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REVISED PHARMACEUTICAL INDUSTRY CODE OF PRACTICE ON PROMOTING MEDICINES TO HEALTH PROFESSIONALS: A BRIEF SUMMARY OF THE ABPI CODE DUE TO COME INTO FORCE IN JULY 2021

After consultation with members and stakeholders, the Code of Practice 2021 has been agreed.  The current version from 2019 will be replaced by the 2021 version with effect from 1 July 2021.

The ABPI Code of Practice, administered by the Prescription Medicines Code of Practice Authority on behalf of the ABPI, has regulated the promotion of medicines by pharmaceutical companies to health professionals since 1958.  Since the writer’s first involvement in the life science and pharmaceutical industry in 1988, the Code has been amended more than a dozen times. 

The objectives behind the latest revisions are to reflect the structure of the latest version of the Code for the European Federation of Pharmaceutical Industry Associations (EFPIA) and to “simplify, clarify, harmonise and remove repetition” and, more generally, to make it accessible for its intended audiences and be future-proofed, where possible.

As a reminder, amongst the guiding tenets of the ABPI are the following key principles:

“Patients are at the heart of our industry. We aspire to ensure that everything we do will ultimately benefit patients. Our primary contribution to society is to research and develop high quality medicines and to encourage their appropriate and rational use. Patient safety is paramount.

Ethical relationships with stakeholders are critical to our mission of helping patients, guiding the appropriate use of our medicines and ensuring the appropriate and timely exchange of scientific information”.

The new code contains a thematic colour-coded approach to the required standards relevant to particular stakeholders:

  • Overarching Requirements – Grey
  • Promotion to Health Professionals – Blue
  • Interactions with Health Professionals and Healthcare Organisations – Green
  • Interactions with Health Professionals and Healthcare Organisations, Patient Organisations, the Public and Journalists – Yellow
  • Specific Requirements for Interactions with the Public, including Patients, Journalists and Patient Organisations – Pink
  • Annual Disclosure Requirements – Teal

Some of the key changes include:

Clause 2

Clause 2 of the 2019 version states that “Activities or materials associated with promotion must never be such as to bring discredit upon, or reduce confidence in, the pharmaceutical industry”.

Clause 2 of the 2021 version removes the words “associated with promotion” so that it now reads:

“Activities or materials must never be such as to bring discredit upon, or reduce confidence in, the pharmaceutical industry”. This important overarching obligation therefore applies across the board to all activities of pharmaceutical companies.

Clause 20

Clause 20 of the 2021 Code introduces the concept of “collaborative working”. This covers “working with other parties to deliver initiatives which either enhance patient care or are for the benefit of patients or alternatively benefit the NHS and as a minimum, maintain patient care”.  This definition goes further than “joint working” under the 2019 code which covered only activities involving direct benefit to patients.

Contracted Services

This term replaces “use of consultants”. There is also an additional requirement from 2022 to disclose payments for contracted services paid to members of the public not representing patient organisations.

Donations and Grants

The term “Medical and Educational Goods and Services” from the 2019 version is no longer to be used, but these goods and services will now be covered by donations and grants. “Donations” will cover physical items and services whereas “Grants” now just covers the provision of funds.

Digital Communications

The new code expressly refers to digital communications throughout.

Covid 19 Amendments

A number of amendments have been made, including to Clause 26, Relations with the Public, to reflect the impact of the coronavirus. These include the temporary supply of medicines for public health emergencies; promotions of such medicines to health professionals can only be made with the consent of health ministers. Finally, the usual prohibition of advertising prescription-only medicines to members of the public does not apply to vaccination campaigns carried out by pharmaceutical companies and approved by health ministers. For full details click here.

For those readers who are very familiar with the 2019 Code, changes from the 2019 version are shown in the tracked changes version shown here.

Following publication of the agreed Code for 2021 the PMCPA is consulting on two further amendments that it wishes to make before the Code takes effect on 1 July 2021. Once these proposed amendments have been considered and published by the PMCPA, Prospect Law will publish a short summary.

About the Author

David McIntosh was admitted as a Solicitor in 1988 and is a highly experienced commercial projects lawyer who has advised clients in a number of different fields including intellectual property, data privacy, procurement law (both public and private), manufacturing, distribution, information governance and general regulatory matters covering both the nuclear and pharmaceutical sectors.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or advice on your company’s promotional arrangements to healthcare professionals, or any issue arising from the 2021 Code, please contact David McIntosh on dmc@prospectlaw.co.uk or +44 (0)7940 204 948.

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THE END OF LOCKDOWN AND GETTING STAFF BACK TO WORK: THE FUTURE OF WORK-FROM-HOME

With hopes rising that lockdown will soon come to an end, employers are naturally looking to get back to normal. For most this means ending furlough agreements and, where appropriate, getting employees back to work.

Whilst many employees are desperate to get back to work, others may have been affected mentally and might feel nervous or overwhelmed – and some are flat out refusing to come back.

The good news, contrary to the beliefs of most companies, is that the law is on the side of the employer. You are entitled to ask employees to work in the way that best suits your business, both during furlough leave and after. If this means coming back to the office, then that is what you are entitled to request. However, with the suggestion that post-furlough, the government may pass regulations to continue to oblige employers to allow staff to work from home if at all possible, each employee’s situation first needs to be considered properly and objectively, on a case by case basis.

If someone simply does not have the IT, at the moment employers are obliged to help set this up where feasible (and indeed this obligation may continue as well). If it really is not possible to supply the necessary infrastructure, then that employee cannot work from home. Post furlough, they will have to come back.

The hardest employees to assess are those who are not performing. These are best approached by considering above anything the needs of the business.

Objective and justifiable reasons are, for example, that working from home is having a detrimental effect on productivity, colleagues or on turnover. It might be difficult to communicate with staff, or you may not be able to monitor their day-to-day activities. Those who do monitor may notice that certain employees are not dedicated to the task in hand whilst at home. These are all justifiable reasons to ask staff to come back.

If they do object, stating they have a ‘right’ to carry on working from home, evidence can then be provided to prove why they cannot. In the event they continue to be obstructive, this becomes a disciplinary matter, for which employers need to take advice as to the process to be followed.

Those who have mental health issues or are nervous about coming back will need a bit more care and it is advisable to take advice as to whether they come under disability discrimination law, but essentially it’s still a business decision and if the business is not working as well without them, then they should come back.

About the Author

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

Philippa Wood is a solicitor with many years’ experience advising on all areas of contentious and non-contentious employment law. Her clients include individuals and companies of all sizes from entrepreneurs to global brands. Philippa qualified as a solicitor in 2005 after working for 13 years in the media, most notably being part of the start-up team for two national cable television stations in the 1980s and 90s.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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PROSPECT LAW SECURES CONVICTIONS IN LINKED CRIMINAL PROSECUTIONS UNDER THE TOWN AND COUNTRY PLANNING ACT 1990

Prospect was delighted to represent Brent Council in two linked criminal prosecutions which concluded today at Harrow Crown Court under the provisions of the Town and Country Planning Act 1990 against Mohammed Mehdi Ali concerning the unlawful conversion and use of properties at 211 Willesden Lane and 9-10 Tower Road in North London.

Mohammed Mehdi Ali changed the use of the properties from family dwelling houses to Houses in Multiple Occupation, which led to the Council issuing Enforcement Notices in 2014 and 2015. Mr Ali did not comply with the requirements of these Notices, despite losing appeals to the Planning Inspectorate and also, in the case of the Tower Road property, seeing a statutory challenge in the High Court being dismissed.

Her Honour Judge Lana Wood today sentenced Mr Ali to a fine of £75,000 with a 2 year prison sentence in default also being imposed in the event that the fine remains unpaid by 23rd September 2021. In February HH Judge Wood issued a Confiscation Order against Mr Ali under the provisions of the Proceeds of Crime Act 2002 which required Mr Ali to repay over £739,000 in criminal benefit from the rental income he had received at the two properties in the period when he had failed to comply with the Enforcement Notices.

See links to articles in the Guardian and in the Local Government Lawyer here.

About the Author

Edmund Robb is a barrister and co-founder of Prospect Law. He heads up the firm’s Dispute Resolution practice. He was educated at Oxford University, was awarded a Prince of Wales Scholarship from Gray’s Inn and was a barrister at chambers in London where he developed a specialised practice covering the environmental, planning and public law fields at Public Inquiries and at all levels in the Courts. Edmund’s case work has been reported widely, and he has been named as a Legal Expert in his field since 2006. Edmund has particular expertise advising corporate, local authority and private clients on energy, infrastructure and other development projects and in High Court judicial review and declaratory relief proceedings.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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MANAGING RISK IN OFFSHORE WIND: ARTICLE BY PROSPECT LAW PUBLISHED IN WIND ENERGY NETWORK

We are delighted that this week sees the publication in Wind Energy Network of the first of a series of articles by Prospect Law on managing risk in offshore wind. The development of offshore wind forms a major part of the Government’s program to reduce carbon emissions. It is however a complex area and we look forward to sharing some of our thoughts on how to make it as profitable as possible through the careful management of risk. For the first article in the series please click here and find our article on page 41. 

About the Author

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

For more information or assistance with a particular query, please in the first instance contact Edward de la Billiere on 020 7947 5354 or by email on edlb@prospectlaw.co.uk.

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THE EUROPEAN COMMISSION’S STUDY ON POSSIBLE REFORMS TO NUCLEAR THIRD-PARTY LIABILITY INSURANCE: RECCOMENDATIONS MADE

This blog is the final of three on the EC’s study on nuclear third party liability and insurance; previously we have written about the need for the study [1] and, once the report was published late last year, we covered the current difficulties the insurance market is having with some of the revisions to the nuclear liability Conventions [2]. In this blog we look at the recommendations the study makes to alleviate these problems.

With an understanding of the major constraints on insurance provision for the full scope of the revised nuclear liability Conventions, the EC study team identified 14 options that could increase the amount of insurance available (‘capacity’). Some of these options were immediately identified as unrealistic; for example, amending the liability Conventions is unlikely in the short term. Instead the study focused on what could be achieved within the framework of the existing/revised liability Conventions and was conceivably within the power of the EC to implement across all EU member states.

Out of the original 14 options, the 5 options that the study reviewed in detail and recommended were:

  • Allow funds to accumulate to cover the 1st tier of the required liability Convention financial security amount: this arrangement is used in the USA where sufficient premium has built up to allow the required $450 million of financial security for nuclear liability to be fully funded twice over. This allows operators to receive premium rebates and allows insurers to consider their nuclear exposure as more of a catastrophic risk – this alters the modelling on their return on capital and allows them to commit higher capacity.
  • All nuclear liability policies to have single, lifetime limits: some nuclear liability policies limit insurers’ monetary exposure to once in the lifetime of each site; others offer a new policy amount each year. These latter policies will ‘stack’ with each passing year, increasing materially the insurers legacy exposure. The insurance market discovered during the asbestosis crisis that this practice is dangerous, as claimants can claim for each policy year they consider exposure may have occurred. The difference in policy type is purely an illustration of national insurance practice and the nuclear Conventions do not explicitly favour one type over the other; therefore harmonisation is possible. The nuclear liability capacity offering will increase in those countries that removed stacking annual policy limits.
  • Increase nuclear insurance mutual participation with new mechanisms for reinsurance: the nuclear insurance market’s principal competitor is the nuclear industry owned mutual insurers; if these mutuals could offer more insurance (this being backed by reinsurance), then greater capacity could be achieved. New innovative reinsurance mechanisms and new markets (such as the capital markets) could be accessed to increase capacity from the mutuals. Equally, over time, the traditional insurance markets could also develop this way.
  • Mandate a nuclear catastrophe only, EU wide, single event insurance cover to provide funds excess of the current legal regimes: all the liability Conventions mandate the holding of financial security for nuclear liability compensation up to a fixed amount. There is nothing to prevent governments or the EC mandating nuclear site operators buy a separate amount of insurance excess of this; this could be achieved using triggers, identified in the report, to activate this cover. If the use of activating triggers was introduced, significantly more capacity would be available from both the capital and traditional insurance markets. The EC would need to mandate purchase of this new insurance for all EU nuclear operators, but limiting the insurance to a single ‘catastrophic’ event would soften the premium cost, yet offer significant relief to governments (and taxpayers) who are otherwise largely on the hook for such events.
  • Establish an EU wide Protection Gap Entity: the current pandemic has revived interest in Protection Gap Entities [3]. These are entities that will manage catastrophic exposure, perhaps originating from multiple sources (e.g. weather, nuclear event, pandemic or earthquake) to optimise financial protection amongst all stakeholders. In the nuclear sector, this would include governments, insurers, capital markets and operators; sub-dividing and allocating nuclear liability exposure to those most suited would allow material increases in available capacity. For example gradually occurring environmental damage and longevity exposure could be retained within the nuclear industry with tax benefits available to allow the accumulation of funds to support any claims. Cover for only catastrophic nuclear events (similar to Chernobyl and Fukushima) could be allocated to insurers and capital markets; with only catastrophic exposure, higher financial amounts would be offered than today, as nervousness of gradual exposure or longevity risk deters many insurers. Governments could step in to provide high level loss funding, but in partnership with more risk averse capital market players. Such a mechanism would be better suited to a multinational body such as the EC and the mechanism could be used to cover any exposure with systemic loss implications.

It remains to be seen whether the EC implements any of the recommendations or acts upon any of the study content [4]. Achieving a cost-effective higher amount of private financial market contribution to a future catastrophic nuclear event is within the grasp of those willing to confront the difficulties identified in the study; such an outcome could be an opportunity for the nuclear industry, the financial services sector and governments.

Prospect Law was closely involved in the preparation of this study for the EC; for those interested in understanding any aspect of the study in more detail, please get in touch.

[1] See: The European Commission and possible reforms to Nuclear Third-Party liability insurance – Prospect Law

[2] See: Third Party Nuclear Liability Insurance – Will the Insurance Market be able to cope with the proposed changes? – Prospect Law

[3] For more detail and explanation of these entities, see: PGE-Report-FINAL.pdf (city.ac.uk)

[4] The full, published EC study can be found here:  Study on the insurance, private and financial markets in the field of nuclear third party liability – Publications Office of the EU (europa.eu)

About the Author

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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THE UK’S FREE TRADE AGREEMENT WITH JAPAN: UPCOMING TRADE MISSIONS

Following the successful Free Trade Agreement with Japan the UK Government’s Department for International Trade is undertaking a series of business focused UK-Japan Trade Missions commencing with the launch event on 2nd March.  Given Japan is the worlds third largest economy and relies heavily on nuclear power this is a market that UK companies should positively explore. 

Click here for further details.

Click here for free registration.

About Prospect Law

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

We have experts with extensive experience of both risk management through insurance and also business development in the nuclear sector in Japan.

For more information or assistance with a particular query, please in the first instance contact Edward de la Billiere on 020 7947 5354 or by email on edlb@prospectlaw.co.uk.

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PROSPECT LAW HELPS LOCAL AUTHORITY SECURE ORDER FOR REPAYMENT OF NEARLY £750,000 BY ROGUE LANDLORD FOR ILLICIT EARNINGS FROM OVERCROWDED PROPERTIES

Prospect Law welcomes the Confiscation Order in the sum of £739,263 which Her Honour Judge Lana Wood made against Mohammed Mehdi Ali at Harrow Crown Court on 12th February. As Brent Council’s press release explains, the Confiscation Order, which was made under the provisions of the Proceeds of Crime Act 2002, reflects the gravity of criminal offences committed by Mr Ali over the course of many years, by his unlawful use of two properties in North London where he crammed vulnerable tenants into unsuitable and crowded accommodation with no apparent regard either to their own living conditions or of the impact on the conditions of neighbours. Prospect Law was delighted to advise and represent the Council on this important case – the largest such order made by the Courts in 2021.

Click here to read Brent London Borough Council’s press release

About Prospect Law

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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TIPPING THE SCALES: LEGAL INJUNCTIONS TO STOP FLY-TIPPING

Fly-tipping on farm land has been on the increase in recent years.  It’s not just an irritating nuisance; fly-tipping can be very costly to deal with; it can pose a threat to humans, livestock and the environment; it can damage land and crops; and it can cause a blight on the locality.  The National Fly-Tipping Prevention Group estimates that fly-tipping costs around £86m-£186 million every year to investigate and clear up, with the cost falling on tax-payers and private landowners. 

Although guidance is available to help farmers deter fly-tippers, some farmers nonetheless suffer repeated incidents, often on an industrial-waste scale. In such cases, there is another option available to the farmer: an injunction.

What is an injunction?

It’s an order made by the Court which is addressed to a person or a group of people ordering them to do something, or to stop doing something (e.g. to stop depositing waste on a specified area of land).

Who can get an injunction?

The occupier of the land – an owner occupier or a tenant.  It might be possible for a licensee to apply for an injunction, but that would be trickier. 

What about if you can’t identify the fly-tippers?

It’s entirely possible to get injunctions against “persons unknown”.  The injunction would need to be worded carefully to ensure that the “persons unknown” are a defined and limited group of people – the injunction must apply only to people who fly-tip on the land; it cannot apply to everyone in the world indiscriminately.

What land can be protected?

All land occupied by the person applying for the injunction.

What about fly-tipping on the public highway?

Where fly-tipping takes place on the public highway and it obstructs access to your land, you could apply for an injunction to stop the fly-tipping on that public highway because it amounts to a public nuisance.

Will an injunction stop the fly-tipping?

That’s the aim and purpose of the injunction.  Of course, the ultimate way to stop fly-tipping is to build an insurmountable physical barrier around your land, but that’s unlikely to be a practical option.  You will want to try other deterrents first of course – an injunction should be a last resort rather than the first tool out of the box.  But if, despite your best efforts, you have a continuing fly-tipping problem, an injunction is worth considering.

An injunction creates serious legal consequences: breach of an injunction is contempt of Court, punishable through the civil courts.  A person found to be in contempt of Court can be committed to prison or fined.  If you bring committal proceedings in the High Court, the fines are unlimited and the person can be committed to prison for up to 2 years.

What’s the process for getting an injunction?

You launch a legal claim and apply for an interim injunction at the same time.  You will need to show that you have a legal cause of action (in this case in trespass) and that it has a reasonable prospect of succeeding.  You will also need to show that being paid compensation would not resolve the issue – you need an injunction to stop this from happening, not money.  In practice this means you’re going to need to show that you’ve suffered with serious fly-tipping incidents which have caused significant issues for your business and, despite your best efforts, the problems have continued.

If you can’t identify the fly-tippers and you need your injunction to apply to “persons unknown”, you will also need to show that there is a real and imminent risk of further fly-tipping by people you can’t identify, and your application and draft order will need to be tightly worded to meet the legal requirements for such injunctions.

A recent legal case has made it much harder to get final injunctions against people you can’t identify, so your underlying claim, and your proposals to the Court about how that claim proceeds, need to be put together very carefully.

How long will my injunction last?

That will be a matter for the Court, and it will largely depend upon whether you can identify the people who are fly-tipping (when you will want a short-term interim injunction, with a speedy final hearing to get a longer-lasting final injunction).

If it’s not possible to identify the fly-tippers, you will need to persuade the Court to grant you an interim injunction for as long as possible; that may be 6 months; it may be 12 months; or it may be such other period as the Court believes is just and reasonable in the circumstances.

If I get my injunction, how do I enforce it?

Firstly you want to make sure that as many people know about it as possible, because you want to bring it to the attention of the people who have been fly-tipping.  Certainly, you will want copies and warnings posted on the land affected, but you might also consider flagging the injunction on local community internet pages and village hall noticeboards (etc.), and notifying local waste disposal sites.

You should also consider whether you need CCTV or ANPR cameras, or movement-triggered covert cameras, at or near sites where fly-tipping has occurred in the past.  These cameras have come down in cost in recent years. 

If you do catch someone breaching the injunction, you can apply to Court to have that person committed for contempt of Court, providing evidence to the Court of the breach.

Is it worth it?

An injunction is unlikely to be worth the cost and effort if you have an isolated incident of relatively small-scale fly-tipping.  But if you have a persistent issue with industrial-scale tipping, or issues across various sites or land parcels, then an injunction might well be worth considering.  Whilst an injunction is not a guarantee against further incidents, it is a serious deterrent that creates meaningful legal consequences for fly-tippers.  You could also consider joining together with other local farmers to apply for an injunction, especially if the fly-tipping is persistent but spread across a few farms in the area.

About the Author

Nina Winter is a Senior Solicitor with 16 years post-qualification experience in litigation and dispute resolution, with particular expertise in judicial review challenges to government and public body decisions and an established reputation as a legal expert in the agricultural industry. Nina read law at Oxford University before training and qualifying at Eversheds. In 2006 Nina joined the legal team of the National Farmers’ Union (NFU), the leading trade association representing farmers and growers in England and Wales. In 2009 Nina was appointed as the NFU’s Chief Legal Adviser, a position she held for 12 years before joining Prospect Law. Having worked as in-house counsel for 14 years, Nina is able to quickly identify the legal issues at stake and to work pragmatically and seamlessly as part of a team to achieve the client’s objective. Nina’s expertise in agriculture means she brings a comprehensive understanding of the issues facing agri-businesses to her legal work.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy, infrastructure and natural resources  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and other technical experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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RISK PERCEPTION: MISTAKES TO AVOID WHEN ASSESSING CORPORATE RISK

A trio of Covid-19 related risks heads up the 10th Allianz Risk Barometer 2021…’ states the introduction to this year’s eponymous survey of the key business risks of each year. 

Previous Risks

What a surprise! Strangely enough, the pandemic did not feature in the top 10 business risks in last year’s (January 2020) survey (it was 17th), whilst the 3 surveys prior to 2020 nominated business interruption as a key risk.

In 2012 (the first year of the survey) the top two business risks were economic risks and natural catastrophes, which reflected the experience in the previous year of both the aftermath of the 2010-11 financial crisis and also the devasting floods in Thailand. 

Actually, none of these rankings are that surprising, but to those of us interested in risk management what is interesting is to see how we humans frequently rate the most recently experienced risk as the most threatening.

This pattern of human behaviour is well known but can be a problem when conducting a business risk management exercise. There is a tendency to prioritise the risks that have just happened over risks that may be equally or more relevant and/or more likely to occur.

Business Interruption

The risks of business interruption feature strongly in the Allianz surveys and the current pandemic has raised their profile more; business interruption is a generic risk that can cover a multitude of events. As insurance is concerned with tagging the financial cost of any interruption to a specific insured event (or uninsured, as we have seen during the past year) it is limited to mitigating at best some of the exposure to financial loss. Other events that can cause business interruptions such as wider supply chain disruptions, staff absenteeism or economic risks will be uninsured. Therefore, a good risk management programme must address business resilience across a wide spectrum of events, from known exposures to those ‘unknown unknowns’ and mitigate these as much as possible, using insurance as well as a range of other measures.

Risk Management

Where should responsibility for risk management lie? For decades insurers and brokers have worked with company risk managers, whose role frequently was limited to managing insurance purchases and thereby minimising insurance spend. Today there is a greater recognition of business risk and the value of a strong risk management programme. This has led to boards of directors becoming more responsible for a company’s risk management strategy. 

This positive trend will continue as the insurance and financial markets become ever closer, developing products that are better suited to protecting a wider range of risks. It is also pleasing to see that the pandemic has encouraged government, financiers, insurers and academics to devise better methods of risk management and to enhancing systemic economic resilience to risks that threaten more than just a limited number of businesses. However, complacency – the ‘it’ll never happen to me’ mentality – is still often prevalent and it remains an obstacle to risk management planning in many economic sectors.

Risk perception is a wide and fascinating area of study; we all have different risk appetites and perceptions of what is risky. When conducting objective risk management exercises we need to put prejudices and pre-conceptions aside and consider what the real issues facing our business are just now. This should be an exercise that involves senior management taking a holistic view of as wide a spectrum of hazards as possible, evaluating the resilience of the business in the face of these hazards and devising an appropriately wide-ranging mitigation strategy. In short, when considering the risks your company faces, try to look around and ahead – not back.  

About the Author

Mark Tetley has wide experience gained from senior positions across the London insurance market as  both an underwriter and a broker, in a variety of sectors. He provides advice and assistance on a wide range of insurance and risk issues, including comprehensive nuclear liability and property insurance assistance, complex infrastructure project programme design and review, claims and policy reviews, assistance with project insurance design and implementation in developing countries, and many other aspects of risk mitigation.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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THIRD PARTY NUCLEAR LIABILITY INSURANCE – WILL THE INSURANCE MARKET BE ABLE TO COPE WITH THE PROPOSED CHANGES

About a year ago we published a blog about an EC study on nuclear liability and insurance; in that blog we commented on the reasons why this subject was of interest to the EC and gave a broad outline of the report’s content.

The EC has now published the study and although there has been a delay in it doing so, the subject remains topical simply because of the continuing inadequacy of the insurance provision when measured against the soon-to-be revised liability obligation of nuclear operators.

In this blog we will analyse why the insurance provision remains inadequate and in a future blog we will look at the recommendations the study makes to alleviate these deficiencies.

It is almost certain that the liability obligations of nuclear operators in OECD countries will expand materially on 1st January 2022 when the 2004 revision to the 1960 Paris Convention on nuclear liability is ratified. The old definition of nuclear damage will be widened from just property damage and bodily injury to include economic, environmental and preventive measure damages; critically it will also offer the ability for potential claimants to bring a bodily injury claim up to 30 years after the causal incident (the existing period is generally only 10 years). The financial security amount (i.e. the amount the nuclear operators must provide and cover with insurance or some other financial guarantee) will rise to between €700 million and €1,200 million; the existing financial security in the UK is a mere £140 million.

The insurance market can easily cover the existing liability obligations in full – for the full amount, full period and full scope, but at present this will not be the case for the new regime next year – why not?

The study identifies the major blocks on providing this revised liability insurance for nuclear sites as:

  • Ambiguity of language – the Convention’s new, wider scope of cover is less definitively worded than the limited existing cover; for example under one of the new heads of damage operators are liable forcosts of measures of reinstatement of impaired environment but it is not easy for insurers to make provision for exactly how much reinstatement may be required.
  • Volatility – insurers need to make provision for future claims arising under policies underwritten today. The extension of the time to bring a claim for nuclear damage from 10 to 30 years materially increases volatility of outcome for insurers as predicting losses so far into the future becomes guesswork; therefore insurers must allocate disproportionate reserves for such events to cater for unexpected losses.
  • Judicial inflation – insurers are nervous that judicial decisions for claims made decades ahead may be driven by different social and medical values, so increasing the value of claims substantially. This further complicates today’s provision for future liability claims.
  • Other factors such as relatively poor perception of the nuclear sector, the lack of actuarial loss data (there have been very few nuclear insurance losses) and uncompetitive returns on capital have disincentivised insurers from entering the nuclear insurance market, thus restricting innovation and any broadening of the market.
  • Small size of nuclear insurance market – insurance of nuclear risks is mostly provided by nuclear insurance pools; these are national groups containing many insurers in an individual specialist insurance entity that provides cover for most nuclear sites globally. Given that normally competing insurers are grouped into a single entity (a pool), it is axiomatic that these pools are not subject to the normal cut-throat competition seen elsewhere in the insurance sector and this too has limited the development of a fully competitive insurance market for nuclear.

All these factors have challenged the insurers of nuclear liability to provide the required cover for the forthcoming liability Convention revisions. At present the insurers can offer enough financial limit to cover the revised financial security amounts but cannot offer the full scope of the revised nuclear liability language.

As with any market the insurance availability situation is fluid, but it remains unlikely that the full scope of cover will be available for the full amount of €1.2billion in time for next year.

In the next blog we will look at the recommendations the EC study makes to alleviate this situation.

About the Author

Mark Tetley has wide experience gained from senior positions across the London insurance market as  both an underwriter and a broker, in a variety of sectors. He provides advice and assistance on a wide range of insurance and risk issues, including comprehensive nuclear liability and property insurance assistance, complex infrastructure project programme design and review, claims and policy reviews, assistance with project insurance design and implementation in developing countries, and many other aspects of risk mitigation.

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental  sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

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