The document discusses several commercial law topics: 1) The Groceries Code Adjudicator Bill which establishes a statutory basis and independent adjudicator to enforce the Grocery Supply Code of Practice between grocery retailers and suppliers in the UK. 2) The proposed Common European Sales Law which aims to facilitate cross-border transactions but its adoption faces challenges. 3) Issues related to the Eurozone crisis such as risks to pricing and payment obligations in contracts that must be considered. 4) One year after implementation, the UK Bribery Act continues to influence international businesses to strengthen compliance despite no major prosecutions yet.

1. Commercial law
Looking on the horizon
Mary Kelly, Senior Associate
14 September 2012

2. Topics
• Groceries Code – Adjudicator Bill
• Proposed Common European Sales Law
• Eurozone crisis – potential contract risks
• A year on from the Bribery Act

3. Groceries Code: an overview
• Grocery Supply Code of Practice (“GSCOP”)
effective from 4 February 2010
• Applies to retailers with a turnover of £1billion
per annum
• Overarching principle of “fair dealing”

4. Groceries Code: an overview
• All agreements between grocery suppliers and
retailers:
– incorporate GSCOP
– prohibit retrospective variation
– prohibit changes to supply chain procedures (unless
supplier compensated)
– specify contributions to promotions (if any)
– not require supplier to pay for shrinkage/wastage
unless due to supplier negligence
• Sets out dispute resolution procedure
• Establishment of a GSCOP ombudsman to
enforce compliance

5. Groceries Code Adjudicator
• Groceries Code Adjudicator Bill published May
2011 and sets out:
– Statutory basis for Groceries Code Adjudicator
(“GCA”)
– Functions and powers of the GCA
– Funding the GCA

6. Groceries Code Adjudicator
• The GCA will be independent and initially
appointed for up to 4 years
• Mechanism for dealing with breaches of the
GSCOP by retailers
• Provides a remedy for dealing with breaches of
GSCOP, other than suing for breach of contract

7. Functions and powers of the GCA
• Arbitration: referred by the supplier
• Investigation: initiated by the GCA where it is
satisfied that there are reasonable grounds that
GSCOP has been breached
• Enforcement: the investigation will be published
in a report. The retailer may also be required to
publish information about its breach and
investigation
• Advice and guidance: through publications or
directly to either retailer or supplier

8. Funding the GCA
• The GCA will be funded as follows:
– adjudication: apportioned between the parties
– investigation: by the retailer if the GCA is
satisfied it has breached GSCOP or from a
supplier if a complaint was vexatious or wholly
without merit
– other functions: to be divided equally between
all retailers though a levy

9. Practical tips for suppliers
• Train sales and other commercial teams:
– on the scope of GSCOP
– the terms that can and cannot be included in
supply agreements
– behaviours or practices of a retailer that
would put it in breach of its obligations under
GSCOP

10. Practical tips for suppliers
• Record any instances of non-compliance by a
retailer at the time they occur
• Be clear as to whose terms apply and ensure
that GSCOP terms are incorporated
• Oral agreement should be confirmed in writing
within 3 working days (make notes at the time
to ensure accurate record of conversations)

11. Proposed Common European Sales Law
• October 2011, the European Commission
published its proposed Regulation for a Common
European Sales Law (“CESL”)
• The CESL is intended to facilitate cross-border
transactions by providing certainty and reducing
costs
• As a Regulation, if adopted the CESL would have
legal effect in every Member State in the same
way as national laws with no action needed by a
Member State to implement it

12. Proposed Common European Sales
Law: what is it?
• An optional sales law to sit alongside Member
States’ existing national regimes
• Can be used for cross-border contracts for the
sale of goods or digital content and services
directly related to the goods / digital content (eg
repair and installation), where at least one party
is established in a Member State

13. Proposed Common European Sales
Law: what is it?
• Can be used for B2C or B2B contracts where at
least one party is an SME
• Cover the whole life cycle of a contract including
provisions on pre-contractual
information, contract formation, cancellation
rights, deliver and payment obligations and
remedies for breach

14. Proposed Common European Sales
Law: key provisions
• Contract formation
• Duties of disclosure of pre-contractual
information
• The right to cancel and its consequences
• Interpretation of a contract - based on
“common intention”. Prior negotiation and
subsequent conduct admissible for contractual
interpretation

15. Proposed Common European Sales
Law: key provisions
• Principle of good faith and fair dealing basis for
implying terms and a duty to act in accordance
with good faith
• No conditions and warranties
• In B2B contracts can only terminate if other
party in fundamental breach
• It does not include provisions re
capacity, agency and illegality which will
continue to be governed by national law

16. Proposed Common European Sales
Law: likely impact
• Give rise to two parallel systems in each Member State
which could potentially be costly and difficult to manage
• Certain provisions are biased in favour of customers in B2B
context e.g. duty on supplier to disclose pre-contractual
information
• Limited application to EU cross-border contracts means
businesses will potentially need 3 sets of terms:
– domestic transaction terms
– EU cross-border transaction terms
– worldwide transaction terms (although Member States
can choose to extend its application to domestic
contracts)

17. Proposed Common European Sales
Law: likely impact
• The CESL is entirely optional in its current form
• Member States can choose to apply the law to
B2B transactions generally
• There is no suggestion that a supplier is obliged
to offer CESL at the request of a customer if the
supplier does not already offer it
• Generally negative reaction in UK to the
proposals - there remains a question as to
whether there will be much take up of CESL even
if adopted

18. Proposed Common European Sales
Law: next steps
• In order to be adopted the CESL will need to be
approved by the European Parliament and the
Council of Ministers, then published in the OJEU.
• The Commission intends to have the CESL
agreed in time for the 20th anniversary of the
European Union internal market on 1 January
2013. This is an ambitious timetable. The CESL
would come into force 20 days after publication
and apply 6 months after that

19. Eurozone Crisis: what is it?
Sovereign
debt grows
Increasing
debt burden
Lack of
and
growth in
decreasing
economy
Government
revenues
Lending is
higher risk so Increasingly
cost of difficult to
borrowing service debt
increases

20. Eurozone crisis: leaving the Euro
• A Member State could leave the Eurozone
– by agreement (may or may not leave the EU
at the same time)
– by unilateral departure (in breach of EU law)
• Introduction of replacement currency
• What will legislation say?
• Quick depreciation of replacement currency

21. Eurozone crisis: impact on pricing and
payment obligations
• Lex monetae/money of account
• Definition of “Euro”
• Money of payment
• Governing law
• Jurisdiction
• Financial impact

22. Eurozone crisis: analysis of contracts
• Does price have to be in Euros?
• Pricing converts to new currency
– Trigger event
– Exchange rate
• Pricing remains in Euros
– Define Euro
– Place of payment
– Exclusive jurisdiction for English courts
– Payment in Euros
– “No impact” clause

23. Eurozone crisis: analysis of contracts
• Consider interaction with other contract clauses
– Force majeure
– Change in law
– Termination
• Risk profile of the deal/walk away?
– Right to renegotiate price
– Termination right
– Material adverse change clause

24. Eurozone crisis: practical tips
• Identify key/material contracts
• Analysis of contracts for terms that relate to the
Eurozone and identify risks associated with these
terms
• Consider whether any variations to the
contractual relationship would be desirable at
this stage
• Drafting future contracts in such a way as to
minimise risks associated with a potential Euro
crisis becoming reality

25. Bribery Act: background
• UK Bribery Act 2010 came into force 1 July 2011
• Worldwide Reach
• Active Bribery (giving a bribe)
• Passive Bribery (accepting a bribe) New
corporate offence of “failing to prevent bribery” –
strict liability
• New corporate offence of “failing to prevent
bribery” – strict liability
• Defence for the business if it takes “adequate
procedures” – i.e. it takes all possible measures that are
proportionate and reasonable to prevent bribery occurring

26. Bribery Act: background
• Associated persons (AP)
• Employees – presumed to be associated (section
8(5))
• Agents and subsidiaries – possibly associated
(section 8(3))
• Suppliers of goods – depends on the
circumstances
• Joint ventures – partners are probably APs and
also joint venture companies

27. Bribery Act: impact a year on
• No high profile corporate prosecution...yet
• So far only one prosecution under the Act (a
court official for receiving payments to make
traffic offences disappear from a court database)
• Serious Fraud Office (SFO) – Oxford Publications
case – no prosecutions because witnesses in
overseas jurisdiction/difficulties obtaining
evidence
• BUT Oxford Publishing still ordered to pay almost
£1.9 million in voluntary settlement plus SFO
costs.

28. Bribery Act: impact a year on
• Despite lack of prosecutions, international
businesses have placed emphasis on Bribery Act
compliance
• Non UK entities are using UK Ministry of Justice
guidance to ensure they have adequate defence
in place
• Rising number of organisations and countries are
placing importance on anti-bribery/corruption

29. Bribery Act: considerations
• Risk analysis on contract-by-contract basis
• Due-diligence into the anti-bribery procedures of
APs (contracting parties and especially those
who using sub-contractors) or requiring parties
to enter into anti-bribery undertakings
• Remedies other than termination for breach of
anti-bribery clauses e.g. liquidated
damages, forced removal of employees /
directors who have acted illegally to manage risk
without losing benefit of contract

30. Any Questions?