Hello and welcome back to The Pinsent Masons Podcast at the start of an exciting and potentially tumultuous year. This fortnightly dose of easy-to-digest business law news and analysis is designed to help you keep up with developments all around the world every second Tuesday.

I’m Matthew Magee and I’m a journalist here at Pinsent Masons, and this week we look at the UK’s grand AI plans and ask: are they credible? And we look at the impact of UK plans to supersize the biggest pensions master trusts by 2030.
But first, here is some business law news from around the world:
Cider company wins lookalike appeal
EU finance businesses face stricter process regulation
and
Luxembourg law addresses EU AI Act enforcement

A recent UK Court of Appeal decision is “game changing” for brand owners and signals a renewed commitment by the UK courts to protecting brand identity and ensuring fair competition, according to one expert.

The Court of Appeal overturned an earlier High Court decision, finding that the design and look of cider sold by Aldi infringed Thatcher’s trade mark rights.

Intellectual property expert Gill Dennis said: “The decision provides important clarification of the law on infringement by ‘riding on the coat tails’ of a trade mark. In recent years there has been a proliferation of lookalike products and brand owners have often seemed powerless to deal with those effectively. The decision hands the power back to brand owners and is a useful reminder that registered trade mark rights for product packaging do have teeth and are an essential part of a brand protection portfolio.”

Businesses in the European financial sector will have to meet stricter requirements in the areas of cyber security, information and communication technology (ICT) and digital operational resilience following the entry into force of a new regulatory regime.

The regulation on digital operational resilience in the financial sector (DORA) applies to most regulated entities in the European financial sector, such as credit institutions and insurers, but also certain third-party ICT service providers.

Critical ICT third-party service providers, which are designated as such by the European supervisory authorities (ESAs) come directly within the scope of DORA. They provide critical or important functions to financial services companies and must also fulfil many of their own obligations in addition to those contained in their contracts.

Regulated industries expert Florian Elsinghorst said, "DORA presents affected businesses with potentially major challenges. Financial organisations must adapt their existing contracts with service providers to be DORA-compliant, which may entail a substantial amount of contract management and negotiation work."

A new law in Luxembourg has been proposed that would give the country’s data protection authority and a range of other regulators powers to enforce compliance with the EU AI Act.

The draft law, filed with Luxembourg’s parliament just before Christmas, would make the National Data Protection Commission (CNPD) the primary authority for EU AI Act matters in Luxembourg.

It would take on responsibility for supervision of AI systems in cases where those systems are not subject to existing sectoral regulation in Luxembourg – in that regard, the draft law provides for the country’s banking, insurance and medicines regulators, among others, to play an important role in supervising AI use by businesses where that use falls under their existing remits. The Luxembourg Regulatory Institute (ILR) would be responsible for supervision of businesses deploying ‘high-risk’ AI systems which are also operators of essential or important services. This transposes the EU’s second Network and Information Security (NIS) Directive, according to the proposals.

The UK government has endorsed a 50-point action plan prepared by technology businessman Matt Clifford on the future of its approach to artificial intelligence. The plan is expansive and ambitious, and it was endorsed by the UK government on the very day it was published, which industry observers say gives the proposals welcome momentum.

But is the UK government right to claim that the UK is already a world leader in AI? That’s a big claim. And is the plan to stay on top credible?

London based technology law expert Sarah Cameron has thoughts on all this but first she told me what has actually happened.

Sarah Cameron: Matt Clifford, who's a tech entrepreneur and chairman of Aria, that's the Advanced Research and Invention Agency, he was asked by Keir Starmer soon after the election to put together an AI opportunities action plan to drive the AI strategy and promote AI adoption and economic growth. So that's what he's produced and the same day as he produced his plan, the government endorsed the 50 recommendations in there, which focused on increased investment in compute data infrastructure, access to talent and regulation, proposals around increasing adoption across the public sector and the private sector and trying to ensure that the UK retains its status as an AI leader and a key market in the world.

Matthew Magee: Lots of countries have ambitions to be leaders in AI, and none of them will be able to match the kind of resource power that places like the US and China will be able to put behind their efforts. But Sarah thinks UK’s claim to have a lead worth defending is a sound one, in some areas at least.

Sarah: There's no doubt that the UK does have a leadership role to some extent we're highly recognised for our backdrop of leadership in AI in terms of research, in terms of historical figures like Turing, in terms of some of our educational establishments and with the third largest market for AI in the world after the US and China. But we do have to accept that we can't compete with the US and China on things like compute power and volume of data, petabytes of data being produced. But we can compete in the areas where we have strength and be targeted in our investment to retain that status in terms of AI models, AI adoption and also guidance and leadership around safety, regulation and assurance.

Matthew: So what exactly is in the plan? It’s way too big to summarise here completely, but Sarah said amongst the most important elements are the plans to build the physical infrastructure needed to support AI development, and a change in attitude to the sharing of data and when Sarah talks about building ‘compute’, this is a term people in AI use for computing power, the actual machines doing the processing.

Sarah: The focus is on investment in foundations, so that's compute and data infrastructure and ask access to talent and then adoption. So, just taking the first point about infrastructure. So, there's a recognition that we need a long term compute strategy and there's recognition that we need to invest very substantially in our compute capability and increase our build out of data centres. So, the point here is that there's a recognition that we need sovereign compute that is where the public sector owns or allocates compute for highly strategic national missions. That we need to encourage investment by the private sector to build data centres, to increase access to compute. Obviously we need to open up access to data sets both in the public sector and the private sector. So there's a plan here to identify for a start, 5 high impact public data sets and to form a national data library to help make this data available. That's going to need some thought about that as to how that is achieved, about what information requirements are. But there's a plan also to ensure there are frameworks for the release of data sets, incentives for research as an industry to curate and unlock data and there needs to be a very clear strategy about what data is made accessible, what data is collected. You don't want to just make a whole load of public sector data without proper consideration. It's about access to data for specific purposes.

Matthew: Sarah’s already said this plan is ambitious in scope and timescales. So is it credible? Or will the reality never match the plans ambitions?

Sarah: Well, one of the major concerns is about the amount of funding that's required. So, clearly in the government's acceptance of the proposals, it sets out a timeline for each of the 50 proposals for when it's going to either achieve them or start taking very clear concrete actions around them. The first real indication of whether the month that the government is going to spend the sort of money that will need to be available to achieve the proposals will be the spending review. This plan and the acceptance of the proposal is very optimistic, very ambitious, very pro innovation, but it will quickly lose trust if it's thought or shown that the government is not going to deliver on those promises. As I say, it is ambitious, but the UK is extremely talented and able to do a lot with a little. You can do a lot with a limited amount of strategic targeted data. You can do a lot with startups that are scaled up. You can do a lot with industry, public sector and academic coordination and collaboration.

Staying in the UK, the government there has announced ambitious plans to reform how master trusts work. Master trusts being huge pension funds made up of the pensions plans of lots of different employers. The aim is to encourage investment in the UK economy without damaging savings outcomes.
There are three aspects to the plan: firstly, create an over-ride when a fund has lots of individual pensions contracts to enable reform and innovation, secondly to involve employers more in the duty to ensure pensions value. But by far the biggest element is the third one, and this is about encouraging the creation of fewer but bigger master trusts. The governments floated the idea of saying that master trusts must manage £25 billion worth of assets by 2030. The typical asset value for many of the UK's 15 trusts is four or five billion pounds.
Birmingham based pensions expert Katie Ivens outlined the problem the government is trying to solve.

Katie Ivens: So, the government is looking at 2 particular things. It's looking to boost investment in the UK. So it's got concerns that pension schemes are really large institutional investors with a lot of assets at their disposal and the concern is that they're not investing enough in UK investments, whether that's infrastructure, shares, etcetera, and clearly you know the Chancellor has set out the need for growth in the UK economy and so one of the main policy goals here is to try and drive increased UK investment from UK pension schemes. And then the second goal, which is a very common goal obviously for any sort of pensions change is to enhance saver returns or we might sort of more usually refer to that as improving member outcomes. So making sure that people who are investing in pension schemes are getting enough at the point that they retire to be able to live appropriately in their retirement.

Matthew: Katie told me what the government's plan is in relation to increasing the size of the big pension funds, or master trusts.

Katie: So here they're thinking that what we really need are fewer and bigger and better run pension schemes, and this is very much on the DC side, so defined contribution pension schemes. So very much the mindset is bigger is better. And so, what they're looking to do is drive consolidation in the existing DC market. So we've got about 15 commercial master trusts at the moment. They're looking to see that number reduce and those master trusts get bigger. So, they're thinking that if you are a bigger master trust, you are able to better achieve those two policy goals and the number that's being banded around at the moment is 25 billion but there is some sort of debate as to quite what you're measuring to account to that 25 billion.

Matthew: Governments all over the world are trying to increase competition and reduce the dominance of small numbers of super-large companies in any market: think EU Commission concerns about the big tech companies. If it strikes you as slightly unusual then that the UK government is actively seeking to consolidate the market in fewer hands, well Katie thinks so too, and has identified some other problems with the proposed policy.

Katie: The pensions market was subject to a Competition Markets Authority investigation in the mid two thousands that has driven a lot of policy and decision making and sort of legislation and regulation since then. So it does feel like a potential departure from that. And I think as I say I do have concerns that it doesn't, it may not achieve the government's second, you know, objective of having these enhanced saver returns. I think there's definitely some positivity there in terms of looking at bigger schemes and certainly you know generally you would say that bigger schemes got better negotiating power perhaps you know, more assets at their disposal, more support perhaps from their provider. But I do have some concerns about the sort of the drive that bigger is always better. I think there are potential issues around competition in the market. If we try and homogenise everything too much and you know, part of their proposals we're thinking about limiting the number of default funds for example or limiting differential pricing for different employers that if everything becomes homogeneous and the same and the offering is the same between a handful of providers, you know where else the drive for innovation. You could see things like disruption in the market. We’re certainly aware even now of potential tenders where employers are looking to move to master trust, ostensibly because that would provide a better pension saving vehicle for their employees and those tenders are being put on hold because people are worried and uncertain about whether the scheme that they're looking at or the potential schemes that they're looking at are going to still be around.

Matthew: Let's remind ourselves of the policy objectives here: to increase investment in UK companies, and to give savers the best financial return on investments to provide for them when they come to retire. If this policy is successful in objective one, it risks actually conflicting with objective two, says Katie.

Katie: Trustees of a master trust are responsible for where they invest members contributions and employers contributions. So really, what are we looking to do? We're usually looking to maximise, you know, members pots at the point that they retire and we as a trustee board would be looking for the best possible investment options for us to do that. So I think the worry here is that whilst we can completely understand the Chancellor's desire to boost investment in the UK, and we completely understand that there will be good UK investment options out there that will deliver good saver outcomes, I think the question is how does that fit with the trustees fiduciary duty? And there hasn't been a lot of discussion about that in conjunction with this consultation from the government.

Matthew: The proposed changes are enormous, and according to the government's timescale are coming up fast. But Katie doesn't think it's time for master trusts or the employers whose pensions are contained within them to make drastic changes. It's early, she says.

Katie: All master trusts will obviously have a business plan and they will have their own growth ambitions and I think it is important to continue with that at the current time. This is only at consultation stage at the moment, but for now I think it's continue along the journey plans that have been set out focusing on you know those innovative decisions that sort of improvements to products etcetera, that people have been planning to do. And then I think it is starting to think about from a scale perspective, if we do need to achieve that scale, how do we think we can do that? And you know, are there potential acquisitions out there in the future? But I think at the moment, whilst it is concerning and it will be concerning for pension schemes and providers and trustees of those pension schemes, I think it's important not to react too quickly because we are at consultation stage. And we will, I think there will be a lot of responses to this consultation that will be very interesting and it will be important to let the government sort of take stock of those and see where they come out and we may come out with a modified proposal, a longer time frame, a different way of measuring the 25 billion, perhaps even a target without it being an ultimate cut off. There are lots of potential changes that could come to this. Quite a raw proposal at this stage that could make a meaningful difference in terms of how it should be implemented. So, I think caution at this stage, you know an awareness and monitoring situation closely.

Matthew: Thanks for listening, we really appreciate any time you spend with us, we know lots of people are clamouring for your attention.

Remember you can keep up with the constant stream of business law news and analysis from all around the world at pinsentmasons.com, and you can sign up for a tailored email update once a week at pinsentmasons.com/newsletter.

Thanks for listening and until next time, goodbye.