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General Contract Law Principles
Given that an outsourcing contract is a form of commercial contract it is useful to discuss the key contract law principles which apply in England and Wales. This section examines some commonly asked questions about English contract law.
In an outsourcing contract there are a number of options for the ownership of intellectual property. This section provides an overview of the various options. It should be noted that there are no right or wrong answers. The approach adopted will depend on a multitude of factors, including the commercial bargaining power each party holds.
From an employment perspective, the main piece of legislation to consider when outsourcing or in-sourcing in the UK is the Transfer of Undertakings (Protection of Employment) Regulations 2006 (or “TUPE”).
The law which governs the processing of personal data in England and Wales is the Data Protection Act 1988 (“DPA”). The DPA implemented Council Directive 46/1995/EC on the Protection of Individuals With Regard to the Processing of Personal Data and on the Free Movement of such Data Within the European Member States (the “Directive”).
The purpose of the Directive and of the DPA is to set the rules for the processing of personal data, the data protection principles, and to give the subject individuals rights in relation to their information and how it is held and used.
Outsourcing Financial Services
Outsourcing financial services is subject to specific regulations.
The Financial Services and Markets Act 2000 (“FSMA”) is the main legislation regulating financial services. The Financial Services Authority (“FSA”) is the statutory regulator under the FSMA and issues rules and guidance.
An FSA-regulated firm cannot delegate or contract out of its regulatory obligations when outsourcing. It must give advance notice to the FSA of any proposal to enter into a material outsourcing arrangement and of any material changes to arrangements.
Outsourcing and the Public Sector
In England and Wales procurement by the public sector is regulated by the Public Contracts Regulations 2006 as amended by the Public Contracts and Utilities Contracts (Amendment) Regulations 2007. For simplicity, these pieces of legislation are referred to throughout as the “Regulations”. The Regulations implement EC Directive 2004/18, on the procedures for the award of public works contracts, public supply contracts and public services contracts (the “Public Sector Directive”).
The term “public sector” covers an extremely broad range of organisations, from central government departments (for example, the Inland Revenue) to legislative bodies, executive, non-departmental public bodies, local authorities, police and fire authorities and universities. In many cases it will be clear and a matter of record whether an organisation is “public sector” or not. Public-sector organisations which are subject to the procurement rules are defined in the Regulations as “contracting authorities”.