Technol-AG: November roundup

It has been a busy month for AI, particularly for developments regarding AI safety.  Even before the UK's AI Safety Summit, which took place on 1 and 2 November, there were several key AI safety-related announcements, including that: 

• the UK Government was setting up an AI Safety Institute;
• President Biden had signed an Executive Order on the safe, secure, and trustworthy development and use of artificial intelligence;
• the UN had issued principles for the ethical use of artificial intelligence; and
• the G7 had issued international guiding principles and an international code of conduct for organisations developing advanced AI systems.  

At the Safety Summit itself, 28 countries agreed to safe and responsible development of AI in the form of the Bletchley Declaration on AI Safety, which included commitments to two further summits (a mini virtual summit in the next 6 months in The Republic of Korea and another in person summit in France a year from now).   

You can follow these links to read more of the additional AI-related insights we have recently published and which we consider to be of most relevance in practice: Google offers to share the fate of its generative AI customers  and Safety first: How tech companies and regulators are competing for first place in the race to make AI safe.

Safety has also been the theme of legislation since our last edition of Technol-AG: after much debate and many iterations, the Online Safety Act 2023 received Royal Assent on 26 October 2023 (the Act). As we reported in June, the Act is intended to establish a new set of laws aiming to protect children and adults online by making social media companies more responsible for their users' safety when engaging with their platforms. The UK government believes that this will make the UK "the safest place in the world to be online". There is still some way to go towards this goal however, as although Ofcom has immediately been awarded its new powers as the online safety regulator under the Act, the substantive provisions are not yet in force. These will be implemented by secondary legislation, currently expected to be enacted in 2024. Over the next three years Parliament will also approve codes of practice drafted by Ofcom. Once each code receives Parliamentary approval, providers of in-scope services will have 21 days to comply with the duties it relates to. Ofcom have published a useful guide to the rules and their implementation timeline here.

Will the rules apply to me? 

The rules will apply to you if you provide online services which: 

• 1) have a significant number of UK users or for which the UK is a target market; and
• 2) fall into one of the following categories: 
• online services which allow users to create and share content, or interact with each other (e.g. a social media site or a dating app) ("user-to-user services"); 
• online services where people can search other websites or databases (e.g. a search engine) ("search services"); and
• online services which publish or display pornographic content. 

What are the rules? 

The precise duties will vary from service to service, but most in-scope providers will be required to: 

• carry out risk assessments to assess the risk of harm to users from illegal content;
• assess the particular risk of harm to children from harmful content, if children are likely to use your service;
• take effective steps to manage and mitigate the risks identified in risk assessments;
• ensure that you clearly explain how you will protect users in your terms of service; 
• provide users with clear and accessible ways to report illegal content and content harmful to children;
• make it easy for users to complain, including where they think their post has been unfairly removed or an account blocked; and
• consider the importance of protecting freedom of expression and the right to privacy when implementing safety measures. 

Is there anything I need to be doing now? 

If you think the rules are likely to apply to you, there are things you can do to start preparing now, including: 

• Risk assessments: Most online services will need to carry out an illegal content risk assessment, so it is worth starting to think about these, including considering your service, what its features are and what evidence you could collect about potential risks of harm. Ofcom has provided a quick guide to help with this.
• Reporting and responsibility: You may wish to consider appointing someone to be responsible for getting your business ready for the new online safety duties.
• Ofcom publications and announcements: Ofcom recommends that you subscribe to email updates from its platforms in order to receive updates on the Act, including any important changes to what you need to do.  

In the recent case of Last Bus Ltd (t/a Dublin Coach) (Last Bus) v Dawson Group Bus and Coach Ltd (Dawson) [2023] EWCA Civ 1297, the Court of Appeal considered how the reasonableness test (the Reasonableness Test) under the Unfair Contract Terms Act 1977 (UCTA) applies to exclusion clauses in contracts based on one party's standard terms and to hire purchase agreements.  

What was the case about? 

Dawson leased coaches to Last Bus under a hire purchase contract on Dawson's standard terms. These included an exclusion of liability for terms implied by law (the Exclusion Clause). A few years after the contract was entered into, several of the coaches caught fire. Last Bus brought proceedings against Dawson for breach of the implied term that the coaches would be of satisfactory quality. Dawson argued that the Exclusion Clause meant it had no liability and Last Bus had no real prospect of resisting its argument that the Exclusion Clause satisfied the Reasonableness Test and was therefore enforceable.  Dawson applied for summary judgment on this basis and the High Court granted it. This case was an appeal to the Court of Appeal by Last Bus to overturn this decision.  

What is the Reasonableness Test? 

UCTA prohibits any exclusion or restriction of liability relating to the implied term that goods will be of satisfactory quality, unless such exclusion or restriction meets the Reasonableness Test, which is that it is "a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made".

What did the Court of Appeal decide? 

The Court of Appeal disagreed with the High Court's decision for two main reasons: 

• 1) Bargaining strength: It was wrong to have approached the Reasonableness Test with the view that the parties were of equal bargaining strength. Where a contract is on one party's standard terms, the first matter to consider is whether, although the parties may have equal bargaining power as regards price, they are also on an equal footing regarding the terms of the contract. 
• 2) Blanket exclusions: The intended effect of the Exclusion Clause was a blanket exclusion of all or substantially all liability for the quality of the coaches supplied. This could leave Last Bus without a remedy, even if it received no value at all while having to pay for the hire. Such clauses are on the face of it unenforceable (subject to the Reasonableness Test indicating to the contrary). This should have been considered by the judge.  

The Court of Appeal did not give their view on whether, once the Reasonableness Test was properly applied, the Exclusion Clause would be held to be enforceable, leaving this as a matter for the trial judge. It will be interesting to see what they decide.    

Key takeaways

Although the parties to this case are not in the technology sector and the contracts were not IT-related, the key takeaways from the judgement are nonetheless relevant to both. In particular, the case serves as a useful reminder that:

• 1) Standard terms and hire purchase contracts: Where parties are contracting based on one party's standard terms or entering into a hire purchase contract, they may be of equal bargaining strength commercially but unequal bargaining strength regarding terms. This means that exclusions of liability may be subject to the Reasonableness Test.
• 2) Drafting of exclusion clauses: Care should be taken to ensure that provisions in a supplier's standard terms which limit or exclude its liability are not drafted so broadly that they inadvertently fall foul of the Reasonableness Test and become unenforceable. The burden of passing the Reasonableness Test is on the party seeking to rely on the exclusion clause so Suppliers and hirers should be capable of, and ready to, defend their exclusion clauses as reasonable.