Trade and Investment News: February

Brexit and the Role of Supreme Courts

The lead-up to Brexit was much affected by litigation in the UK on the legality of steps taken by the then UK Government to effect Brexit. The role of the UK Supreme Court in such litigation was particularly significant as is the new role of that Court in the post-Brexit era, given the safeguarding function that the Court has been given in UK legislation to ensure the sovereignty of UK law for the UK as against EU law.

The role of the Israeli Supreme Court as the guardian of the Israeli constitution has been demonstrated by its decision, reported in The Times on 2nd January 2024, to overturn the Israeli Government’s sponsored law,  which would have prevented the Israeli Supreme Court  applying a “reasonableness standard” when holding the Israeli Government to account and reviewing Israeli Government actions.

Reportedly, the Israeli Supreme Court reached this decision by a majority of 8 to 7, with the majority judgment being given by the Court’s outgoing President , Esther Hayut, who wrote that the  law in question contradicted “ the principle of the separation of powers and the rule of law, two of the most important characteristics of our democratic system. Such a violation at the very heart of our founding narrative cannot stand”. Reportedly, 12 of the 15 Israel Supreme Court judges also ruled that the Court had the power to cancel quasi-constitutional “basic laws” passed by the Knesset, the Israeli Parliament, which were incompatible with the Israeli constitution.

According to a letter from Lord Wolfson of Tredegar KC, published in The Times on 3rd January 2024: “The cause of peace in the Middle East will be advanced when all of Israel’s neighbours also have courts that can decide against the government on separation of powers and rule of law principles”.

Whilst complacency should be avoided, it will be gratifying for many to know that Supreme Courts in Western-style democracies such as the UK and Israel can withstand political pressures from Government and are able to uphold the overriding importance of the rule of law.

Brexit and the Netherlands

The 17th century Dutch philosopher, Baruch Spinoza, has been quoted as saying that “everything excellent is as difficult as it is rare” .

This quotation could perhaps be applied to the relationship between the UK and the Netherlands over many centuries – an excellent relationship in so many ways but also difficult and complicated at times. Brexit has not done anything to reduce that complexity but the relationship between the two countries remains very strong  and in economic as well as in political terms is very important to both countries.

According to a trade and investment factsheet released by the UK Department for Business & Trade (DBT) on 21st December 2023, total trade in goods and services (exports plus imports) between the UK and the Netherlands was £125.6 billion in the four quarters to the end of Quarter 2 (Q2) 2023, an increase of 21.5% or £22.3 billion in current prices from the four quarters to the end of Q2 2022. Of this £125.6 billion:

  • Total UK exports to the Netherlands amounted to £57.2 billion in the four quarters to the end of Q2 2023 ( an increase of 11.6% or £5.9 billion in current prices, compared to the four quarters to the end of Q2 2022); and
  • Total UK imports from the Netherlands amounted to £68.4 billion in the four quarters to the end of Q2 2023 ( an increase of 31.4% or £16.3 billion in current prices, compared to the four quarters to the end of Q2 2022).

The DBT factsheet also showed very importantly that the Netherlands was the UK’s 3rd largest trading partner in the four quarters to the end of Q2 2023 accounting for 7.0% of total UK trade.

According to the factsheet, in 2021, the outward stock of foreign direct investment (FDI) from the UK in the Netherlands was £155.2 billion accounting for 8.8% of the total UK outward FDI stock and, in the same year, the inward stock of foreign direct investment (FDI) in the UK from the Netherlands was £217.5 billion accounting for 10.9% of the total UK inward FDI stock.

In these current volatile times internationally, the strength of the UK-Netherlands relationship will hopefully continue to shine.

In the Rijksmuseum in Amsterdam, there hangs a striking painting rooted in the Dutch countryside, where water is never far away. The painting is simply called “Landscape with Waterfall” and is the work of 17th century Dutch painter, Jacob van Ruisdael. It is a glorious watery evocation of nature but with a human dimension, showing in a classical but now very modern way how human life is very much affected by the enduring forces controlled by nature. The painting is perhaps a metaphor for two historically closely – intertwined maritime nations such as the UK and the Netherlands.


Brexit and the UK Corporate Governance Code 2024

On 22nd January 2024,  the UK’s Financial Reporting Council (FRC) published the UK Corporate Governance Code 2024 (“the Code”), an updated version of the previous code published in 2018.

The Code operates on a “comply or explain” basis and will apply to financial years beginning on or after 1st January 2025.  However, new provision 29  ( concerning the monitoring  of the relevant company’s risk management  and internal control framework  and  the review, at least annually, of its effectiveness )  comes into force for financial years beginning on or after 1st January 2026.

The Code applies to premium listed companies on the London International Exchange but in practice is followed by a wider range of companies. There is controversy as to whether corporations such as the Post Office ( currently beset by the so-called Horizon IT scandal) should in practice have followed earlier versions of the Code.

According to an article in The Times of 23rd January 2024, the Code is a “watered -down” version of the reforms originally proposed. Reportedly, the FRC has dropped its earlier proposals  for revisions to the 2018 code that would have placed new duties on board audit committees around environmental, social and governance issues. Apparently, proposals to expand diversity and inclusion expectations  and crack down further on non-executive directors taking too many jobs were also dropped.

As for the Code revisions which are going ahead,  the new rules on internal controls coming into force for financial  years beginning on or after 1st January 2026 should be important , according the CEO of the FRC as reported by The Times, in forcing boards to address weaknesses such as excess leverage and cyber-hacking.

This cautious pragmatic approach to corporate reform may reflect the UK Government wish not to deter companies from listing in the UK , in the post-Brexit era.


Brexit and Artificial Intelligence (AI)

On 9th January 2024, the EU Commission issued a press release confirming that it had launched that day two calls for submissions on competition policy in virtual worlds and generative artificial intelligence. The deadline for making submissions is 11th March 2024.

The press release states that in this context :-

  • “Virtual worlds are persistent, immersive environments , based on technologies including 3D and extended reality (XR), which make it possible to blend physical and digital worlds in real-time, for a variety of purposes such as designing, making simulations, collaborating, learning, socialising, carrying out transactions or providing entertainment”; and
  • “Generative AI systems are AI systems that generate, in response to a user prompt, synthetic audio, image, video or text content, for a wide range of possible uses, and which can be applied to many different tasks in various fields”.

Thoughtful definitions!