Commercially Connected shorts - 20 May 2026

This week we look at:

• UK: Small Business Protections Bill introduced to Parliament
• UK Government response to report on AI, copyright and the creative industries
• Legal advice privilege and intra client communications – England & Wales
• Executive compliance guide: EU Critical Raw Materials Act

UK: Small Business Protections Bill introduced to Parliament

On 19 May 2026 the Commercial Payments Bill was introduced to Parliament. This was announced in the King’s Speech last week.

• introduce mandatory maximum payment periods of 30 days for public authorities and 60 days for private sector buyers in contracts where the supplier is smaller than the buyer, with non-compliant payment terms being void and replaced with statutory defaults
• make any contract term that excludes or varies the right to statutory interest on late payment void
• require disputes on invoices to be raised within a short timeframe, with the supplier entitled to recover a fixed sum payment from the buyer if disputes are raised late
• ban retention payments in construction contracts, subject to a two year transition period
• require the Small Business Commissioner to set up an adjudication scheme to deal with payment disputes involving small businesses
• give the Small Business Commissioner power to investigate persistently poor payment practices by large businesses and to issue recommendations, directions and fines in relation to these practices

This Bill aims to address late payment culture in the UK and to protect, in particular, small businesses who are disproportionately affected by the impact of late payment on cashflow. When enacted, it will have a significant impact on contracts where the supplier is the smaller business, giving them rights to strict payment timescales and enhanced protections from the Small Business Commissioner. All suppliers will benefit from the right to interest on late payment and protection from spurious and late invoice disputes. Businesses on the customer side will need to review and update their payment terms and practices, as it will not be possible to contract out of these protections.

UK Government response to report on AI, copyright and the creative industries

On 15 May 2026 the UK Government published its response to the March 2026 House of Lords Communications and Digital Committee report on AI, copyright and the creative industries.

The response reflects the Government’s approach of building evidence and watching market and international developments, rather than regulatory intervention. In the report it is expressly noted that the Government considers that, because of the diversity of AI applications, most AI systems should be regulated at the point of use rather than there being general regulation of AI.

Points of note in the report include:

• there will be no reform of copyright law unless and until the Government can be confident, based on evidence, that reform will meet its objectives for the economy and for UK citizens and adequately protect the interests of both copyright owners and AI developers
• licensing remains the primary means of copyright protection in this context and the Government has no current intention to intervene in the licensing market, but it is setting up a working group on independent and smaller creative organisations to assess whether government may need to intervene to support smaller creatives in licensing their content
• the Government is establishing the Creative Content Exchange, a secure, trusted online marketplace for licensing and for accessing “digitised cultural and creative assets”, with a pilot already underway
• the Government will conduct a review of the mechanisms that can help creators control use of their works online, including standards, technical solutions and best practice on input transparency for AI model training. It takes the view that whilst government can support adoption of best practice, development of solutions must be market-led
• the Government is setting up a taskforce on AI labelling, to develop evidence-based proposals to government on best practice for labelling AI-generated content, with an interim report to be published in autumn 2026
• there will be a summer 2026 consultation on digital replicas, to consider how to address harm cause by an individual’s likeness being replicated without their permission
• the Sovereign AI Unit was set up in April, as part of a plan to prioritise domestic AI to help make the UK more resilient and independent

This response largely reflects the report on copyright and AI published under the Data (Use and Access) Act 2025 in March. Given this, and the fact that the King’s Speech contained no reference to AI regulation, it is unsurprising that there is no suggestion of legislative reform on the horizon. For now, the message continues to be that copyright owners need to rely on licensing to protect their rights, and AI developers should ensure that they obtain appropriate licences or risk infringement claims.

Legal advice privilege and intra client communications – England & Wales

The High Court has recharacterized the practical scope of legal advice privilege (LAP) to include intra-client communications, even where no lawyers are involved, provided the dominant purpose of the document is to seek legal advice.

The High Court’s recent decision in Aabar Holdings S.À.R.L. & ors v Glencore PLC & ors is a potentially significant development for organisations concerned about disclosure risk. The court rejected the argument that LAP only applies to lawyer client communications. Instead, it held that intra client emails, notes and drafts prepared internally between individuals within organisations responsible for seeking/obtaining legal advice (defined as the “client group”) may attract privilege if they are prepared for the dominant purpose of seeking/obtaining such advice. This represents an expansion of the scope of the protection afforded by LAP.

The judgment re-characterises the practical impact of the Court of Appeal’s decision in Three Rivers (No 5) (the leading authority on LAP which established the lawyer-client test and which has been criticised as being too restrictive).

The decision may pave the way for greater protection for organisations when preparing documents internally for the purposes of seeking legal advice. However, as a High Court decision, it is susceptible to challenge and Three Rivers (No 5) remains the prevailing authority on LAP. Organisations should therefore proceed with caution.

To maximise privilege protection and reduce disclosure risk, organisations should:

Identify the “client group” clearly: if litigation is contemplated, identify who within the organisation is authorised to seek legal advice and ensure internal communications (to the extent possible) stay within that group.

Separate legal and commercial discussions: mixed purpose communications risk losing privilege. Where possible, keep documents created in preparation for obtaining legal advice separate.

Be clear about purpose: when preparing internal notes, emails or drafts, make sure the purpose is to seek or prepare for legal advice, rather than such documents being purely commercial in nature (it may be prudent to record the purpose in the document itself wherever possible).

Take care when labelling documents (but don’t rely on those labels): mark documents “privileged and confidential – prepared for the purpose of seeking legal advice”, but remember purpose and substance matters more than headings.

Train teams involved in sensitive matters: ensure senior executives and legal adjacent teams understand how LAP can apply to internal working documents.

Review disclosure strategies early: this judgment may strengthen arguments for withholding intra client material, but privilege still needs to be justified on a document by document basis.

This decision arguably reflects a more realistic, modern approach to how large organisations operate, and perhaps acknowledges that legal advice is rarely sought in a vacuum and often requires internal investigation, discussion and preparation before external lawyers can advise.

However, the decision does not attempt to overturn Three Rivers (No 5), which remains the leading authority on LAP. In particular, Aabar does not abolish the dominant purpose test, and does not expand on the definition of “client group” (which remains narrowly drawn). Organisations should therefore proceed with caution: internal documents prepared outside of its designated client group, or for mixed legal and commercial reasons will still be vulnerable to disclosure.

Looking ahead, this judgment may influence future appellate courts and strengthen pressure for a fuller reconsideration of Three Rivers (No 5). Until then, there is likely to be uncertainty as to both the durability of this decision, and also its practical implications, which will persist until the issue of LAP returns to the appellate courts.

In the meantime, Aabar nevertheless provides helpful authority for organisations seeking to protect legitimate internal preparatory work (to the extent it satisfies the dominant-purpose test and remains within the narrowly defined client group) from disclosure.

For more information see our briefing: Legal advice privilege and intra client communications – England & Wales

With thanks to Richard Little, Helen Eastwood and Laura Heeley

Executive compliance guide: EU Critical Raw Materials Act

In May 2024, the Critical Raw Materials Act (CRMA) entered into force, introducing binding targets, supply chain resilience measures, and new obligations on sourcing, reporting, and strategic project participation across the EU.

Since its adoption, the CRMA has been reinforced by additional EU actions, including:

• selection of 60 strategic projects focused on battery materials and EU processing capacity
• adoption of the RESourceEU plan accelerating circularity, investment, strategic projects, and coordinated raw material stockpiling
• a proposal to amend the CRMA to address geopolitical risks and implementation gaps, particularly targeting strategic raw materials

For more information see our Executive Compliance Guide: Critical Raw Materials Act & Updates | Navigating EU Law

With thanks to Monika Zejden-Erdmann, Dominique Strieder, Claire Gregory and Marjolein de Backer