I’m Matthew Magee and I’m a journalist here at Pinsent Masons, and this week we ask: have two recent court decisions checked the momentum of climate litigation? And as a court case begins in London we examine the ongoing policy and litigation battle between content creators and AI companies.

But first, here is some business law news from around the world: First EU labour market fines issued on competition grounds UK snack makers should review products after mini poppadom decision and ‘Very large organisations’ face higher fines under Sentencing Council guidance

Companies that agreed not to poach one another’s employees and shared commercially sensitive information with one another have been fined more than €329 million by an EU regulator. The European Commission said it is the first decision where it had found a cartel in the labour market and the first time it had imposed sanctions in relation to the anti-competitive use of a minority share in a competing business. According to the European Commission, food delivery companies Delivery Hero and Glovo engaged in a cartel in the online food delivery business between 2018 and 2022. The companies admitted their involvement in the cartel and German-based Delivery Hero was fined €223.3m and Spain-based Glovo €105.7m.

Snack manufacturers should review their products after a UK court ruled that the normal value added tax (VAT) exemption for food does not apply to mini poppadoms, experts have said. The Upper Tribunal upheld the First-tier Tribunal’s (FTT) decision confirming that Walkers’ Sensations Poppadoms are a product that, like potato crisps and similar snacks, are excluded from the 0% VAT rate typically applied to food. Bryn Reynolds said: “This is the latest in what is becoming a long series of cases about the very fine dividing lines in the treatment of food products within the UK VAT system. As this is now an Upper Tribunal decision, it has precedential value and would be applied to other disputes about this exclusion from zero rating for food.”

Very large organisations could face higher fines for health and safety offences under amended guidelines published by the Sentencing Council for England and Wales. Regulatory expert Kevin Bridges said: “The amendments could mean that the starting points for fines significantly increase for health and safety, food safety and food hygiene, corporate manslaughter and environmental offences committed by very large organisations.” The new amendments aim to provide greater clarity and consistency in sentencing organisations whose turnover far exceeds the threshold typically used in existing guidelines. Until now, courts have had limited direction on how to scale fines appropriately for companies with turnover “very greatly” exceeding the threshold for large organisations of £50m, often leading to inconsistent outcomes.

One of the most closely-watched climate claims has been ruled against by a German court, while a London court has overturned previous rulings to make it harder to take action against public bodies over climate damage. So, having gone through a period when climate and activist litigation got much more traction than anybody expected, are we seeing it reach the limits of its effectiveness? Has climate litigation hit the buffers? The case taken by Peruvian farmer Saúl Luciano Lliuya against German energy generator and supplier RWE and had become something of a bellwether for activist claims. Lliuya wanted RWE to contribute to the cost of protective measures to guard against flood damage on his farm that he said was caused by climate change, in proportion to RWE’s contribution to greenhouse gases. The case attracted worldwide attention as it proceeded through the German courts, and many were initially surprised that courts were prepared to hear arguments that a company in Germany could be held responsible for damage on the other side of the world if it was found that that damage was partly due to its conduct. London based litigation expert Emilie Jones told me why the case was important.

Emilie Jones: I think this case was so closely watched partly because it's thought to be the first civil climate change case in Europe seeking damages, which has reached the stage of evidence being considered—so has reached a fairly advanced stage. But also, I think it captured people's imagination, captured people's interest because of this concept that potentially a company in Germany could be liable for damage as far away as in Peru.

Matthew Magee: And she explained what the ruling said.

Emilie: This was a case in which a Peruvian farmer, Mr. Lliuya, brought a civil claim in Germany against the German energy company RWE, and in that case he claimed that his farm land in Peru was at risk of flood damage from the melting of a glacier nearby. This case has been going on for some time and it's been closely watched by those interested in the development of climate change litigation. In the recent decision, the court in Germany, the Higher Regional Court of Hamm, has dismissed the case. And the basis on which it has done that is it found that there was not a sufficiently concrete risk, on the expert evidence, of floodwaters reaching Mr. Lliuya's property and damaging it. So that case is at an end and, as a result, the German court won't have cause to address difficult questions such as the extent to which, if any, there's a causal link between the energy company's emissions and the alleged danger.

Matthew: Meanwhile, the Court of Appeal in London was hearing a case about the importing of Australian beef that could have a seriously negative impact on climate litigation. The UK government had signed a trade deal that reduced tariffs on imported Australian beef, and environmental charity Global Feedback Limited objected because it said that the emissions of the Australian beef industry were higher than the UK's. It took the UK government to court in a judicial review, which is where you ask the court to examine the quality of governmental decision-making. It said that the government should have done a risk assessment on the climate impact of the tariff deal because a 2018 piece of tax law said that government policy must have regard to international commitments, which Global Feedback said should include the Paris Agreement and other climate target-setting deals. It was able to bring the case because environmental cases are subject to a special rule, the Aarhus Convention, which says that even if you lose your case you are only liable for five or ten thousand pounds’ worth of the government’s costs. But the government challenged the application of that costs cap, as Birmingham based litigation expert Nicola Seymour explained.

Nicola Seymour: The crux of the legal argument raised by GFL was that the government failed to properly assess this risk in its impact assessment, and they linked it back ultimately via international climate change treaties like the Paris Agreement. They linked it back under UK law to what was the Taxation Act 2018, and that required ministers to have regard to international arrangements. But before the ins and outs of this argument could be heard, the government raised a preliminary issue, which was whether this case is a special type of environmental case under English law that gets cost protection under the Aarhus Convention. If the claim is classified as an Aarhus Convention claim, it could be subject to a cost cap of £5,000 or £10,000. You can see how this would potentially be very significant because you look at potential adverse legal costs, they could be in the realm of hundreds of thousands. So if the claimants did have the cost protection under the Aarhus Convention, this would make it infinitely more realistic and achievable to pursue the claim rather than, you know, hundreds of thousands potentially being at risk if they were to lose the claim. So getting classified as an Aarhus claim is absolutely fundamental to whether they could afford to litigate.

Matthew: The Court of Appeal agreed with the government, saying that the Aarhus Convention should only apply to actions taken under laws that were specifically about the environment. This was not only an overturning of the previous High Court decision in this case, but also of quite a lot of other rulings which had created a broader application of the convention.

Nicola: So the national law that has been allegedly contravened must be fundamentally about the environment. Its purpose has to be environmental protection or regulation. The Court of Appeal drew a distinction, which they said was a crucial distinction, between this and, you know, if a decision just affects the environment. Undoubtedly, this decision would affect the environment. But the underlying national law wasn't about the environment, it was a taxation act. It was a really interesting analysis conducted by the Court of Appeal in the judgment when it ran through previous case law to arrive at that conclusion. So the Court of Appeal decision here really significantly narrowed the scope of an Aarhus Convention claim compared to previous case law.

Matthew: Nicholas says that this ruling will have a significant impact on what kinds of cases charities and pressure groups will be able to bring against UK government decisions.

Nicola: The impact is potentially really significant because if claimants who are usually, you know, charities or NGOs, entities that want to challenge the decision of a government, if they can't rely on this cost protection in relation to climate litigation, then that might disincentivise them from issuing in the first place. A lot of decisions made by the government, whether it relates to infrastructure, energy, implementation, across the board, really, a lot of decisions will have some sort of impact on the climate because of the works that will be carried out by the ramifications. And so if those decisions cannot be challenged and receive the cost protection under the Aarhus Convention because the underlying national law doesn't fundamentally relate to the environment, then we can expect the number of claims to probably fall.

Matthew: These two cases have dented the sense of momentum of climate litigation, but many other cases are still going through the courts. So I asked Emilie, has there been a change in the fortunes of climate litigation, or is this just the way that court cases go?

Emilie: I think this case shows that climate change litigation is very challenging for claimants, including activist groups, to pursue. There are many legal and evidential hurdles. But that said, I don't think we can assume that this litigation will stop those claimants. Those groups will continue to innovate to attempt to bring these types of claims, and I think businesses have to prepare for that to be the case and mitigate their risks accordingly.

There is a battle raging – cultural, social, financial – between the creative industries and the burgeoning AI industry about who has the right to access cultural material. Generative AI systems can’t reflect, replicate or respond to the world unless they know what the world is like, so developers feed them massive amounts of information to train them. But that information isn’t just facts and figures, it is cultural material too – paintings, drawings, music, film, writing, recordings. That material was created by people, and those people have rights to choose who gets to use it and to ask for money if it is used. This battle is being waged all over – in lobbying, in legislation, in parliaments, but also in courts. And one of the big early battles began in London’s High Court yesterday. Huge photo agency Getty Images is suing AI developer Stability AI, which has built a system that will create images based on text prompts. Getty says that Stability AI’s system was trained on material for which it owns the copyright, and that too much of Getty’s material actually appears in the AI system’s output. Birmingham based intellectual property specialist Cerys Wyn Davies told me why this case is so important.

Cerys Wyn Davies: It’s the first real testing of the issue of copyright law in relation to the development of AI technology, which very much depends on the use of content, the use of data. Particularly when we're looking at large language models, they need a vast amount of data. Interestingly, Lindsay Lane Casey, who is counsel for Getty Images, in her opening of the trial actually said that it was the day of reckoning on this issue. Copyright content is critical to the advancement and development of AI, but it is also critical to the protection of creators' rights. So this is the first of its kind in considering that balance between those two rights. What we would expect to see is a decision that will in some way seek to address that balance. It's going to test the ability of copyright to protect the creator's rights, but within that, we need to see the ability for AI developers to continue without that innovation being hindered by copyright.

Matthew: The case comes at a pivotal moment when, like in other countries, the UK government is trying to find a policy that balances the interests of copyright owners and AI developers. I think it's fair to say that that's a nut that no policymakers have cracked yet.

Cerys: So it's very interesting timing for the case. The backdrop to that goes back to 2021. This first arose as a result of the Intellectual Property Office in the UK looking at the whole issue of intellectual property laws and whether they were fit for purpose in the context of the fast development of AI and the importance of AI to the world at large. Copyright was one area where it was decided there should be some change in order to encourage AI innovation. That debate has effectively flip-flopped because of the fine balance between the rights of copyright content creators and the need for AI developers to use the content. But the government has not come back with a decision as a result of the consultation and has said that it needs to take time to consider that. Perhaps that’s leaning towards allowing development more freely, which needs to be reconsidered. So we're in a position where we haven't yet got any strong position from the government as to which way this debate should go and whether copyright laws should be reformed in order to allow greater use of content material for AI development.

Matthew: It's a real bind for policymakers and legislators. The creative industries are a vibrant, profitable field that governments want to protect and nurture. But AI is an exciting, new, and potentially massive industry. This copyright issue means that they pretty much have to pick a side.

Cerys: It does very much seem like you have to take one side or another on this debate because there are such strong industries to be protected. Indeed, there is a geopolitical piece where every country in the world wants to be open to AI development in that country. The debate could just go on and create uncertainty for both the content creators and AI developers, and that will hinder growth for both. But interestingly, there has been what I consider to be a middle ground, which is actually coming to the fore currently. The Copyright Licensing Agency has for many years provided a system of licensing, a collective licensing arrangement, whereby you take a licence from them which gives you legal access to use multiple content owners’ content. They are well underway in developing such a licence for the use of content for AI training purposes. That is due to be released in the coming months across many different areas of content, including publications and music. The collective licensing of materials has been a successful means of redressing this sort of balance for many years.

Matthew: Of course, the UK is not alone, and countries all over the world are grappling with exactly this issue.

Cerys: I would say many countries are in a very similar position to the UK in that this issue is currently up for debate. In the US, the Copyright Office has quite recently suggested that copyright law , copyright protection would be enforceable in the case of the use of content for training AI tools. Shortly following that announcement, the head of the Copyright Office in the US was sacked. That may be an indication of the political environment in which this debate is ongoing there. Meanwhile, in Europe, a referral is being made to the European Court of Justice to look at this issue, prompted by a referral from a Hungarian court. The aim is essentially to clarify how the laws would apply in this exact scenario where content is being used to train AI tools. There is going to be a lot of debate, both at legislative level and at court level, over the coming months and perhaps years.

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The Pinsent Masons Podcast was produced and presented by Matthew Magee for international professional services firm Pinsent Masons.