Business Confidentiality and Freedom of Information Act

Concluding confidentiality agreements with commercial partners to protect commercially sensitive or personal information is a widely accepted business practice. Breaching them can lead to legal action either to prevent disclosures or recover damages.

However under the Freedom of Information Act (FOIA) public authorities are obliged to disclose information, when requested, if it is deemed to be in the public interest.  Naturally, this could include commercial information about those companies who have supplied or tendered for services provided to that public authority.

An additional complicating factor is the lengthy and diverse list of organisations that qualify under the heading ‘public authority’. As well as the obvious, namely local and central government, local authorities, police, armed services, NHS, the state education sector and publicly-owned companies, can be added the less obvious ranging from the  to Investors in People. There is also a provision for more to be added if so desired, by the Secretary of State.

There are approximately 100,000 public authorities that in response to a request to disclose information are required to state, in writing, whether or not they hold that information. If they do, they are required to supply it within 20 days unless a relevant recognised exemption applies.

Exemptions

The construction of the relevant exemptions is central to the preservation of commercial confidentiality. The exemptions from disclosure listed in the FOIA include;

• information provided in confidence;
• "trade secrets";
• such information which, if disclosed, would or may "prejudice the commercial interests of any person" (inclusive of the public authority itself).

The first exemption is generally described as an "absolute" exemption and does not necessarily apply to information you consider to be confidential. The information is only protected by the exemption if its disclosure would constitute an actionable breach of confidence.

This means in practice that a public authority will have no duty to disclose such information or be obliged to confirm or deny that it holds it. However, the final arbiter of whether or not the information is genuinely confidential is the law – in other words, whether its disclosure constitutes valid grounds for bringing legal proceedings.  A public authority acceptance of an obligation of confidentiality may change over time: for instance, once a contract has expired it may be viewed merely as a historical record.

The decision to disclose rests with the public authority not the proprietor of the information. In line with upholding the public interest a public authority will make its decision to disclose based, for example, on the number of people affected by facts revealed in the information or if breaches of law are apparent.

The latter two exemptions are often referred to as "qualified" exemptions which cover a wide range of categories. The onus is on the public authority to decide if the public interest in disclosure overrides the obligation to maintain the exemption. As with "absolute" exemptions regarding disclosure, a public interest question has to be answered in all cases.

The term "trade secrets" is not defined in the FOIA but appear to be related to matters such as price proposals or customer lists. "Commercial interests" can include trade secrets if disclosure of the latter can be proved to have damaged the organisation in question.

The Risks to Commercial Confidence

Any commercial organisation supplying services to, or tendering for, public authority business needs to be aware that public interest considerations can override any confidentiality obligations negotiated in the first place. Third parties can obtain commercially sensitive information if the public authority deemed it to be in the public interest to release it.

In particular, you should be aware that:

• the "duty to confirm and deny" may reveal that a potential supplier tendered for a particular project;
• there is a wide variety of bodies considered to be "public authorities" under the FOIA and you should ensure that you know the status of any organisation you are dealing with;
• your own legal analysis is correct as to whether the public authority in question should have preserved confidentiality: consider a complaint to the Information Commissioner or even a claim for injunctive relief and damages if the public authority appears to be in breach of the FOIA.

Avoiding Problems

Bespoke confidentiality provisions are advisable when dealing with a public authority.  Model clauses for use in procurement contracts have been drafted by the Office of Government Commerce and a draft Code of Practice is to be issued by the Secretary of State in consultation with the Information Commissioner recommending that public authorities should accept information in confidence only if it is genuinely confidential in nature.

The draft Code also provides for consultation to take place between the public authority and third parties having legal rights, particularly where consent to disclosure is likely and where the views of a third party may assist the public authority to determine if the information is exempt from disclosure or, alternatively, whether there is a public interest in favour of disclosure.

Overall there is a general incentive to act reasonably, as an agreement not to disclose might well be obtainable by consent.  At the very least, if there has been consultation, any disclosure of information would not come as a surprise!

Towards the end of 2004, the press was reporting that central and local government were shredding records to avoid the consequences of a potential avalanche of disclosure requests.  In addition public authorities have been asking external suppliers for lists of what is considered to be confidential information as a matter of good compliance practice following on from the draft Code.

Using the FOIA to Your Advantage

The FOIA is just as much an opportunity for businesses – it is a two way street. Although third parties can seek public authority-held information and documents relating to you, you too can make use of the right to obtain information on any subject or about any other business which has had dealings with the public authority in question.

By using the FOIA tactically to gain information on projects in which your competitors are involved, the intelligence gained can be used as a basis for your own competitive marketing to organisations in the public sector.

Article first appeared in NewsBrief, Spring 2005