Hausfeld’s response to the Law Commission’s 14th Programme of Law Reform consultation
In March 2021, the Law Commission launched a consultation for its 14th Programme of Law Reform, seeking the public’s views on areas of the substantive law of England and Wales that are most in need of reform. As a leading law firm which often represents individuals and/or consumers in need of clear, straightforward legislation that protects their legal rights and facilitates access to justice, Hausfeld welcomed the opportunity to respond to the Law Commission’s request.
As a starting point for the consultation, the Law Commission provisionally identified a few focus areas where it considered legislative reform and/or intervention may be needed, including: emerging technology; the UK departure from the EU; the resilience of UK law following the COVID-19 pandemic; the environment; and more generally the simplification of UK law to bring about real and lasting benefits to individuals and organisations.
Based on our expertise in both areas, we submitted responses in two areas:
- Environmental and climate-related corporate reporting; and
- Consumer redress in the context of product liability.
Environmental and climate-related corporate reporting
We drew the Commission’s attention to the widely-reported fact that many UK companies are failing to (i) provide meaningful information regarding the financial and other risks posed by climate change; and/or (ii) make disclosures with sufficient substance that investors need to integrate climate-related information into their investment and stewardship decisions. This is delaying alignment of the economy and financial system with the UK’s commitment to achieve ‘net-zero’ greenhouse gas emissions by 2050 and its emissions reduction targets under the Paris Agreement and its sixth carbon budget.
In fact, the current legislative and regulatory framework governing climate-related reporting has significant shortcomings. First, it is founded on a ‘comply or explain’ approach, whereby a company can decide not to provide the required disclosures if it considers that climate change does not materially affect its business. Second, there is a clear enforcement and accountability gap. The current legal duties and powers for companies, directors, shareholders, investors, auditors and regulators are not aligned with the Paris Agreement goals and insufficient to hold companies to the required standards.
Whilst the UK Government’s commitment to make it mandatory for companies’ disclosures to be aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) by 2025 shows a willingness for positive reform, the ongoing related proposals and consultations by Government departments and regulators may not go far enough. Any reforms should explicitly require companies to report climate-related risks on a mandatory basis and ensure that any disclosures are TCFD-aligned. All companies are at material financial risk from climate change - albeit to varying extents - and thus all companies should disclose a clear strategy, with associated metrics and science-based targets, that is aligned with the Paris Agreement goals. Further, climate risks should be disclosed in a specific, quantifiable way in companies’ financial accounts. Such mandatory reporting requirements should then be supported by strong supervision and enforcement for noncompliance from regulators, as well as additional accountability tools for shareholders and investors to challenge ‘greenwashing’. For example, directors’ duties could be redefined so as to make directors responsible for promoting adherence to Paris Agreement commitments, whilst exposing them to liability to claims by shareholders should they fail to do so.
In this regard, we drew the Law Commission’s attention to proposals for reform that have been advanced in this area by the Better Business Act campaign and the How Do Companies Act campaign, as well as to the proposed EU Corporate Sustainability Reporting Directive which is due to set very ambitious parameters for company reporting, including requiring reporting to be made as part of the financial statements in a digital format and requiring specific disclosures as to how the company is planning to ensure that its business model and strategy are consistent with the Paris Agreement (amongst other things).
Consumer redress in the context of product liability
Based on our experience representing claimants in this challenging area, we set out the current difficulties consumers face in accessing redress when they are harmed by products.
Currently, the primary potential route to redress is the Consumer Protection Act 1987 (CPA). This legislation implemented the EU Product Liability Directive (PLD) into domestic law. The PLD, and by extension the CPA, intended to introduce a strict liability regime where, “liability without fault on the part of the producer is the sole means of adequately solving the problem”. The CPA is concerned with the safety of a product, such that a defendant will be liable for harm caused by a defective product which does not meet the consumer’s reasonable expectation of safety.
However, claimants have encountered numerous difficulties in pursuing successful claims under the CPA since its introduction, and very few claims have been brought to trial such that there is limited precedent caselaw to assist with the interpretation of key issues under the CPA. This contributes to increased litigation risk which has impacted, for example, on the availability of litigation funding. Where the court has grappled with the CPA, it has been interpreted in such a way that claimants struggle to successfully establish product ‘defect’ in the absence of, for example, a manufacturing error. Establishing ‘defect’ has become extremely complex and routinely requires multidisciplinary expert evidence, with the cost burden that goes with it. This, coupled with the extended duration of such cases, has contributed to a situation where claimants face significant challenges to fund litigation themselves or to secure viable funding elsewhere. In our response, we questioned whether the CPA had achieved the “fair apportionment of risk between the injured person and the producer” envisioned by the PLD.
The CPA is now some 34 years old and we identified in our response ed some areas where it is arguably no longer fit for purpose given the technological and commercial advances since 1987. Artificial Intelligence, machine-learning, the internet of things and post-market software updates all raise new issues that further evidence the need to reform the CPA. Furthermore, evolving business models such as online marketplaces where traditional supplier/consumer relationships may be disrupted.
The challenges for claimants pursuing product liability claims under the CPA are now so formidable that there has been a trend towards such claims being pursued under ‘traditional’ causes of action such as negligence or breach of contract, despite those having perceived difficulties which the CPA was intended to remedy.
We proposed a reform of the current CPA framework to properly implement a strict liability regime which copes with the technological and commercial advancements of the last three decades. We argued that the definitions of a ‘product’ and ‘defect’ should be clarified to reduce the ability of defendants to effectively import notions of fault or negligence. We suggested that reform might include a collective redress mechanism to ease the funding challenges claimants currently face, thereby increasing access to justice.
We drew the Law Commission’s attention to Baroness Cumberlege’s recommendations in Independent Medicines and Medical Devices Safety Review that a no-fault redress scheme should be established in relation to medical drug and device injuries. We also noted that a review of the General Product Safety Directive (GPSD) at EU level has been ongoing since June 2020 and that a Proposal for a Regulation was recently published which put forward various new provisions intended to cope with evolving technologies and e-commerce.
In our view, domestic reform is an opportunity to keep pace with developments in the EU and beyond and that compatibility with the future EU regulations will achieve fairness for consumers and certainty for manufacturers/suppliers.
Hausfeld specialises in complex competition litigation, commercial and financial services disputes, and environmental and product liability litigation. We are experts in managing individual and group claims across a range of sectors, including technology & data breach, defective medical devices, pharmaceuticals and environmental damage, and our cases are often high profile and international in scope. We also have a dedicated climate change litigation team with a broad range of expertise and clients, including international NGOs, climate change activists, businesses and individuals.
 Under the Law Commissions Act 1965, the Law Commission is required to submit programmes of law reform to the Lord Chancellor. Since 1965, every three to four years the Law Commission sets out the areas it intends to work on going forward.
 See for example, ClientEarth, ‘Accountability Emergency, A review of UK-listed companies’ climate change-related reporting (2019-20)’ (2021)