In a landmark judgment, Oceanbulk Shipping & Trading SA v TMT Asia Limited and others [2010] UKSC 44, the Supreme Court has limited the application of the "without prejudice rule". This judgment has far reaching implications with respect to the negotiation of settlement agreements.

The "without prejudice" rule was established to encourage the parties in a dispute to reach a settlement during the course of proceedings. Any communications (oral or written) between parties aimed at settling a dispute are "without prejudice" and cannot be put before the courts in evidence should such negotiations fail. The Supreme Court's judgment has created an exception to this rule.

Relevant "without prejudice" communications are now admissible as evidence of the true meaning of any provision in the settlement agreement in the event that the parties disagree on that meaning.

This judgment has highlighted the need for caution when negotiating and drafting settlement agreements. It is important to use clear language so that there is no room for ambiguity when the parties' agreement is recorded in writing.

For more information on negotiating and drafting settlement agreements, click here.

Solvency II will be in operation across EU states by the beginning of January 2013. The Solvency II regime is based upon a three pillar regulatory approach, similar to that applied under Basel II. Insurers and reinsurers across Europe will be subject to a risk-based solvency regime which more closely matches capital and supervisory requirements to the risks which insurers face.

A recent development in the slow process of implementation has been the identification by the European Commission of those non-EU supervisory regimes deemed to be suitable for an equivalence assessment in anticipation of Solvency II. The Solvency II Directive (2009/138/EC) contains provisions relating to the assessment of the equivalence of "third country" (non-EU) supervisory regimes (found in Articles 172, 227 and 260 of the Framework Directive). These articles relate to reinsurance, group solvency and group supervision respectively. In each case, a finding of equivalence can bring significant benefits. For example, where a third country regime is deemed equivalent under Article 172 EU insurers will be able to take credit for reinsurance ceded to undertakings in those countries; similarly, Member States will not be able to demand collateral from those reinsurers. In the absence of any such finding, equivalence will be determined on a case by case basis.

In June of this year, the European Commission wrote to the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) requesting that it provide a list of countries that should be prioritised in terms of an equivalence assessment. As a result of an initial review of suitable third country regimes, it was decided that both Switzerland and Bermuda should be considered in relation to all three articles and Japan should be considered in relation to article 172 (reinsurance) only.

The Commission has accepted that undertaking equivalence assessments will be resource and time intensive and therefore only Switzerland, Bermuda and Japan should be assessed in the first wave. However, the Commission has proposed that transitional measures are introduced that will allow third countries eligible for inclusion to receive the same benefits under Solvency II as if there had been a positive finding of equivalence. The Commission proposes that transitional measures are time limited and any countries considered eligible will need to fully satisfy the equivalence criteria by the end of the transitional period in order for a finding of equivalence to be made permanent.

The Commission proposes that the "Omnibus II Directive" (which will amend several existing financial services legislation) will provide an opportunity to allow for the introduction of these transitional measures in the Level 2 implementing measures for Solvency II.

Although the Commission makes it clear that it is unable to pre-determine the outcome of political discussions on these transitional measures, it states that there is strong support from the insurance industry that the United States should be considered a candidate for the transitional regime.

In June 2010, the Takeover Panel's Code Committee published a consultation paper suggesting possible amendments to the Takeover Code following high profile criticism of the UK takeover regime in the wake of Kraft Food's hostile bid for Cadbury. In October 2010, the Panel announced the Committee's conclusions on the principal issues consulted on. While the areas that will be the focus for changes to the Code are not surprising, the potential scope of the changes is perhaps more radical than the market anticipated.

The Committee's decision to truncate the "put up" or "shut up" process was not unexpected. That said, the move towards automatic deadlines of four weeks and, in particular, the identification of potential offeror(s) in any announcement which commences an offer period, was more surprising. In view of the risk of a leak following an approach to an offeree, offerors are going to need to be much more ready to launch an offer when making an approach or a possible offer announcement. To suggest the truncated timetable will put a brake on takeover activity is probably a bit strong, but for financial or private equity bidders, given their due diligence and financing requirements, consortium bidders and those bidders offering securities as consideration (with the related requirement for regulatory approval of securities offering documentation), the shorter timetable will mean the takeover landscape might become more challenging.

The Committee's decision to do away with the more restrictive deal protection measures that have become a feature of takeover practice is welcome as they have made it more difficult for later competing bidders. However, the decision to abolish break or inducement fees is more questionable. While break fees have become standard practice in takeovers, rarely have they been interpreted as a barrier to a competitive bidder. Break fees serve a legitimate purpose and the expectation of an offeror who makes a recommended offer to receive some form of compensation if a higher competing offer is made, in recognition of the risk and cost inherent in launching any public offer, has merit and encourages bid activity. A tightening up of the permissible triggers for payment of break fees or the comfort required from financial advisers to the Panel on the negotiation of the fee level might have been alternative considerations. So far as schemes of arrangement are concerned, the impact of the Committee's approach to deal protection suggests the end of implementation agreements.

The Committee's desire for a greater degree of transparency about an offeror's bid finances, the level of advisory costs to be paid and the offeror's plans for the offeree is not surprising. However, requiring advisory fees to be disclosed remains a bold move (even if it will not particularly impact on the conduct of takeovers) and while the Panel currently requires an offeror to be clear about its intentions for the offeree, the ability to hold the offeror to such statements for a period of 12 months after the offer closes is an interesting development.

In due course the Committee will publish one or more consultation papers detailing the proposed amendments to the Code in full. For more information on the proposed amendments set out in the October Panel statement, see The Takeover Panel's conclusions from its review of certain aspects of the regulation of takeover bids.