- Increase in cases involving sanctions – Navigating overlapping, rapidly developing sanctions regimes is challenging for businesses and individuals, particularly in these uncertain economic times and following the CJEU decision on open public access to registers dealt with below. The effect of the UK’s and US’s new strategy (announced in their joint statement of 17 October) to cooperate and collaborate further on economic sanctions implementation and enforcement is likely to be felt, as will OFSI’s investment in staff (doubling its headcount by the end of 2022). Source: UK and U.S. Announce ‘Enhanced Partnership’ on Economic Sanctions Implementation, Enforcement | Insights | Greenberg Traurig LLP (gtlaw.com) As a result, it is likely that, in the coming months, litigation relating to sanctions and enforcement action by OFSI will increase.
- Asset recovery threats and opportunities abound – The CJEU’s decision in November 2022 that open public access to beneficial ownership registers is a breach of the Charter of Fundamental Rights of the European Union is likely to make it more difficult to trace assets across the EU. A number of EU countries have, as a consequence, shut open public access to their registers, with other EU countries likely to follow suit. Because the UK is no longer part of the EU, it is not obliged to do the same, but the Economic Crime (Transparency and Enforcement) Act 2022 means overseas entities that own UK properties must provide information as to their beneficial owners to Companies House, which (with the Persons of Significant Control Register) will also assist with asset recovery.
- Increase in civil fraud claims related to ESG credentials – Consumer concern for the environment meant ESG-friendly businesses have increased in number and value. Regulators are increasingly interested in businesses that have made inaccurate or reckless claims about their ESG credentials, as are investors who have put money in based on those credentials. Claims in this area are likely to rise, together with a commensurate increase in “greenhushing,” which describes the practice of companies that are silent on environmental concerns.
- Increase in insolvency claims – The geo-political and economic circumstances in which we find ourselves in January 2023 are likely to mean insolvency claims will continue to rise – of the G7 nations, the UK is anticipated to have the worst recession and weakest recovery this year. According to The Insolvency Service, the number of registered company insolvencies in November 2022 was 2,029, an increase of 21% compared to the same month in 2021, and 35% higher than the number in November 2019. November 2022 saw 290 compulsory liquidations, more than five times as many as in November 2021. Companies, officers, investors, and creditors will need to understand their rights and obligations in the lead up to and after an insolvency event. Source: The Insolvency Service - GOV.UK (www.gov.uk)
- More claims against directors – Hand in hand with an increase in insolvencies are claims against directors. Increasing numbers of shareholders take a keen interest in how companies in which they are invested are run and are prepared to act if they consider their investment to be prejudiced in any way. Whilst the Supreme Court’s decision in BTI 2014 LLC v. Sequana SA & Ors  UKSC 25 gave some welcome assistance to directors in terms of their duties to consider creditors, directors will need to ensure they understand the scope of their duties (particularly in the light of the new legislation referred to above), and the risks of getting it wrong.
About the Authors
Kathryn Garbett, Claire Broadbelt, Martin Shobbrook, Hannah Blom-Cooper, and Annabel Thomas are shareholders in Greenberg Traurig LLP's UK Civil Fraud & Business Disputes Group. The group is one of the largest specialist teams in the UK, and comprises experienced lawyers ranked in Chambers & Partners, Legal 500 and Who’s Who Legal. They have collectively handled myriad high-profile and sensitive multi-jurisdictional civil fraud matters and business disputes. Their clients include corporations and individuals across a diverse range of sectors/industries. The team has taken many cases to trial, to the Court of Appeal and to the Supreme Court in England and Wales, and is regularly called on to supervise multi-site search & seizure orders.