as stakeholders and factor possible or actual engagement obligations with them into the deal process.

By Kendall Burnett, Tom D. Evans, David J. Walker, Paul Lawrence, and Catherine Campbell

Widespread economic pressure — including pay, inflation, and the ongoing cost of living crisis — has increased union visibility. As the number of workers interested in union membership grows and the frequency of strikes surges in the UK and elsewhere, PE deals teams should remain mindful of the presence and role of unions in M&A.

PE firms face growing regulatory and litigation risks from greenwashing claims as they navigate a fragmented anti-greenwashing landscape.

By Tom D. Evans, Nell Perks, Anne Mainwaring, David J. Walker, and Catherine Campbell

Amid concerns of exaggerated or misleading sustainability claims, the UK Financial Conduct Authority’s (FCA) recent proposal for new labelling and disclosure rules to combat greenwashing (see text box) should put PE firms on alert for a growing range of greenwashing risks. The FCA proposals are just the latest in a wave of new rules and requirements being enacted and contemplated as regulators across jurisdictions look more carefully at green claims and seek to hold regulated firms (including PE sponsors) to account for exaggerated credentials and misstated investment policies.

Similarly, investor and other stakeholder claims over greenwashing are on the rise as firms and portfolio companies come under greater scrutiny and are required to publish ESG disclosures in market-facing and other public information. These claims can be brought under different and overlapping laws, including statute, securities regulations, and “soft law” provisions, making a consistent and proactive risk management approach essential.