Deloitte Legal predictions 2023

Introduction

Andrew Joint, lead partner for Legal Advisory:

“2023 will see a continuation of many legal themes that arose in 2022, albeit some persist for different reasons. Topping the list of themes include the macroeconomic environment in which we enter 2023, meeting ESG commitments, and navigating a rapidly changing regulatory landscape.

“Against the backdrop of a recession, 2023 will see businesses ‘doubling down’ on extracting value from their resources and managing their costs. This will present opportunities as well as challenges; historically, economic strain has been a driver for innovation, and we expect to see the Legal industry expedite its adoption of automation and modernise legal contract lifecycles.

“This year ESG will gain more legal momentum impacting every sector, from TMT to consumer business. However, with the ESG specific laws and regulations taking some time to catch-up with general societal and political sentiment, any material legal impact will likely be felt after 2023.

“From a regulation standpoint, the UK will likely continue to see its acceleration in implementing new laws in 2023 as it looks to differentiate its economic and social environment from other major jurisdictions so as to attract growth and development globally. This will likely include changing rules around data privacy, how we regulate the internet, and the way the UK’s financial services operate and treat retail customers. This will create substantial challenges for legal practices to work through over the next 12 months, with many of these themes going beyond the legal world - also having far-reaching societal impact.”

Legal Technology

Bruce Braude, global chief technology officer, Deloitte Legal:

“2023 will see corporate legal functions and their legal service providers adopt technology to better manage legal knowledge, both for use within legal functions and for sharing with business users. The use of such technologies will ensure reuse of knowledge, consistency of service, better legal risk management and will allow for technology-based self-service, allowing lawyers to focus on bespoke complex legal issues.

“We will also see increased focus on the application of AI such as Large Language Models to offer a more ‘human’ user experience, to ‘understand’ content and to undertake increasingly sophisticated tasks such as research, document drafting and provision of legal guidance. Alongside growing interest in such technologies, we will also see focus on the risks involved and the necessary controls.

“Due to the growing complexity of implementing sophisticated technologies in legal services, we will increasingly see some legal service providers offering clients holistic solutions that bundle legal advice, implementation, legal managed services and technology, rather than leaving corporate legal departments to procure and implement technologies themselves.

“Finally, we will see a continuation of legal departments being more data-driven. A focus on data will provide GCs with a better understanding of current activities, trends and the ability to pre-empt future risks.”

Employment law

Marian Bloodworth, partner and financial services lead for employment law at Deloitte Legal commented:

“As the current financial pressures on firms look set to stay for some time, recruitment freezes are becoming more common, obliging firms to focus efforts on ‘right-sizing’ their organisations. Many firms are looking to avoid, wherever possible, the need to make costly redundancies and we expect to see more businesses choosing to re-deploy or re-skill their current workforce to fill talent gaps.

“As a consequence, retaining existing staff has become even more critical and the employee value proposition is likely to remain as important as ever. Government announcements around flexible working show how important this is now to many employees.

“We are also increasingly seeing a call from employees for workplaces to do more to help them navigate life’s events and provide support. In the last year, clearer policies around menopause and baby-loss have been introduced by many employers. These have broadened out to include policies around fertility and even support around issues such as menstruation and domestic violence; topics that were considered ‘taboo’ and rarely acknowledged in the workplace even five years ago. With a current proposal going through parliament on paid parental leave for parents of premature babies, we are expecting more employers will incorporate neonatal care into existing parental leave policies in 2023.

“Finally, UK employers will be bracing for further uncertainty depending on the outcome of the Retained EU Law Bill – with its proposals to remove a range of existing law with EU origins from the statute book by the end of 2023. At this stage it is not clear whether these laws will be removed in their entirety, re-enacted in their current format into UK law, or amended. This could impact employment laws including those in relation to holiday pay and rights, agency workers, TUPE, equal pay and collective consultation. It is currently not clear whether the Bill will pass in its current form, so it looks likely that uncertainty is here to stay for the time being.”

Financial Services regulation

Clare Jenkinson, Deloitte Legal partner, said:

“The UK will start to see more detail around post-Brexit financial services regulation changes in 2023. The Edinburgh package of announcements on 9 December presented a significant and extensive set of changes, covering a broad range of topics; from further reviews of the MiFID regime, to the senior managers and certification regime. The package also confirmed the various mandates in the draft Financial Services and Markets Bill and the imminent HMT and Bank of England consultation on a UK retail Central Bank Digital Currency. In addition, organisations that have a presence in the EU will have to balance these changes with a range of review measures and determine how best to approach likely divergence between the regimes.

“However, financial services organisations mustn’t allow this to distract from their implementation of the FCA’s Consumer Duty, which comes into force on 31 July 2023 for new and existing products or services that are open for sale or renewal. The regulation requires financial services institutions to review its product design and lifestyle to ensure that, where there is a retail customer, the firm seeks ‘good outcomes’ for the customer. Compliance could prove onerous for financial instructions but, in the context of rising cost of living, is especially important for supporting more vulnerable consumers.”

Cyber security

Cavan Fabris, Deloitte Legal partner, stated:

“Data remains one of the most valuable and sought-after assets for any organisation, and protecting it will continue to be a priority in 2023. The threat is also not going away, with 91% of global organisations reporting at least one cyber incident in 2022—up 3% from 2021. Organisations will have to improve their cyber vigilance in 2023, ensuring they are prepared to address and respond to the increase in number and sophistication of the threats. Security lapses and immature data privacy programmes, rather than a determined actor, increases the likelihood of a breach of regulatory compliance. For some, this will mean looking at existing data privacy and data protection programmes to ensure they are both cost-effective and robust, whilst others may look at more structured managed services from third-party providers.

“Coming down the line, the UK Government has expressed a desire to revise UK GDPR and we may also see changes to the data protection regime. Large businesses should already be compliant with GDPR so any changes are likely to be met with minimal disruption, but such changes could pose a bigger challenge for smaller businesses or for less mature privacy programmes as they contend with possibly having to comply with differing UK and EU data protection regulations.

“Elsewhere, a UK version of the EU’s NIS II Directive could also come into effect in 2023 which would hold critical industries, such as utilities and healthcare, to a higher standard of cyber resilience. Whilst these proposals are known, putting new practices into place will be necessary, but an opportunity to improve processes for those in scope.”

Internet regulation

Joanna Conway, partner and internet regulation specialist:

“The volume of global internet regulation coming in 2023 means many digital businesses will have a challenge staying on top of the changes. With both the Digital Services Act and Digital Markets Act already live in the EU, in-house legal teams must partner with risk and compliance functions and product areas to effect change and manage risk and compliance. Not getting this right could potentially mean facing regulatory enforcement or significant fines as well as legal, commercial and reputational risk.

“In the UK, the Online Safety Bill (OSB) has accelerated over the last three months and businesses will need to be assessing its impact and be planning for compliance through 2023, as well as keeping an eye on the Digital Markets Competition and Consumer Bill which has similarly accelerated recently. However, internet regulation is a global challenge so businesses must ensure they are continually scanning for new laws and regulations wherever they operate, assessing impact, and getting in place holistic structures for compliance and risk, rather than reinventing the wheel each time and per regulation. This includes managing common regulatory themes (such as content risk, as required under the UK’s OSB and also the EU’s Digital Services Act) and common regulatory requirements (such as audit as required under the DSA and EU Digital Markets Act or transparency reporting under DSA and OSB, to name a few).”

Consumer business

Rachael Barber, partner and IP specialist:

“Entering 2023 in the context of a cost-of-living crisis, consumer businesses understand that building and retaining brand loyalty will be critical in the 12 months ahead, and engaging with consumers in the digital world will remain key. For many, the metaverse is already old news, with attention turned to Web3 as part of wider digital transformation projects to capture insights on changing consumer behaviours and enhance loyalty.

“We are starting to see an uptick in businesses capturing and actively managing their intangible portfolio, to increase corporate value. Intangible assets go way beyond traditional IP rights; whilst important, there is a real focus on intellectual capital - the ‘secret sauce’ of any business - and intangible assets, including data and digital assets, reputation, and so on.

“Periods of recession also tend to see an increase in the production of copycat products so consumer businesses should go into the new year with a heightened awareness of potential IP infringements. Inventory losses are also typical of downturns, so having robust stock resilience will be important for prevention.

“More broadly, ESG will remain high on the agenda in 2023 for consumer businesses. This is especially so on the ‘social’ element, both in terms of consumer decision-making when buying, but also in talent attraction and retention as more employees look to work for businesses where their values align.

Legal Contracts

Craig Conte, lead partner for Legal Operate, Deloitte Legal:

“The past year has seen more businesses think beyond how they incorporate technologies, such as contract lifestyle management, AI and machine learning, into their contracting lifecycle but how it can be approached from an enterprise-wide perspective. Rather than think about contracting in a vertical way, businesses are looking at how contracting technology, and contracts themselves, can be drawn up cohesively and collaboratively across different functions.

“More broadly, there are two main legal themes that will continue to impact day-to-day contracting through 2023. The first is down to ongoing macro events which have diverted contracting teams away from the everyday. Combined with businesses themselves adapting to economic pressures, be it cost-cutting or restructuring, many are asking themselves how contracting can be done in a smarter way. Ultimately, we are likely to see more businesses adopt a style of business-as-usual contracting that is self-serve, automated or even outsourced entirely.

“With ESG regulations also coming down the line, businesses realise they will need to change their day-to-day contracts as they work towards sustainability ambitions and ensure compliance; not only for themselves, but also of their third and fourth parties.”

Legal contracts - TMT

Peggy Pauwels, Deloitte Legal partner, commented:

“Looking ahead to 2023, different organisations within the TMT industry will each have their own challenges. One commonality, though, is the need to continually innovate to meet unwavering consumer demand for seamless communication services, bandwidth and transmission speeds enabling 24/7 online accessibility. This requires substantial and continuous investment into the network infrastructure - a tough balancing act, particularly for telco and tech companies as they operate in a capex-constrained environment.

“All of this puts even greater emphasis on the need to be agile on costs and creative on unlocking commercial value.

“One way to do so is for businesses to look across their contracting ecosystems, ensuring contracts are pro-actively mined for data and insights so as to inform critical price renegotiations and also enable supply chain optimisation. Likewise, adopting AI and machine learning technologies to increase time to value and optimise the workforce.

“With sustainability and Net Zero targets in mind, and energy demand of infrastructure networks continuing an upward trajectory, ESG is high on the agenda for TMT businesses. 2023 will see a heightened focus for TMT businesses to balance business-as-usual activities with their sustainability promises.”

-Ends-

Notes to editors

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