ESG

No surprises, ESG remains a critical theme for businesses. Within this large topic there will be some core focuses for General Counsel and in-house lawyers.

Firstly, obligations will harden as regulating authorities introduce standards for reporting disclosures and anti-greenwashing rules.

Nature and biodiversity considerations are in force in the European Union. For most developments in the UK the obligation to demonstrate biodiversity net gains will apply, broadening the scope of what in-house teams have to consider within the ESG landscape.

Not only in the US, anti-ESG backlash will require companies to reframe how they address ESG issues. They will have to manage the competing fiduciary duties of maximising shareholder profit and answering a wider group of stakeholders.

We expect to see innovation around achieving sustainability goals  

• ESG-focused technology consolidating reporting practices and processes.
• Requirement for law firms to standardise ESG reporting.
• Environmental insurance products – to protect risk holders against increased legal obligations.

Artificial Intelligence

2024 will be the year of Regulation

Tensions between proliferation and control are straining

A general counsel’s role in creating AI governance and compliance frameworks for their company’s adoption is key.  They can use this window to exert influence by leading collaboration between policymakers and the private sector.

We predict the differing regulatory approaches between permissive and restrictive will become less challenging as a default emerges for the more restrictive regimes, necessary for companies that want to do business in those markets. Organisations with business in the EU have been here before: in the same way General Data Protection Regulation is the global standard, we expect adoption of the EU AI Act.

General counsel in sectors where use of generative AI carries bigger risks. Biometrics, health and financial services should anticipate greater regulatory scrutiny.

The Creative Sector

The UK government committed to developing a code of practice to “enable the AI and creative sectors to grow in partnership“. But are competing interests irreconcilable? Has too much already been given away through text and data mining?

There are a current cluster of copyright disputes including the New York Times multi-billion dollar copyright infringement claim against OpenAI for unauthorised use of its content to train its large language models and Getty Images claims in both the US and UK against Stability Diffusion. These are interesting for those watching to see the arguments tested, even if the virtually inevitable confidential settlements will be anticlimactic.

In 2023 the UK Supreme Court dismissed an appeal in Thayer against an earlier ruling that artificial intelligence cannot be the inventor of a patent. This is unlikely to be the last word on ownership.

Legislators may be reluctant, but we predict new laws will be needed. They will go beyond existing concepts such as moral rights to protect performers from digital content forgery or ‘deep fakes’.

Competition Anti-trust

Continued activity around competition and anti-trust

At the beginning of the year the European Commission launched calls for contributions on competition in virtual worlds and generative artificial intelligence, requesting information from major digital players. This sends a signal of action to come.

In early 2024 the UK’s Digital Markets, Competition and Consumers Bill will allow the regulator to designate “strategic market status“, giving it the power to develop specific requirements for those digital firms.

Concentrated data sets and large language models controlled by leading players in the generative AI market will come under scrutiny from competition authorities. This is particularly true in specialised areas where data is not widely available such as healthcare, finance and biomedical. Likewise, corporate deals where major players look to acquire disruptive start-ups in adjacent markets can expect regulatory attention.

We expect new law will address the anticompetitive effects of algorithmic collusion, where there is no human involvement in computing decisions to maximise profits.

We expect to see innovation around achieving good AI governance frameworks in-house.

• Rights management technology will help lawyers understand the IP risks associated with generative AI content.
• Proactive undertakings offered for potential M&A activity for below threshold deals.
• Human governance of consumer facing pricing algorithms.

Geopolitics  

Industrial policy as global risk management

The start of the year’s military action in the Red Sea compounded the last few years’ increasingly precarious global supply chains.

In efforts to mitigate risks from unstable global dependencies, we expect government intervention directly impacting more industry sectors.

We expect to see national security prioritised over purely economic considerations. This will mean greater interventions in deal making for “national security” reasons. It will increase export controls in sectors that governments consider “strategic” such as artificial intelligence, semiconductors, telecommunications, mining, renewable energy, and biotechnology.

We expect continued fracturing of the global economy and less coordination on non-economic global issues.

Greater influence of Brics+ countries will lead to more uncertainty, regional diversification and greater legislative discrepancies.

We expect to see innovation through:

• Greater efficiency in horizon scanning and compliance implementation.
• Strategic nearshoring arrangements in newer territories.