Reform of UK slot regulations at Level 3 co-ordinated airports is on the cards for 2025. Proposed changes may call time on grandfather rights to slot allocations (take-off and landing rights) that are perceived to give an unfair advantage to incumbent slot holders and present challenges both to established carriers seeking to expand existing services and to new entrants. The UK's Department for Transport (DfT) seeks to make the UK's slot system "more efficient, dynamic and transparent". In August 2024, the Competition and Markets Authority, the UK's competition watchdog, endorsed the DfT's proposed changes. These include (i) a revision of the 'use it or lose it' rule, (ii) redefining the new entrant rule, and (iii) establishing a clear legislative framework for secondary trading of slots.

The International Air Transport Association (IATA) predicts 10% growth in passenger numbers in 2024 – back to pre-COVID levels - but with changes in the connectivity provided by airlines globally. 2024 is predicted to be the first year to exceed unique city pair numbers seen in 2019 – rising to more than 22,000 - and with a mirrored increase in the overall value of trade carried. We predict increased connectivity in 2025, particularly for Asia-Pacific markets and Europe-APAC connectivity which has to date been hampered by the war in Ukraine. We also see continued improvements in the global safety profile of the industry. The International Civil Aviation Organisation (ICAO) 2024 Safety Report highlights the preceding year as the safest in the past five years in respect of global accident rate, number of fatal accidents, total fatalities and fatality rate. We anticipate continuing progress, notwithstanding the increase in flight and passenger traffic.

While activist litigation has been high profile across several jurisdictions in 2024, 'polluter pays' litigation based on contribution to harm caused by climate change will continue to progress. In the US, a series of claims have been issued by states and municipalities against fossil fuel companies, including in City & County of Honolulu v Sunoco LP, based on the defendant's allegedly deceptive marketing and its failure to warn of the climate change impacts of its products. A petition filed by the defendant arguing that the claim should be dealt with federally is outstanding in the US Supreme Court and, in June 2024, the Supreme Court invited the Solicitor General to file a brief expressing the views of the US.  Other actions do not seek damages, but rather funds for remediation. Outside the US, we continue to watch similar cases brought by individuals (often from the Global South), such as Lliuya v RWE, which has now reached the evidentiary stage. This stage itself has the potential to effect substantial change and momentum as further information comes to light. If successful, these claims will result in significant damages awards against carbon majors and precedent for yet further classes of action.

Improvements under the Arbitration Bill were reintroduced in the King's Speech. Key proposals include a new general principle to disclose circumstances that might reasonably give rise to justifiable doubts about an arbitrator's impartiality; the governing law of the arbitration defaulting to that of the seat of the arbitration; and the inclusion of an explicit power for arbitrators to dispose of disputes summarily, where a case has 'no real prospect of success'. As a result, we are likely to see applications for summary disposal at an early stage, clarity over the applicable law, and a wider array of potential arbitrators. The key question that should be on all parties' lips when negotiating a contract should be: "what dispute resolution process should we choose? Is arbitration easier to enforce and better for this contract?" For those already facing arbitration, the improvements proposed by the Bill serve as a reminder that there is no 'one size fits all' arbitral procedure and early consideration should reap dividends further down the line.

As the litigated claims for COVID-19 related business interruption losses complete their journeys through the Commercial Court and the appellate courts during 2025, insurers' attention will naturally switch to their own outwards reinsurance recoveries.  As losses crystallise, an ever increasing flow of claims into the reinsurance and retrocessional markets will see a spotlight fall on claims presentations to excess of loss catastrophe contracts. Underwritten on a 'Named Perils' basis, the contracts only provide cover for loss caused by the perils specifically listed as covered (in contrast with 'All Risks' coverage, which applies to loss from all causes not specifically listed as excluded). Those contracts typically provide cover for “Natural Perils, including but not limited to…” and “Non-Natural perils as follows” and a key battleground will be whether COVID-19 is a Natural Peril where the list of Natural Perils is typically limited to seismic, flood, weather, and fire related perils (i.e. natural perils that arose by way of physical natural catastrophe).

The number and value of construction insurance claims will continue to rise. While inflation may be slowing, building costs are still expected to increase by 15% over the next five years. Recurring themes include increased borrowing costs, skilled labour shortages and higher material costs. Coupled with rampant contractor insolvency, regulatory changes under the Building Safety Act and ever increasing plant and tool theft, construction insurers could be facing challenging times. With London retaking the top spot for the most expensive place to build globally, and multiple cities across the UK and Ireland filling the top 30, the domestic market will be particularly exposed.

The construction sector is currently susceptible to insolvency. This is due to an almost perfect storm of issues such as debts accrued over the years, repayments of COVID-19 loans, changes in taxation rules, inflationary pressures, increased labour costs, lack of working capital, falling cash flows and 'suicide bidding' to win work. We may also, once again, see an increase in speculative claims being 'shoe-horned' into professional liability policies and greater use of the Third Parties (Rights Against Insurers) Act 2010. That said, we will need to wait and see how the government will react, especially with its intention to meet huge new housing targets, the continued de-carbonisation of the energy sector and its plans around infrastructure. Whether the government will re-introduce a form of Private Finance Initiatives to achieve these aims remains to be seen – but this perfect storm will not be solved without real intervention.

The 'anti-greenwashing' rules recently announced by the Financial Conduct Authority (FCA), aimed at ensuring that managers of UK based investment funds are correctly labelling their investment products, are a further example of the FCA's hardening approach to companies that make misleading statements to their customers. With a greater focus on climate and wider environmental, social and governance issues, corporate disclosures and statements are being closely scrutinised for accuracy and they are providing fertile ground for shareholder litigation in England and Wales. Claims are typically pursued under s90 and s90A of the Financial Services and Markets Act 2000, which provide a path to redress for shareholders of listed companies if they have allegedly suffered loss due to untrue or misleading statements. Activists are increasingly buying stakes in companies in order to use their shareholding to hold officeholders to account and challenge corporate behaviour. The increase in regulation, alongside an increasingly active investor population, will continue the growth of shareholder litigation.

The omission of the Litigation Funding Agreements (Enforceability) Bill in the King's Speech in July 2024 was surprising. The Bill would have reversed the Supreme Court's decision in the PACCAR judicial review and clarified the enforceability of litigation funding agreements (LFAs) by amending s58AA of the Courts and Legal Services Act 1990 and confirming LFAs are not damages-based agreements. The government is set to conclude its general review of the litigation funding sector, including the need for greater regulation and safeguards to protect claimants, by Summer 2025. Uncertainty over the enforceability of LFAs is therefore now set to continue for at least another year. Such a long wait is disappointing for the litigation funding industry and restricts the vital funding options available to individuals and small businesses, potentially preventing them from accessing justice and pursuing claims against better resourced corporations.

Fraud offences in the UK are changing. The Economic Crime and Corporate Transparency Act 2023 (ECCTA) creates a new "failure to prevent fraud" offence, committed when an employee of a large organisation perpetrates a fraud and the organisation has failed to implement reasonable fraud prevention measures. ECCTA also reforms the identification principle, making it easier to attribute criminal liability to corporations for economic crimes committed by a 'senior manager' acting within the actual or apparent scope of their authority. This represents a substantial widening of potential liability, as the definition of senior manager is broader than the board of directors and may include any individual with substantial management authority. ECCTA brings a greater risk of corporate and D&O prosecutions, and therefore organisations must implement robust fraud prevention procedures and safeguards to oversee the conduct of their senior managers. The consequences of non-compliance will otherwise be severe.

High levels of corporate failure in the UK mean that claims against directors remain prevalent. Insolvency practitioners seeking to recoup funds for creditors continue to review the actions of directors prior to the insolvency process. The high-profile court decision in 2024 against former directors of BHS was notable for the liquidators succeeding with a novel claim of trading misfeasance in addition to their wrongful trading claim. This decision will give liquidators encouragement and potentially opens a new avenue for recovering assets from directors of insolvent companies and their D&O insurers.

Representing one of the most significant global technology outages since NotPetya in 2017, the CrowdStrike incident will act as a poster child to prompt policyholders and insurers to review their policy wordings and coverage where a systemic or supply chain cyber incident has the potential to cause a massive financial impact. Coverage for non-malicious cyber events, including 'system failure' cover, is not always available or purchased by policyholders, and the CrowdStrike incident highlights its need. The CrowdStrike incident acts as a useful case study to review appropriate interruption periods, 'waiting periods' and retentions for non-physical damage BI cover, if purchased. It also prompts future discussion as to where the line is drawn between a policyholder's software and systems, and a managed services provider. Policyholder reliance on systemically important and vulnerable systems is continuing to increase beyond infrastructure and the cloud, challenging insurers to determine appropriate coverage limits and value appropriate premiums.

In the absence of a more generous approach by the courts when assessing quantum and costs, the pursuit of data breach claims on behalf of individuals will prove to be a question of financial risk for claimant representatives. Recent decisions have demonstrated the difficulty in succeeding in data breach actions where minimal distress or loss has been caused to a claimant. Alternatively, claimant representatives may look to pursue actions on behalf of numerous individuals in a class action. However, these actions are by no means a guaranteed route to success. The decision in Farley v Paymaster saw a significant percentage of data breach actions in a mass claim dismissed for not meeting the appropriate threshold of seriousness, and Adams v Ministry of Defence demonstrated the challenges of using an 'omnibus' Claim Form, where multiple claimants are added to a single claim. The Civil Procedure Rule Committee is considering this method of pursuing multiple claims, and this route may be closed off or narrowed significantly upon further guidance. Nonetheless, we still expect that claimant practitioners will explore other avenues to pursue data breach actions in response to judicial guidance and other pressures, as they have done in the past.

We expect to see increased financial pressure on independent schools, colleges and universities, with the possibility that this will lead to some closing, contracting or merging. We are already seeing steps being taken by some universities to cut costs to deal with these pressures and mitigate the reduction in applications from UK and international students. While the government has confirmed that the new Finance Bill will bring in changes to the VAT status of independent schools on 1 January 2025, legal challenges have been launched, along with political pressure to delay any changes until the next school year. These financial pressures and uncertainties will also likely result in an increased number of student complaints, including about the standard of course delivery and withdrawal of courses, as well as employment claims and third party contractual claims.