Arthur Cox: Operating at the heart of Northern Ireland’s advanced manufacturing sector

With a client list that includes some of Northern Ireland’s leading companies in aerospace, pharmaceuticals, and the oil and gas sector, Arthur Cox is considered the pre-eminent legal advisor to precision and advanced manufacturers. Lynsey Mallon, a Corporate and Commercial Partner at the firm, examines how advancements in the sector are accompanied by new legal challenges.

Northern Ireland has long been renowned across the globe for the quality of the goods manufactured here, contributing to a rich heritage built on world-class linen, shipbuilding and aerospace.

While the nature of what is made in the region may have changed, Northern Ireland remains synonymous with quality manufacturing and is now home to a large number of dynamic firms operating at the forefront of some of the most advanced processes in the industry.

Lynsey Mallon, a Corporate and Commercial Partner at Arthur Cox, is part of a strong senior team at the firm which, working alongside some of best-known manufacturers in the local sector, joins them at the cutting edge of developments.

Arthur Cox regularly advises one of Northern Ireland’s leading companies in the aerospace sector on supply chain agreements, intellectual property licensing agreements and liability clauses on a global basis.

Other recent mandates include advising a leading UK firm on a bespoke academic collaboration for the introduction of robotics and artificial intelligence into its current manufacturing processes.

Lynsey said: “The manufacturing sector in Northern Ireland today is unrecognisable compared to that of just a few decades ago.

“Our already well-established aerospace sector now encompasses a supply chain that supports thousands of jobs. Major components designed and built in Northern Ireland are now present in planes assembled across the world, while the region is also home to the globe’s leading aircraft seat manufacturers.

“Additionally, we are seeing new subsectors emerge, as evidenced by the establishment of an advanced maritime research and development facility that will see a return of shipbuilding to Belfast.”

New challenges

However, these new technologies are also accompanied by new legal challenges, Lynsey explained, with pertinent issues including intellectual property (IP), data protection, regulatory matters, and how to deal with increased automation – each of which require specialist legal advice to be properly addressed.

Lynsey added: “More than ever, manufacturing must be considered in a global context, so while companies based in Northern Ireland may design and make components, these often form part of an end product that is contributed to by a world-wide supply chain.

“Therefore, we are increasingly providing advice on the protection of IP rights in new technology, including appropriate licensing models on a global rather than purely local basis.

“The specific type of IP is also important because when it comes to processes or software, it can often by extremely difficult to secure a patent.

“It is therefore critical to ensure protection of intangible IP such as trade secrets, know-how and confidential information, which is most effectively achieved through practical steps and contract obligations.

“Arthur Cox has worked with a number of high-profile clients to produce novel and inventive ways to ensure their intangible IP is protected such as the use of separate special purpose vehicles and cross licensing agreements.”

In order to stay ahead, many businesses choose to partner with other firms to pool their knowledge and resources, Lynsey observed.

She said: “It is essential that any collaboration is documented properly to ensure that both parties’ inputs and outputs are clear, and that each organisation is free to exploit the results of the partnership in the manner envisaged.”

Supply chain

For those companies that form part of the local supply chain, there are additional legal considerations that must be taken into account.

Lynsey added: “Given the nature of the industry, supply chain agreements are commonplace, but they must be fit for purpose and relevant to new technological processes.

“Many companies are still using old terms and conditions and standard-type manufacturing or supply agreements without considering whether they need to be updated for the modern era and the context of their business operations.

“Standard liability clauses are simply no longer appropriate given the increased levels of automation that we are seeing in the market.”

“For their legal teams, it is essential that they possess the requisite level of specialism to recognise that one size does not fit all.”

Another emerging trend in the sector is for increased automation, as manufacturing businesses seek to streamline production methods and improve cost-effectiveness and overall efficiency.

Liability

However, as Lynsey explained, this trend also requires stronger emphasis on liability clauses.

“Standard liability clauses are simply no longer appropriate given the increased levels of automation that we are seeing in the market,” she said.

“It used to be the case that any faults could be linked neatly to either human error in operating a machine or to the machine being faulty. However, nowadays it isn’t that clear cut.

“Clients need adequate contractual protection as there could be a number of factors contributing to the fault such as software, hardware, or telecommunications, in addition to human error and faulty machinery.

“Therefore, every contract in the chain needs to be carefully considered to ensure that liability for any problem can be properly attributed. Failure to do so can be catastrophic for businesses as insurance policies may not cover the gap in the chain.”

Contingency

The increased reliance on automation also means that contracts should include detailed contingency or disaster recovery provisions to reduce the impact and cost should something go wrong.

Lynsey added: “Errors and accidents can occur, so it is of vital importance that provision is made to ensure the contract and relationship survives such an event.

“In many contracts that haven’t had bespoke drafting inserted, these events would most likely automatically give rise to a breach of contract and a right to terminate. This can be critical. Businesses will have anticipated and prepared for the contract and so to suddenly lose it can have serious adverse consequences.

“Therefore, it is best to have an agreed action plan set out in the contract on terms that both parties are happy with, so that they react appropriately to these events without the risk of ending up in dispute.

“As automation becomes increasingly sophisticated, new issues will also develop, for example around health and safety regulations as the industry considers how human employees can safely interact with robots in the workplace.

“The emergence of automation has also increased the amount of employee data that is captured and in light of GDPR, it is essential that businesses seek professional advice in this regard.”

Data relating to the product manufactured and its use can also prove to be valuable, and perhaps even as lucrative as the product itself, Lynsey added.

“It is now possible to tell suppliers how customers are using a product, how that product fits with its environment and what improvements could be made or when a breakdown is looming,” she said.

“While this clearly has many benefits, it also serves to raise issues as to the ownership of information. For example, can the supplier unilaterally exploit it, if it is generated as a result of a customer’s use of products for which the customer has paid?

“In addition, it allows the supplier to add value for the purchaser by offering ways to increase their efficiencies and outputs. For this reason, data has been referred to as the ‘new oil’.”

With a depth of experience that spans the advanced manufacturing industry, Arthur Cox has gained a reputation for providing sector-leading legal guidance to firms across Northern Ireland and beyond.

Lynsey added: “By taking a collaborative approach with clients and working with them from an early stage in the process, Arthur Cox enables firms to adopt and embrace new technology in their manufacturing processes.”

 

With unrivalled expertise in the issues facing advanced manufacturing companies, Arthur Cox is well positioned to advise on all aspects of the sector. Please call
+44 28 9023 0007 for further information from Lynsey or your regular Arthur Cox contact.