Hello and welcome back to the Pinsent Masons podcast. We're here trying to keep you up to date with everything you need to know from the whole world of business law news, every second Tuesday. I'm Matthew Magee and I'm a journalist here at Pinsent Masons and this week, we examined the unexpected implications of a ruling about tennis players’ data that could hamper AI development in Europe; and we discuss how companies can cope with English judges’ new power to force them out of the courts and into alternative dispute resolution.
But first, here is some business law news from our outlaw team from around the world:
Australia introduces scam prevention laws
EU price comparison ruling sets ’30-day rule’ and
Ireland’s budget offers support to start-ups and multinational companies
Public consultation on new regulations to safeguard Australian consumers from scams has now closed, with legislation to introduce multi-sector scam obligations supported by sector codes to be brought before parliament by the end of the year. The Australian government’s Scams Prevention Framework (SPF) seeks to prevent scams, beginning in banking, telecommunications and digital platforms. Australian regulators say that scam activity has increased, costing consumers as much as AU$2.7 billion (US$1.8 billion) a year. The SPF will be administered and enforced by the Australian Competition and Consumer Commission (ACCC) which will delegate its functions and powers to SPF ‘sector regulators’. E-commerce merchants across the EU may need to revisit their online pricing algorithms to ensure promotional price reductions are based on the lowest price in the past 30 days rather than the initial price of the advertised products, an expert has said. It follows a case brought by a German Consumers Association against ALDI over its advertised reductions and a ruling from Europe's highest court, the Court of Justice of the European Union (CJEU). The CJEU ruled that price reductions must be calculated based on the lowest price applied by the trader during a period of at least 30 days prior to the price reduction. Technology expert Jeroen Schouten said “An interpretation battle between the EU Commissions, various national regulatory authorities and e-commerce industry stakeholders has been settled following this decision.”
Ireland’s budget for 2025 sets out a range of tax relief measures as part of the government’s aims to improve its business environment, support innovation, attract foreign investment, and boost economic growth. The measures and policies to support Irish start-ups and multinational businesses include the increased limit on gains qualifying for angel investor relief and the changes to Ireland’s research and development (R&D) tax credit regime. The majority of the measures in the budget will take effect from 1 January 2025 following the passing of the Finance Bill, with some becoming effective at midnight on 1 October.
Artificial intelligence systems need to be trained to understand how humans communicate, what good answers or solutions look like and what questions really mean. One of the ways this is done is by feeding the systems huge amounts of data that contains actual human interactions. People often have concerns about this – some to do with the intellectual property rights of the creators of material that’s fed in, some to do with the privacy of the people whose data or interactions is used. Well, Amsterdam based privacy and technology law expert Wouter Seinen thinks that a ruling by Europe’s top court, the Court of Justice of the European Union, in a case about the Dutch tennis federation selling access to its members’ contact details will make it harder than ever to feed data into AI systems for training. From amateur tennis players to AI data guzzling is a bit of a long road, but it all started with the Dutch data protection authority, the AP, telling the tennis federation that its use of members’ data breached the general data protection regulation, or GDPR.
Wouter Seinen: The Court of Justice of the EU was asked to answer an almost funny question for many spectators in the data privacy scene. The Dutch Data Protection Authority has taken a quite doctrinarian view about the use of legitimate interest as a processing ground under the GDPR. If you can't get implicit consent one of the few available options to get a justification for using personal data for processing personal data is actually say, well, this is actually necessary for the pursuit of my legitimate interest. So what the AP then decided at some point a couple of years ago is that actually a commercial interest, i.e. just you collect or process personal data because you want to make money with it should not be eligible for that precise processing ground and the reasoning was well actually, a legitimate interest should be an interest that is sort of respected and delineated by the law and there is no law that says you have a right to make money.
Matthew Magee: This case, then, is all about whether having a commercial interest in using data counts as a ‘legitimate interest’ under the GDPR.
Wouter: The case was about a tennis federation and at some point the federation decided that it wasn't in a very healthy financial state and they were approached by sponsors, by companies that were interested in the membership data, just names and contact details. They could use it for direct marketing purposes and they were willing to pay the federation, the association, some money for that. That is what took place and for that behaviour the association was fined over half a million euros. This was escalated up to the European Court of Justice and the question was very simple. Is it a commercial interest, can that qualify? Is it eligible to rely upon as a processing ground of GDPR? The court essentially disagrees with the AP in on the view that commercial interest could fundamentally not be eligible. It's taken a more nuanced view. It actually says whether an interest that is being pursued is legitimate or not actually is up to the member states. It requires an assessment whether it’s anything that is inappropriate or illegal, so in violation of law, and if it's not illegal, then it could depending circumstances, could be eligible as a legitimate interest.
Matthew: This is a useful and interesting ruling on a point that will interest many data processors. But the CJEU ruling didn’t stop there. It went on to say – though not to actually rule, as such – that a factor to consider in all this is whether the people whose data was being used knew this was happening – because if they didn’t know they couldn’t object or take action.
Wouter: But then the court continues by saying well whether a legitimate interest can be relied on in the circumstances of an individual case really depends on the expectations of the users involved. The court here reasons if a user doesn't know then it is unable to exercise his rights or to make objections or whatever. So, it's important that once an organisation relies on that ground, they should be sufficiently comfortable that the data subjects indeed knew or could have known.
Matthew: This is the part of the ruling that Wouter thinks could affect AI training. First, he told me how data is used to train AI systems, then how these CJEU comments might apply.
Wouter: This decision could inform the future thinking on when is an organisation actually allowed, when is it permissible under the GDPR to share volumes of data that include personal data to a third party for training an algorithm. Even if the use case is quite innocent and there's no real harm to the users it could become more problematic now to say, well, we did this for a good cause, we think it's a normal thing because anyone that had complaints or a data protection authority could go back to this decision and say, well, if the Tennis Association could have informed first, why could you, as a commercial business not just go back to everyone involved and notify them of your plans before you would do that, before you would really start sharing the data for instance, training of AI. Many AI systems really, at this moment are trying to understand how people communicate and how people reason. So for that it is needed for the for the systems to get access to large volumes of data and that could be internal correspondence that could be business files that could be all, all kinds of communications, but most interestingly if it's a dialogue, if it's you and I that are exchanging views to come to a decision or to if you are reasoning with me because you're trying to convince me of a certain position, those types of dialogues are very interesting for large language models and generative AI because it helps the AI to understand how a reasoning is being brought. How is it how it's built.
Matthew: This is about grounds for processing data where you don't have someone's explicit consent to process the data. It feels like this part of the ruling is almost going back to needing user consent by the back door.
Wouter: Yeah, that's right. The line between consent based processing and processing on the basis of legitimate interest is getting really blurry. It's becoming implied consent almost as we knew it in the past so if you're required to be transparent and say exactly what you are planning to do in order to give people the opportunity to say, well, I actually don't like that then we are almost back to the implied consent doctrine of the ICO before the GDPR.
Matthew: So what can companies do in the face of what looks like a bit of a reversion to older, more permission-based models of regulating data use? Show evidence that you’ve at least considered this is a first step, says Wouter.
Wouter: Having a defensible position, having thought through your position and documented it, rather than having to sort of make your case once you're being put on the spot, is always a good thing. So I expect that companies will, if they're wise, will spend more time in trying to explain why they think actually the type of processing that they do is within the reasonable line of expectation of the stakeholders involved. So if it were your employees or your members you might want to consider stepping up your comms game and also having some sort of evidence that you thought about this and why you think that within the parameter set by this decision you still think an average user has been properly informed, or at least could understand that this was going on and could exercise their rights.
Judges in commercial courts in England and Wales now have the power to stop the progress of court cases and order companies to explore other ways of settling the issue, known as alternative dispute resolution or ADR.
Courts have long supported and encouraged any alternative to big, long, expensive court cases involving warring companies. But actually being able to force companies to go down alternative routes is quite a development.
This isn’t a big new law, it’s just a change in the rules that govern how courts work, says London based litigation expert Emilie Jones.
Emilie Jones: Last week, new court rules came into effect in England and Wales to strengthen judges powers to encourage parties to settle their disputes through some form of ADR alternative dispute resolution rather than through expensive, protracted litigation in the courts, and when we talk about alternative dispute resolution ADR, what we are talking about is a range of different methods by which parties can resolve the dispute without going to court. Mediation is probably the most well known, so where an independent mediator facilitates the parties in reaching a negotiated solution in a confidential process, but there are other methods too. And in England and Wales, the process of civil commercial litigation is governed by the Civil Procedure Rules, or CPR, and those rules were amended last week with effect from the 1st of October in a number of ways which give greater prominence to ADR. There's 3 broad groups of changes. The first is changes to the overriding objective as it's called under the CPR. The overriding objective is the guiding principle which guides how judges manage cases and that objective is to enable the Court to deal with cases justly and at proportionate cost and the rules contain examples of what that includes, and that list has now been added to so that it now includes promoting or using ADR. The second group of changes concern case management, the courts case management powers and duties. Those are perhaps the most significant amendments and what has been done here is that the rules now make clear that judges shouldn't just encourage parties to use ADR, that was already there, but they also have power to actually order that parties must engage in ADR. And when giving directions for the procedural timeline and conduct of a case, judges are now generally under an express obligation which requires them to consider whether to order or encourage the parties to engage in ADR. And finally, the third group of changes relates to costs. So in England and Wales, it's common for the winning party in a piece of litigation to ask the court for their costs to be paid by the other side, including their legal fees and the court has a wide discretion as to whether to make a cost order and if so, what cost order to make and it will consider in doing that, the conduct of the parties and the rules now make expressly clear that that conduct includes whether a party fail to comply with an order for ADR or unreasonably failed to engage in ADR.
Matthew: Those civil procedure rules, or CPRs, are just reflecting a change that actually happened in England’s Court of Appeal late last year when a homeowner got quite angry about the Japanese knotweed in his garden.
Emilie: These changes have come about to give effect in the rules to a decision of the Court of Appeal of England and Wales last year, and that was a decision called Churchill and Merthyr Tydfil, and that considered whether judges can compel parties to enter into a form of ADR, or whether that would breach their right to a fair trial under Article 6 of the European Convention on Human Rights. Mr Churchill discovered some Japanese knotweed on his premises and made a claim against his local authority who owns some adjoining land and the local authority argued that he should have explored non court dispute resolution options such as its own complaints process before taking court action and they applied for a stay or a pause of the court proceedings. The case went all the way up to the Court of Appeal. The Court of Appeal found that judges did have power to stay proceedings for ADR, or indeed to order parties to engage in an ADR process, so long as that didn't undermine the essence of a parties Article 6 rights to a fair trial and was done in a proportionate way.
Matthew: So if judges have been pushing companies towards ADR for some time, how big a change are these new rules?
Emilie: Well, I think these changes are more in the nature of giving greater prominence to ADR in the rules and really encouraging a cultural shift rather than being a radical change. But I think some judges will now focus more on ADR than they were previously and feel more empowered to make orders requiring the parties to engage in ADR. So for example, I think parties can expect it to be a routine question at the first procedural hearing and a piece of litigation, well have you engaged in any form of ADR? What are your proposals for doing so?
Matthew: So if the policy objective here is getting more disputes to go down the root of ADR, why is that? Why is ADR being seen as better than a court case?
Emilie: Well, ADR has been encouraged by the courts for a long time and that's simply because litigation is expensive, it's time consuming and there is a recognition that it's better for parties to resolve their disputes without proceeding all the way, for example to a trial in front of court.
Matthew: Emilie doesn’t think that lots of judges have to compel lots of companies to mediation in order for the culture in litigation in English courts to shift.
Emilie: I think judges will still remain reluctant to compel a party that really doesn't want to engage in ADR to do so. I think what will be common and is already common to an extent is that judges will impose a stay, and that's like a pause in the proceedings for the parties to go away, explore ADR option, try and resolve the dispute through ADR sometimes to then come back and if the matter hasn't settled and explained to the court what steps have been have been taken. So I think we will see judges using a range of options with that compulsion option being the most severe and probably still used in fairly rare circumstances.
Matthew: Thank you again for joining us this week on the Pinsent Masons podcast. We know there are lots of things clamouring for your attention and we really appreciate the time you spend with us. Don't forget you can keep up every day with the latest business law news, analysis and developments from our team of journalists around the world at pinsentmasons.com, and you can sign up for your own tailored weekly digest at pinsentmasons.com/newsletter. Thanks for listening until next time. Goodbye.
The Pinsent Mason's podcast was produced and presented by Matthew Magee for International professional services firm Pinsent Masons.
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