Mon 13 Jan 2014

Are your contracts as confidential as you think?

Many contracts contain a confidentiality clause - by which I mean a provision which prevents the parties to the contract from publicising, or otherwise disclosing to others, certain information. This often applies to the existence of the contract and any of its content, but might also extend to other information (e.g. technical data) that has been given to parties only as a result of the contract negotiations. Usually such prohibitions are not absolute, as they tend to have exceptions for disclosure under a legal obligation e.g. information required by HM Revenue & Customs or Stock Exchange disclosure rules or need to know information for other involved professional advisers.

However there is another exception (which is rarely mentioned in contracts) that applies if one of the parties to the contract is a public body e.g. a local authority - and that is disclosure under Freedom of Information ("FoI") legislation.

Freedom of Information disclosure obligations on public bodies

Even if a document contains a confidentiality clause, if one of the parties to it is a public body, that party might be required to disclose certain information to someone applying to it under FoI law.

Slightly different legislation applies to Scotland and England. For Scotland, the main statute is the Freedom of Information (Scotland) Act 2002 which covers public bodies over which the Scottish Parliament has jurisdiction. England is subject to the Freedom of Information Act 2000. For the purposes of the impact of a confidentiality obligation under a contract, the differences are not important.

Essentially, FoI law obliges public bodies to disclose information "obtained" by them - this wording being very important - subject to a number of exemptions.

A confidentiality clause might protect you against information you give to a public body (e.g. information about your organisation or its products or procedures, including technical and pricing information) as part of a pre-contract discussion or a tender process, provided that your confidentiality clause extends to such pre-contract or tender provision of information. The protection might also extend to any of the content of any concluded contract that is sensitive commercial information.

However, a confidentiality clause won't protect you against disclosure of the existence of the contract or any of the content of it that cannot be claimed to constitute such sensitive commercial information - the reason being that the contract is not "information obtained" by the public body, but rather something that has occurred as a result of a negotiation.

What can't be disclosed by the public bodies?

Both regimes exempt certain information from the disclosure obligation, including:-

  • personal data on any person
  • information that would be protected by legal professional privilege
  • information that was obtained by the public body but subject to an obligation of confidentiality, where disclosure of it would allow the other party to sue the public body and
  • trade secrets or information the disclosure of which would (or would be likely to) prejudice substantially the commercial interests of any person - unless disclosure is in the public interest.

The last category of exemption, ie trade secrets or the protection of commercial interests, might allow someone contracting with a public body to prevent that public body from disclosing in response to a FoI request, in circumstances where the confidentiality clause doesn't protect the information because it is not classed as "information obtained by" the public body.

Enhanced confidentiality clauses in contracts with public bodies

Although you might think that a piece of information is a trade secret, or the disclosure of it would substantially prejudice your commercial interests, unless your contract covers the position, the public body might proceed to disclose in response to a FoI request without going back to ask what you think.

Therefore, if you are contracting with a public body and don't want information about the deal or about your organisation or its products or processes to become public knowledge, then it is best to supplement the usual confidentiality clause with some extra protections.

The first step is to set out in the contract or tender exactly what elements of the information you consider need to be protected - on the grounds of them being a trade secret or disclosure of which would prejudice your commercial interests.

You could then leave, to the discretion of the public body, the decision as to whether any requested information is exempt from disclosure under the FoI rules - but require the public body:-

  • to notify you if it receives a FoI request and
  • to consider and take account of any representations you make on the matter, before the public body makes its decision.

Alternatively, slightly more comfort might be obtained by:-

  • requiring the public body (1) to notify you if it receives a FoI request and (2) to obtain your approval to disclosure and then
  • if you refuse to approve disclosure (within a given time), obliging the public authority to obtain a legal opinion from an expert confirming that the public body is bound to disclose, before it does so - rather than leaving the matter to the public body's discretion.

Neither set of protections would ultimately stop the public body from disclosing information if it was bound to do so under FoI rules (which might force disclosure, even of trade secrets or other commercially sensitive information, if this was considered to be in the public interest) but at least you would know what was happening in advance and have some input in the process.

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