Top things you should be thinking about in 2024

• International investment by US VC firms
• US private equity firms with international portfolios
• Guarded optimism in Miami with international arbitration booming
• Lowering sticker shock around pharmaceuticals
• Predictions for privacy, AI and beyond
• Changes are coming in transatlantic data regulations
• Regulatory concerns for retail and consumer companies operating internationally
• Know your ESG legal obligations and what's on the immediate horizon
• AI's impact on the future of work internationally
• Reduction in global workforces outside the US
• A return to international expansion for Silicon Valley tech firms

Many businesses are constantly adapting to keep pace with the evolving legal landscape in Europe. What are the anticipated key legal challenges and themes that could surface in 2024 requiring businesses to be more agile and proactive in their compliance strategies? Our US-based experts share their perspectives on potential emerging trends for the upcoming year.

International investment by US VC firms

By Yeliz Atak, Vice President – Legal, US

We remain hopeful for a steady rebound in the VC sector and anticipate the following trends in the upcoming twelve months.

Resilient European VC landscape: Europe's VC landscape shows resilience and growth, with cities like Berlin, London, and Stockholm becoming hubs for innovative tech companies. European VC activity has thrived in recent years, and the region is emerging as a formidable player in global VC.

Rise of hyper-specialist VCs: In 2024, hyper-specialist VCs are predicted to rise, leveraging their market navigation skills and attention to entry prices. With a reduction in capital allocated to VC in 2023, specialists with capital have the potential to unlock outsized returns.

AI dominance and IPO resurgence: AI is set to dominate the VC landscape, especially with the breakthrough of generative AI. Startups specializing in AI applications are capturing investor interest.

IPO activity resurgence: Signs suggest a potential resurgence in IPOs in 2024 as venture-backed companies mature and seek access to broader capital markets.

2023 challenges and 2024 rebound: Startups faced challenges in 2023, marked by a decline in unicorn creations in North America. However, the 2024 US Venture Capital Outlook by PitchBook Data anticipates a rebound in VC investments, focusing on key sectors like health tech, biomedicine, renewable energy, digital economy, fintech, logistics, and AI.

Record 'dry powder' challenge: Despite positive economic signals, the surplus capital or "dry powder" accumulated during the 2010-2015 VC "bull run" poses a challenge in 2024. The sheer volume of unallocated capital may impact returns as investors chase deals to deploy their capital effectively.

Given the backdrop of continued economic uncertainty and slowdown in the VC market over the last couple of years, it's likely going to be a rebound year, and, if conditions revert to those of 2020, that will be a positive sign. There will always be great opportunity to be tapped into especially in the buzzing sectors such as AI, health tech and renewable energy which will likely see continued growth.

US private equity firms with international portfolios

By Malcolm Pobjoy, Executive Director, US Market Management

US private equity managers are likely to have a more rewarding 2024 than 2023, given the continuation of favorable market dynamics and diligent focus. The positive market indicators from 2023, such as expected interest rate cuts by major central banks, inflation returning to normal and stable labor markets, are anticipated to continue and possibly accelerate in 2024. The impact of the mass migration following the Ukraine war and other disputes has been well managed in European countries without significant unemployment increases, indicating a possible "soft landing."

The advent of technology, especially AI, is expected to bring about a productivity boom across industries, offering investment opportunities to scale businesses, increase margins in sectors burdened with administration, and create innovative services and products.

However, the challenges for 2024 include liquidity, especially as fundraising outside of top-tier managers is likely to remain difficult. The increased use of continuation funds and the secondaries market has helped unlock liquidity, but substantial change is expected when managers sell existing holdings or take them public, despite high valuations and increased regulation.

US PE firms also face regulatory challenges with international investments due to increased government focus on owning "strategic" companies and industries. This has led to the release of foreign direct investment control measures, particularly in the UK and Europe. Increased enforcement around greenwashing, decarbonization plans and supply chain management due to new regulations is likely in 2024.

Oversight of new AI regulations, consumer protection laws, and employment matters will be crucial for PE firms looking to maximize the sale value of their assets.

In conclusion, a strengthening economic environment and careful navigation of the regulatory landscape will be key to a rewarding 2024 for US PE firms.

Guarded optimism in Miami with international arbitration booming

By Javier F. Samaniego, Partner, US

"It's tough to make predictions, especially about the future". According to market sources and DBR (Daily Business Review) the general consensus among Florida business lawyers is that corporate and transactional activity in 2023 was a little worse than 2022, and that 2024 will be similar to 2023. Real estate was weak in 2023, but, if interest rates go down, it will improve in 2024. We will make no mistake betting for technology law – especially with generative AI impacting every business and for international arbitration – particularly with a LATAM component. Both are two fast-growing legal areas in Florida, whose economy ranks the fourth in the US.

The AI-hyped rally will certainly also push the Florida equity market in 2024. A number of OpenAI competitors are catching up (not only Google's Gemini AI model), and we forecast significant transactions in 2024 in this – until now-nascent – industry.

As for international arbitration the euphoria continues, and all sources agree that Miami arbitration market will continue growing with a particular focus on commercial disputes involving LATAM jurisdictions. After surpassing New York's volume of international arbitration cases seated in the city in 2021, Miami wants to repeat that milestone again.

Lowering sticker shock around pharmaceuticals

By Jonathan Cheng, Vice President, International Sector Advisory, US

Governments are keen to keep pharmaceutical drug prices from getting out of control. In the US, this means enforcing law such as the Inflation Reduction Act (IRA) that requires drug companies that raise their drug prices faster than the rate of inflation to pay Medicare a rebate. While fixing the high costs, this price setting policy enacted over a year ago may conflict in discouraging continued drug development as companies look to invest in other operational areas for quick returns. The IRA will also affect payers, patients, and providers, and therefore may have knock-on effects that need to be considered as well. The long-term ramifications of the IRA won't be known for a number of years, but companies need to begin planning now. Additionally, M&A activity signs point to shifting away from new small molecule drugs such as those drugs treating older adults.

More harm than good: The EU Pharmaceutical Legislation aims to give timely equitable access to effective and affordable medicines. However, there are concerns that the proposed legislation will reduce innovation in the industry. For example, lessening the regulatory data protection period that is troubling generic drug makers. Or reducing European intellectual property (IP) rights while adding complex requirements to recover the lost IP protection.

Better data, better results: In 2024, further partnerships will be signed as drug makers provide more transparency in data access such as toxicity and trial data. There will be a maturity from the already leveraged AI tools to identify new biomarkers, targets, novel compounds to validating in pharmacology studies and clinically relevant models, and as result there will be excitement for shorter and less expensive drug discovery cycles. In the next few years, AI will be able to expedite drug design with greater precision, specificity, and speed, resulting in more effective treatments with fewer side effects.

Predictions for privacy, AI and beyond

By Emily Barwell, Senior Associate, US

Regulators in 2023 have been busy. Data privacy regulators have been stretched to consider adjacent digital issues, and they took action.

Regulators have issued record breaking fines in 2023 (as high as 1.2 billion for one fine), for multiple types of breaches. But it's not all been about fines either. Earlier in 2023, Garante, the Italian data privacy regulator, effectively stopped data collection of Italian citizens until Open AI could take further steps to comply with the GDPR. It even offered more creative enforcement, such as requiring Open AI to create local radio broadcast announcements to increase public awareness about their data collection.

It follows that in 2024, even more regulators could feel empowered to act against breaches of not just data privacy laws, but also a whole host of digital laws (including the new AI Act when that starts to come into force).

In 2024, companies will likely stop discussing the importance of children's privacy and start putting it into action. While the UK is looked to for its children's code, which has been cited across the world as an inspiration for dealing with children's privacy, the UK's Online Safety Act and EU's Digital Services Act also have provisions in place for protecting children online from harmful content. They both empower different regulators to use new sets of enforcement powers.

Given the progress in this area, it's safe to predict children's digital services will be put to even closer scrutiny in 2024. Companies that deal with children will need to be especially proactive managing regulations in this space.

Finally, 2023 brought some huge shifts for digital advertising. Google recently announced that it was releasing a feature on its Chrome browser as part of its plan to ban third-party cookies, with a complete phase-out planned later in 2024. The use of cookies and similar tracking technologies have been in decline, given than Chrome is a popular browser and, coupled with the EU and UK e-privacy enforcement action in 2023, cookies may be reduced to crumbs.

Instead, it makes sense to predict some changes in the advertising industry: perhaps a shift towards more privacy conscious advertising, such as context-based adverts, or the use of new technologies altogether. Nevertheless, this area continues to attract regulator enforcement action and one to keep an eye on in 2024.

Changes are coming in transatlantic data regulations

By Felix Hilgert, Partner, US

The AI Act will be coming, but that's not the only piece of regulation that will affect the data sector.

The Court of Justice of the European Union has just recently decided that algorithmic calculation of credit scores could amount to (restricted) automated decision-making under GDPR even if a human made the final approve or reject decision on a credit application – based on the consideration that human oversight must be meaningful and cannot be limited to just rubber-stamping machine output.

It takes little imagination to see how similar reasoning might be applied to other AI supported decision-making, and one German data protection authority has already released a public statement to that effect. Other German privacy regulators have also published guidance on GDPR compliance for foundation models, so regulatory scrutiny can be expected, and Italy's Garante, which has temporarily shut down ChatGPT before, will not be the only agency you should have on your radar.

The other piece of legislation to keep in mind is the EU Data Act, which will require providers of IOT devices and smart products to share the raw data generated by those devices (at the direction of the user of the service). The Court of Justice of the European Union is likely to interpret this obligation quite broadly, if recent case law about similar sector-specific rules in the automotive industry are any indication – thereby opening up a treasure trove of training data for AI applications.

Regulatory concerns for retail and consumer companies operating internationally

By Kelly Harlick, Senior Vice President, International Sector Advisory, US

Greenwashing enforcement in the EU: The European Union and the UK's Competition and Markets Authority (CMA) have been actively working on sustainability initiatives and regulations. The increased focus on combating greenwashing has meant that this is an area of heightened risk for retailers. Companies claiming to be environmentally friendly without adequate evidence or meeting specific criteria may face stricter enforcement measures. Retailers should stay informed about the UK and EU's evolving regulations on sustainable practices and ensure that their marketing and product claims align with established standards.

Supply chain monitoring: Supply chain transparency and responsible sourcing are becoming increasingly important for retail and consumer companies. In 2024, companies should be aware of regulations related to supply chain monitoring, such as the EU Conflict Minerals Regulation and the UK Modern Slavery Act. These regulations aim to prevent human rights abuses, forced labor, and environmental harm within supply chains. Companies should focus on improving visibility into their supply chains, implementing responsible sourcing practices, and leveraging technology for monitoring and reporting.

Sustainability disclosures: Companies are facing growing pressure to disclose their ESG performance. In the EU, the Corporate Sustainability Reporting Directive requires certain companies to disclose non-financial information, including environmental and social aspects. Retail and consumer companies should prepare for potential changes in reporting standards and ensure that they have robust systems in place for collecting and reporting relevant sustainability data.

Circular economy initiatives: The concept of a circular economy, which aims to minimize waste and make the most of resources, is gaining traction. Companies may face regulations encouraging or enforcing circular economy principles. Retailers should assess their product life cycles, explore ways to reduce waste, and consider the recyclability and sustainability of their products.

In conclusion, sustainability will take center stage, with eco-friendly practices and conscious consumerism driving purchase decisions. The future of retail is customer-centric, tech driven, and sustainable.

Know your ESG legal obligations and what's on the immediate horizon

By Ray Berg, Partner, US

If you conduct business in Europe, then you should understand your ESG obligations. There are a number of changes coming into effect, including:

The EU Corporate Sustainability Due Diligence Directive: Being finalized in 2024, including the triggers for obligations for non-EU companies.

Ensure you understand your exposure to Green Claims: It is a B2B issue, not just a B2C issue.

First reports under the EU Corporate Sustainability Reporting Directive will be due in 2024: Even if this does not apply to your business, it will be instructive to see how others approach this reporting.

EU Deforestation Free products regulation: This is due to come into effect on 30 December 2024. For any company that sells products, this is likely to require an in-depth examination for your supply chains.

In conclusion, ensure that you have a clear goal for where you want to get to on ESG and a prioritized strategy to get you there. Access our latest Regulatory Outlook which includes an essential ESG section highlighting more detail.

AI's impact on the future of work internationally

By Rachael Oakley, Vice President – Legal, US

As the workplace is experiencing a significant rise in the use of AI by both employers and employees, it's important that they consider the challenges this presents and keep pace with international regulatory developments.

Employers need to consider to what extent employees are permitted to use AI in their work and what parameters should be put in place to prevent AI use, encourage or prescribe it.

There are many considerations that go into this decision by employers and it's a challenge to balance practical considerations against the legal risks, particularly around AI and the future of work across jurisdictions and internationally. The two main risks when using AI in the workplace are around bias and discrimination, and data protection.

Bias and discrimination: The use of AI within the employment context brings the risk of algorithmic bias and discrimination. Algorithmic bias can result from the use of non-representative data (for example, an insufficiently diverse and representative data set) to train AI systems. Where the use of biased training data sets skews the outputs of an AI tool in a way that negatively impacts an individual or group of individuals with a legally protected characteristic, there is a risk of illegal discrimination under existing equalities legislation in different jurisdictions.

Data protection: Machine learning systems depend to a large degree on data as part of their training process and also when executing day-to-day tasks. When that data includes personal data, then local data protection legislation needs to be complied with (for instance, the UK and EU GDPRs in the UK and Europe).

This is a rapidly evolving area both technologically and legally – for example, the fast-evolving status of the EU AI Act – so employers should remain up to date on developments in the regulation of these technologies to enable them to respect local AI regulations in the jurisdictions in which they operate.

Reduction in global workforces outside the US

By Alex Schlicht, Vice President – Legal, US

With the global economy on the verge of high interest rates and deflation, organizations continuously face the tough decision of having to go through a reduction in force (RIF). Missteps in the RIF process can lead to legal complications such as workplace conflicts, financial setbacks, and damage to the company's reputation. What are five common mistakes to steer clear of when reducing global workforces?

Lack of clear rationale: It's imperative to have a transparent business rationale before initiating any layoffs or redundancies. Ensure stakeholders – as well as the collective employment representation and judges ruling over the case – understand the strategic reasons behind the reduction. The rationale can be restructuring, economic downturn, outsourcing or shifting business priorities to other markets. Think of having a bullet-proof shareholder resolution in place.

Underestimating timeframes and costs: One of the most frequent errors is not setting realistic timeframes for the RIF. Rushing the process can lead to errors, oversights, and increased costs in the long run. Initially, calculate the potential savings against the immediate costs, ensuring you factor in not only severance packages but especially other associated financial obligations per jurisdiction. Don’t let a rushed decision-making process obscure these figures. High deviations in the cost-benefit analysis might backfire internally.

Ignoring legal procedures: Every jurisdiction has specific legal requirements for selecting employees for redundancy. Get yourself a legal expert to quarterback your legal in-house team. Failing to adhere to local employment laws can result in costly litigation and reputational damage. Familiarize yourself with the rules and weigh out the benefits and risks when selecting affected employees.

Neglecting consultation exercises: Engaging in meaningful consultations with affected employees and collective bodies is not just a legal requirement but a moral obligation. Employers often forget that in certain jurisdictions they need the consent of the collective body, internal arbitration boards or courts to move forward with the RIF. Effective communication fosters trust, reduces resistance, and helps in mitigating the negative impact on employees and organizational culture.

Neglecting formal requirements and inadequate documentation: Finally, neglecting the specific form and language requirements stands out as a prevalent mistake. Proper documentation isn't merely about recording actions, it's about adhering to specific formats and linguistic standards that may be mandated by local regulations or industry standards.

In conclusion, don’t make these (and many other) common mistakes and – when in doubt – please get in touch.

A return to international expansion for Silicon Valley tech firms

By Katharina Ferguson, Senior Vice President, International Sector Advisory, US

In 2024, a surge in the global expansion of US tech companies is imminent, driven by the aim to diversify market risks and maintain growth rates to achieve business objectives and increased brand recognition.

International business expansion has become a vital strategic pillar for many companies and the technology sector is at the top of the list. Companies are poised not only to reshape the global tech landscape but also to usher in innovation and cutting-edge solutions. The global mobility of talent and the accelerated pace of digital transformation has fundamentally reshaped business operations. As the demand for cloud-based solutions and collaborative tools grows, some tech giants are already fortifying their presence in emerging markets, offering cutting-edge technologies to facilitate a seamless transition to the digital era. US tech giants are anticipated to leverage this paradigm shift, strategically expanding their services and infrastructure in alignment with talent and economic conditions that support and propel their growth ambitions.

This has opened many doors for both challengers and leaders in the tech domain, who recognize the need for advancements in key technologies, such as AI, data and cybersecurity applications and other platforms. Intensified competition has shown the need to build quickly to gain market share, while leaders are planning business infrastructure and expansion to areas with complimentary regulations to safeguard and protect the business along the way. With Europe and Asia, in some cases, at the forefront supporting innovation.

A key consideration for companies expanding to Europe is the commitment to sustainability. Motivated in part by regulation and in part by market expectations, companies in Europe prioritize sustainability, boosting brand image, trust, and global competitiveness through environmentally responsible practices. Sustainability attracts eco-conscious consumers, fostering positive community relations and enhancing operational competitiveness, making firms resilient and adaptable in foreign markets. This commitment plays a pivotal role in strategic decisions, shaping market positioning for international growth.

2024 is anticipated to be a year of learning and unlearning. It is marked by building, expanding, and regulatory catch-up for tech leaders, who will pave the road for increased valuations, investments, and acquisitions down the road. The impact of these trends is poised to be transformative, shaping the trajectory of the global tech landscape – and we are excited about it!