Topic: Liability

Relief events clauses are included as standard provisions of most technology implementation, outsourcing and services contracts. Under such provisions, the supplier is relieved of its obligations if or to the extent that its failure to comply with contractual requirements is caused by the customer.

Liability is often a contentious topic (and typically the last provision to be agreed) in a technology or outsourcing contract negotiation.

The financial services sector is becoming increasingly reliant on cloud service providers (CSPs) to fulfil its growing data processing and storage needs. Financial services providers in the United States have reportedly had the highest levels of adoption, operating 54 percent of their workloads in the cloud; and according to the European Central Bank, banks spent 13.5 percent more on cloud outsourcing in 2024 than in 2023.

The European Banking Authority (EBA) is currently consulting on its draft guidelines on the sound management of third party risk (Draft Guidelines), which are intended to replace the 2019 guidelines on outsourcing arrangements (2019 Guidelines).

Financial regulators globally emphasise the importance of financial entities being operationally resilient, which includes the ability to manage and recover from disruptions caused by their service providers. The topic receives significant attention in the financial services sector because the sector is regulated, with the aim of promoting financial system stability.

Norton Rose Fulbright LLP’s Cyber and Technology team recently hosted a roundtable dinner in London, bringing together technology lawyers and a diverse group of clients from leading financial institutions and tech-driven businesses.

Most incidents handled by our Norton Rose Fulbright cyber team originate from the customer’s service provider. In many cases it is the service provider’s systems, infrastructure and environment which proves to be the most vulnerable to cyber breaches and security issues.

Increased regulatory burdens on asset management businesses have resulted in additional cost pressures. However, regulation has also required more pricing transparency, which has led to an increasingly competitive market, with investors demanding either ultra-low cost or increasingly bespoke investment solutions.

Directive (EU) 2024/2853 on liability for defective products (the Revised Product Liability Directive) was published in the Official Journal of the European Union on 18 November 2024.

The recent case of James Kemball Ltd v. "K" Line (Europe) Ltd [2022] EWHC 2239 (Comm) serves as a useful reminder to give careful consideration to the effect of so-called “sole and exclusive remedies” clauses contained in contracts before purporting to terminate them.