The consultation asks covers a number of areas that are of relevance to organisations that either outsource services or provide outsourced services to third parties:

• whether the amendments introduced under the 2006 Regulations have been effective in providing greater clarity and transparency as to the application of TUPE?
• have the 2006 Regulations reduced the need for legal advice and/or the number of tribunal claims?
• should TUPE apply to the provision of professional services?
• is the absence of a mechanism to harmonise terms and conditions across a workforce post transfer a burden? If this right is desired, how should it work?
• should more be done to clarify the application of TUPE upon an insolvency situation?
• is the guidance on the application of the economic, technical or organisational reason sufficiently clear?

The consultation is open until 31 January 2012. You can access the papers here.

The government stated on Monday that it will adopt the recommendations in full. As John mentioned in a previous blog, the proposals to ring fence retail banks will have an impact on the way in which banks structure their key IT and outsourcing contracts to ensure that the ring fenced bank’s access to key infrastructure is protected.

You can read the e-update in full here.

If you’d like to discuss the impact of the recommendations and how you might be able to structure your key IT and outsourcing contracts, then please contact Grant Campbell or John Mcgonagle, or your usual TIO Group contact.

On 1 March the remit of the Adverting Standards Authority (ASA) was extended to include the claims companies make on non-paid for space online. This covers adverts for a company’s goods and services on its own website and on any social media sites within its control.

Since the ASA’s digital marketing remit was extended earlier this year the independent UK regulator has received a 40% increase in complaints.

The rules and criteria that are applicable to digital and online marketing are the same as those applicable to ‘traditional’ media, such as the obligation that the advert is not misleading, exaggerated or offensive. However, there are some particular things to look out for when advertising online, including via social media channels.

Here’s a quick list of do’s and don’ts to ensure that your company doesn’t have to explain itself to the ASA:

• Don’t exaggerate savings by comparing an offer to the most expensive alternative.
• Don’t say something is free if it isn’t. If the product is free, but postage is not, then say that upfront.
• Don’t include unnecessary price breakdowns for a product or service unless the costs being detailed are optional. If they are not optional then it is pointless explaining what they are.
• Don’t pick and choose customer reviews to appear on your website to make your company look good.
• Do include any surcharges, such as booking fees, upfront.
• Do make sure a discount is actually a discount. If the prices are the same before, during and after the promotion then it’s not really a promotion and is in breach of regulations.
• Do ensure that you have robust evidence of quality and performance if you are going to make claims about your product.
• Do state clearly that an offer may be extended at the company’s discretion if you think you may want to exercise this option.

For further information please contact me or get in touch with your usual Brodies contact.

The dispute
When Wayne Rooney was 17 he entered into an Image Rights Representation Agreement (“IRRA”) with Proactive, under which Proactive would negotiate contracts with third parties for exploitation of his image rights.  Proactive would take 20% of the gross sums payable on any contracts agreed, and the agreement was to run from 16 January 2003 to 16 January 2011.  All was well until October 2008, when Wayne and Proactive fell out.  The IRRA was subsequently terminated, and since then Proactive have been claiming that it is owed millions in damages and further millions in future commission.

The parties ended up in court, and on 1st December the Court of Appeal broadly upheld the earlier Manchester Mercantile Court decision that the IRRA was unenforceable on ground of restraint of trade.  Proactive will receive a payment for the reasonable value of its services, which will be established at a later hearing, but it won’t be calculated according to the contractual commission rate of 20%. (In case you’re wondering, the £5k in my joke above was how the tabloids reported it, but in typical tabloid-disinformation style actually refers to an accountancy bill which was adjudged to have been owed by Rooney to Proactive as the result of a totally separate agreement.)

In reaching their decision the judges found several aspects of the deal between Proactive and Rooney persuasive, including:

• Wayne was only 17 years old when the IRRA was signed;
• Wayne and his parents were “wholly unsophisticated in legal and commercial matters”, but were not advised to take legal advice;
• The IRRA was not in any sense a standard form – on the contrary, it was unusual in many respects; and
• The duration of the IRRA was excessive (notwithstanding Proactive’s submissions that it needed to “adopt a long terms strategy to develop the value of the player’s brand”).

What are “Image Rights”?
A good result for Wayne then.  But what are “Image Rights”?  “Image Rights” in the context of footballers refer to the rights in the likeness, name and other personal attributes of that individual, exploited through various off-field activities such as sponsorship, promotional appearances and shirt sales.  Legally, the UK has no actual codified law of image rights, so an individual wishing to protect these rights has to rely on a mix of privacy case law, and assorted legislation regarding data protection, copyright and trade marks.

At a World IP Day conference in Edinburgh a few years ago, I asked Patrick Stewart (Head of Legal at Manchester United) about image rights.  Patrick said it was the one thing he had hoped he wouldn’t be asked about!  At the time I was just genuinely interested to hear how they operated, and how they could be enforced – but with hindsight I was potentially putting Patrick on the spot about a pretty sensitive issue.

Image rights contracts in football
Football clubs increasingly use the concept of image rights as a way of offering paying star players suitable remuneration.  Payments for image rights allow players to avoid paying 50% income tax on all their earnings, whilst also saving the club from having to make National Insurance or PAYE contributons.

Here’s how it works.  Players are paid wages for their services on the pitch, but further image rights payments are made to a company which has been set up to hold the player’s image rights.  These payments are subject to corporation tax levied at 22%, and the players can take interest-free loans from the companies as a “benefit in kind” taxable at 2% (instead of salaries and/or dividends which would be income, and be taxable at the corresponding higher rate). 

Unsurprisingly these tax arrangements attract a lot of negative publicity.  In August the Press Complaints Commmission rejected a complaint made by Wayne Rooney about a Sunday Times article investigating the structuring of his finances.  Arsenal striker Dennis Bergkamp won a test case against the Inland Revenue in 2000 after it attempted to claim that a percentage of the image rights income that had been paid into an offshore business established in his name constituted tax evasion.  Nevertheless, HMRC has recently announced a new crackdown on tax evasion in football, so it looks like things will “kick off” (ah a football-pun in stoppage time!) again in 2012.

[Ed: the Techblogggers will now be negotiating image rights deals at their next appraisals.]

The problems are affecting apps on the website that allow customers to calculate the prices of letters and packages. The problems also appear to be affecting services that allow customers to pay for postage online and print out smart stamps.

Here’s what the Royal Mail says about it:

A Royal Mail spokesman said that the shutdown had been caused by a shift of online services to a new server – a process that had been ongoing for 18 months…He said the migration problems had not been anticipated before Christmas.

I can imagine the Royal Mail has a lot of unhappy customers at the moment. It seems that online retailers and mail order businesses are being particularly hit, as they use the systems when fulfilling orders. They are presumably having to use the Royal Mail’s compeititors to fulfil those orders, which won’t be good for the Royal Mail’s business.

It is for this reason that most businesses operate a “change freeze” on their IT systems around their busiest times of the year (for example the run up to Christmas for any retailer, Valentines Day for online florists etc, bank holidays for banks providing ATMs and transaction processing). No matter how much planning is done, IT projects often encounter unanticipated problems, and once the damage is done it is very difficult to pedal back to the previous release.

It is therefore just sensible practice to ensure that no system upgrades or modifications take place during or in the run up to those key periods.

Note that this doesn’t just apply to your internal IT systems, but also those of your key contractors and suppliers. Do your contracts make sure that your contractors don’t implement major changes at the time when you are most reliant upon them?

The Independent Commission on Banking (“ICB”) published its Final Report on 12 September, setting out recommendations on structural and non-structural reforms to improve stability and competition in UK banking. 

The recommendations broadly suggest that:

• Banks need to improve their loss absorbency, by achieving more equity relative to their assets;
• Competition needs to be encouraged; and
• Retail banks should be ring-fenced from any wider corporate group and/or financial organisation of which they form part.

Earlier this month my Banking colleague Derek Arnott and I delivered presentations in Brodies’ Glasgow, Edinburgh and Aberdeen offices discussing the recommendations. 

Derek (a lawyer of formidable experience in this field, and a former Head of Group Legal Services at The Royal Bank of Scotland Group) discussed the recommendations from the perspective of a banking solicitor, while I focused on the implications of the retail ring-fence from the perspective of an IT/outsourcing/commercial contracts lawyer.

Recommendations of most significance to the IT/outsourcing/commercial contracts lawyer

I believe that the retail ring-fencing recommendations will have a direct impact on any lawyer who advises on corporate governance or commercial contracts.

The particular recommendations which are of most direct significance to the IT/IP/commercial contracts lawyer are broadly summarised in the following list:

• Ring-fenced banks should be separate legal entities.
• Ring-fenced banks should be prohibited from offering certain services and/or carrying out certain activities.
• Any financial organisation owned or partly owned by a ring-fenced bank should conduct only activities permitted within a ring-fenced bank. Such a financial organisation’s balance sheet should also contain only assets and liabilities arising from these services and activities.
• The wider corporate group should be required to put in place arrangements to ensure that the ring-fenced bank has continuous access to the entire infrastructure required to continue provision of its services and activities, irrespective of the financial health of the rest of the group.
• All transactions (including secured lending and asset sales) between a ring-fenced bank and all other entities forming part of a wider corporate group should be conducted on a commercial arm’s-length basis.

Far-reaching consequences

These recommendations, and the overall concept of a ring-fence, are directly at odds with the present day corporate structures of many large banks and financial institutions.

Most financial institutions operate some form of shared service model, with one group entity contracting with suppliers on a basis that allows other group members to benefit from that contract.

The ring-fenced bank will either have to possess its own infrastructure or, if it is shared, then such infrastructure will have to be identified (which may be by no means a straightforward task) and then made available formally to the ring-fenced bank, via:

• direct agreement with the supplier;
• direct agreement with another member of the group; and/or
• a member of the wider group, which contracts with suppliers, but is “bankruptcy-remote”.

Infrastructure separation of the type that is likely to be required by the ICB recommendations may feasibly involve:

• drafting agreements to formalise supply of infrastructure services to the ring-fenced bank;
• renegotiation of existing agreements to separate provision of infrastructure services;
• novation or assignation of agreements to a well-capitalised, bankruptcy-remote shared service subsidiary (without assets or liabilities) to provide infrastructure services on behalf of the separated entities; and/or
• partial or wholesale outsourcing of infrastructure provision.

Implementation

There are many questions still to be answered regarding the ICB recommendations.

The deadline that the ICB has set for implementation of its’ recommendations is 2019. George Osborne, the Chancellor of the Exchequer, has indicated that he intends to implement the recommendations and will “seek a legislative slot” in the 2012-13 parliamentary session.

What seems certain is that some sort of separation or segregation of retail banks is inevitable and, in this context, the deadline of 2019 is not that far away. Whether acting for financial institutions or their suppliers, from now on the IT/IP/commercial contracts lawyer should keep in mind what is on the horizon when negotiating or renegotiating agreements.

In the case of Porton Capital Technology Funds and others v 3M UK Holdings Limited and 3M Company [2011] EWHC 2895 (Comm) the High Court applied existing law to determine whether or not consent had been unreasonably held by a party in a commercial situation.

In brief, the background to this particular case was a purchase by 3MUK of the entire shareholding of Acolyte by way of a share purchase agreement with Acolyte’s shareholders (Porton holding 60.4% of shares). Acolyte’s key, and indeed only, commercial product was ‘BacLite MRSA’ which is used to detect the hospital super-bug MRSA. The purchase price was an initial figure of £10.4 million coupled with a second payment based on net sales, with a (not inconsiderable) potential value of £41 million.

The share purchase agreement had a clause to the effect that Acolyte could only cease to develop and market the BacLite MRSA product if the vendors consented, such consent “not to be unreasonably withheld”. Acolyte did request consent to discontinue the product, but unsurprisingly – considering the potential £41 million payment – the vendors refused to consent. Or at least they said they would only consent if they received the £41 million. They were offered a payment of £1 million instead: deadlock, termination of the BacLite business and a breach of contract claim ensued.

The case considered the issue of whether or not it was reasonable for the vendors to have withheld consent, and made the following key findings:

• the burden was upon 3M to show that the vendors’ refusal to consent to the closing of the BacLite business was unreasonable;
• it was not for the vendors to show that their refusal of consent was right or justified, simply that it was reasonable in the circumstances;
• in determining what is reasonable, the vendors were entitled to have regard to their own interests in earning as large a payment as possible;
• the vendors were not required to balance their own interest with those of 3M, or to have any regard to the costs that 3M might be incurring in connection with the ongoing business of Acolyte.

The issue of reasonableness will always turn on the particular facts in question, however, the findings in this case do offer useful guidance when considering whether to accept an obligation not to act unreasonably, or when trying to assess your exposure before refusing consent. If there are specific circumstances that the parties think are unreasonable (or reasonable), then the parties should consider expressly setting these out in the contract.

In this case, the Warwick Castle website stated that visitor prices were “from £10 excluding VAT, plus VAT of £2.00, total £12.00”. This in itself, isn’t terribly clear, however, on purchasing the tickets customers were then faced with an additional £1 or £2 payment fee, depending on the payment method used for purchase.

The complaint was referred to the ASA for adjudication on the following grounds:

• That the prices initially quoted did not include the mandatory card fee; and
• That the website provided VAT exclusive prices.

On the first point, the ASA found that Warwick Castle had clearly breached the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing (the “CAP Code”). The ASA also found the pricing information clearly misleading and stated that the initial prices should have included the payment surcharge as there was no option but for customers to pay this if they wanted to buy a ticket to the attraction.

On the second point, despite the fact that Warwick Castle put forward a slightly bizarre explanation for displaying the VAT exclusive pricing (that this was part of a campaign to seek a review of VAT charges applicable to tourist attractions) the ASA found that this practice was also in breach of the CAP Code. Under Rule 3.18 of the Code VAT exclusive pricing may only be given if all or most consumers pay no VAT or can recover VAT. As this was not the case here, Warwick Castle were in breach.

The key thing to take away from this is to ensure that if you are displaying prices on a website, that these prices are straightforward, transparent and represent the total amount that the consumer will pay. In addition, it is useful to note that displaying too much information (such as unnecessary breakdowns) is just as likely to find you in front of the ASA board as if you display too little pricing information upfront.

(but actually written by new TIO Group assistant Leigh Kirkpatrick – who will become a full Techblogger soon).

The PRSA is intended to “make provision about the management of records by certain authorities”. The theory is that there is a moral imperative to improve record keeping in Scotland, and that the data protection law and freedom of information regimes are only as good as the records which are kept.

In his keynote address, the Keeper of the Records of Scotland Mr George MacKenzie mentioned that records keepers hate the stereotype of “dusty archives”. When it came to my turn to speak, my opening line was, pointing to my grey suit – “I worked at the Registers of Scotland for 4 years – when I started at the Registers, this suit was white”.

After that it was down to serious law, and the headlines of my presentation were as follows:

• The public authorities to which the PRSA applies are set out in the Schedule. The voluntary sector will only be involved in complying with the PRSA when and where they are contracted by a public authority to perform a public function. The concept of “public function” isn’t defined in the PRSA and could prove controversial. Should the public sector start making provision in contracts for private providers to comply with the PRSA?
• Public records are those created by a public authority in carrying out its’ functions. They’re also records created by or on behalf of a contractor in carrying out the authority’s functions (this is not intended to include persons who provide goods or services, but does however mean that authorities must arrange for managing contractors’ records as well as their own). Finally they’re also records created by any other person that have come into the possession of the authority or a contractor in carrying out the authority’s functions (examples include correspondence, reports, evidence or statistics which relate to the function).
• Authorities must create records management plans, ”agreed” with the Keeper. The issue here is about selecting someone at senior enough level to be taken seriously in driving this forward. This is a resource burden for public authorities and others and may require investment in training.
• By the end of 2011 the Keeper will issue guidance to authorities about the form and content of records management plans. s. 5 of the PRSA provides that a plan will be reviewed not earlier than 5 years after the date of last review. However under s. 6 at any time Keeper may carry out a records management review to check on compliance. The triggers for this ad hoc checking of a plan aren’t clear.
• If the authority fails to comply with any of the requirements of the PRSA, the Keeper may take such steps as Keeper considers appropriate to publicise the failure. Unlike the Data Protection Act, there are no monetary penalties for failure to comply. There is therefore a suggestion that the PRSA may be “toothless”.
• The PRSA is intended to be complimentary to the Freedom of Information (Scotland) Act (“FOISA”).  FOISA is a model publication scheme, while the PRSA is a model records management plan. The list of organisations to which FOISA and PRSA apply are different.  The PRSA seeks to support FOISA, but it will not in any way impinge on FOISA or bring about a change in Schedule 1 of FOISA.

The full guidance notes for the PRSA can be read here.

It became clear during the conference that, at the outset at least, the PRSA is going to be enforced in a collaborative fashion. I don’t think we will see authorities being publicly censured for failures to comply, in the short term at least. It is scheduled to come into force at the start of 2013.

If you’d like more information, or are interested in some training on the PRSA for your organisation, then please email me or your usual TIO Group contact.

What’s it about?
The ruling actually relates to two cases in which the UK High Court stayed proceedings in order to refer questions to the ECJ about the correct interpretation of law. The questions broadly concern the use of foreign decoder cards by UK pubs to screen English Premier League Football matches. “Football Association Premier League v QC Leisure and Others” concerns the legality of importing foreign decoders, while “Karen Murphy v Media Protection Services” concerns the eponymous Karen Murphy using a Greek decoder in her Portsmouth pub, because subscribing to a Greek broadcaster is cheaper than subscribing to the UK rights-holder Sky.

The Football Association Premier League (“FAPL”) is objecting to the use of foreign decoders and subscription to non-UK broadcasters because it grants its licensees the exclusive right to broadcast matches of the Premier League and exploit them economically within their respective broadcasting areas – generally the country in question. In order to safeguard this exclusivity, each licensee is required to encrypt its satellite signal and to transmit it in encrypted form to subscribers within its assigned territory. The program is decrypted with a decoder card.

The applicable law here is not straightforward. The kind of questions referred to the ECJ included whether decoders were “illicit devices” under the Conditional Access Directive, whether a football match could be classified as a copyright work under the Copyright Directive, and whether the FAPL’s exclusive licences were restricting competition.

What did the court say?
The answers to the above were “no” (because foreign decoders don’t permit free access to protected services), “no” (sorry Lionel Messi, but the ECJ believes that “football is subject to the rules of the game, leaving no room for creative freedom for the purposes of copyright”) and “yes” (“agreements which are aimed at partitioning national markets according to national borders or make the inter-penetration of national markets more difficult must be regarded, in principle, as agreements whose object is to restrict competition”).

Overall the ECJ reckoned that “such partitioning and such an artificial price difference to which it gives rise are irreconcilable with the fundamental aim of the Treaty, which is completion of the internal market.”  Where this leaves the concept of territorial licensing for any kind of copyright material is unclear. We may be seeing the first step towards pan-European licensing for sports, film and music, with consortiums of broadcasters bidding for rights.

What does this mean for the FAPL and the letting of broadcast rights?
The consolation goal for the FAPL is that the ECJ acknowledged it can assert copyright in things such as the opening video sequence, the Premier League anthem, various graphics and so on. This means that, in theory, pub landlords like Karen Murphy may still need to get permission of the FAPL to show these elements. This could lead to the FAPL devising a strategy to have as much copyright-filled material during the games as possible, in order to stop pubs from still subscribing to foreign broadcasters and just showing the matches.

However, even if the matches are filled with FAPL copyright material, surely such material would still be incidental to the match being broadcast, falling within the exemption in section 31(1) of the Copyright, Designs and Patents Act 1988: “Copyright in a work is not infringed by its incidental inclusion in an artistic work, sound recording, film or broadcast”?  There’s a suggestion that the FAPL may even resort to having its’ logo flit randomly about the screen, like a menacing and unpredictable “False 9”! It will be fun to see “what happens next”!

PS apologies for reporting this a whole day after the ruling, but I needed to find time to actually read the thing and work out what it meant. I suppose I could have written something broad in advance, with made-up quotes, but I’ll leave that to the Daily Mail.