Legal blog: A race to keep up with the times

If 2017 was about building walls to divide and conquer, 2018 offers the hope that businesses recognise the importance of the global marketplace.Consolidation through the 1990s changed the shape of UK construction, leading to household names being transformed into enormous global businesses with access to new markets and established local workforces. The stage now seems set for mega-consolidation of companies into construction giants, with SNC-Lavalin’s acquisition of Atkins the most notable from last year. These businesses are truly multi-disciplinary conglomerates that blur the lines between skills, nations and cultures with corporate identities beyond their countries of origin. They offer big data and analytical solutions to design and delivery in construction. The use of blockchain technology and AI are two examples of how such companies will change the way the industry works, as between businesses and across the design and construction supply chain.  

Are the regulatory and legal regimes that envelope businesses’ trading activities keeping up with the pace of change and the pace of growth? Changes are also needed in the legislative landscape as a result of Brexit. There is a lot to be done! Progress is being made but slowly – and when change arrives, is it fit for purpose? 

The General Data Protection Regulations (GDPR) will come into force on 25 May, replacing current data protection laws to unify data privacy laws across European Union members’ states. The key aim of GDPR is to protect EU citizens from breach of privacy. They include stricter fines of up to 4% of annual global turnover or €20m (whichever is greater). The UK government has already confirmed that it will implement GDPR following Brexit, and the Data Protection Bill has already had its first reading in the House of Lords. 

I would like to see adjudication used for its initial purpose of easing the flow of cash around the system. Wishful thinking maybe, but protecting our SMEs in the face of the increasing consolidation in the industry is fundamental

The aim of the new data protection laws is to bring them up to date with how businesses use and process our data and to ensure uninterrupted data flows between the UK, the EU and the rest of the world for trade purposes. All good – but are the new laws already out of date? GDRP does not, for example, appear to have BIM, cloud computing and blockchain technology in mind where the identity of the owner of the information – and indeed the location of the data owner – can be unclear.

Cyber-crime is fast growing – each day brings more reports of businesses, banks, supermarkets, and telecoms companies being hit, and those are just the ones that make headlines. The potential impact, both physical and monetary, for construction firms is severe. These companies hold valuable data about our infrastructure and building operations. The prospect of high fines under GDRP may mean some incentive on businesses to protect the data they hold, but criminal laws fall far short of having the teeth required to crack down on cyber-criminals. 

Much of the legislation that governs this area, such as the Computer Misuse Act 1990 and the Regulation of Investigatory Powers Act 2000 were drafted well before the sophisticated techniques used by cyber-criminals came into play. I foresee prosecutors struggling to make offences fit within existing drafting. Such is the scale and potential of cyber-crime that surely the time has come for specific tailored legislation and indeed more enforcement resource.   

Less glamorous is the topic of payment in the construction industry. Late or delayed payment continues to be endemic, despite efforts to improve the flow of payment through supply chains. The government recognising the importance of prompt payment for businesses to thrive and grow has devised incentives to improve payment practices, including introduction of the Prompt Payment Code, creating a statutory duty on large businesses to report on payment practices and implementing stricter statutory payment provisions.  

While the 1996 Construction Act and the changes introduced in 2011 improved the payment landscape, there remain a number of concerns about the act’s effectiveness in solving the issue of late payment. In response to industry concerns, the  government launched a non-statutory “post implementation review” of the 2011 changes to the Construction Act in October last year. The Construction Act consultation, which will run in parallel with a consultation on retentions in the construction industry, closes on 19 January. Based on the responses, the government will decide what steps are required to improve the payment regime and the adjudication process. 

We continue to see adjudication abused by insurers using it for subrogated recoveries and claimants stopping and restarting adjudications. What I would like to see are more stringent rights and  protections  for SMEs that continue to be subjected to creative and unscrupulous attempts to avoid and delay payment to the supply chain. I would like to see adjudication used for its initial purpose of easing the flow of cash around the system. Wishful thinking maybe, but protecting our SMEs and specialists in the face of the increasing consolidation in the industry is fundamental. 

We need to see a faster pace of change within the legal landscape to regulate and control UK construction and promote fairness of trade so that competition can thrive. The legal and justice system needs to up its game to deliver these controls in good time and allow a thriving, fair and open global marketplace through 2018 and beyond.