Line to take - LTT160 - Confidentiality of commercial or industrial information

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  • FOI/EIR: EIR
  • Section/Regulation: reg 12(5)(e)
  • Issue: Confidentiality of commercial or industrial information
  • Source: Policy team; Information Tribunal
  • Details: South Gloucestershire Council / Bovis Homes Ltd (20 October 2009)
  • Related Lines to Take: LTT55, LTT94, LTT95, LTT161
  • Related Documents: EA/2009/0032 (South Gloucestershire)
  • Contact: LS
  • Date: 02/12/2009
  • Policy Reference: LTT160
  • © Copyright Information Commissioner's Office, re-used with permission
  • Original source linked from here: LTT


Line to take

The Commissioner will consider the following questions when applying regulation 12(5)(e):

  • Is the information commercial or industrial in nature?
  • Is the information subject to confidentiality provided by law?
  • Is the confidentiality provided to protect a legitimate economic interest?
  • Would the confidentiality be adversely affected by disclosure?

This is different to the approach to confidentiality taken under s41. In particular, there is no need to consider whether there would be a public interest defence to any claim for breach of confidence. Instead, the exception is subject to the usual public interest test under the EIR.


Further Information

Regulation 12(5)(e) provides:

(5) For the purposes of paragraph 1(a), a public authority may refuse to disclose information to the extent that its disclosure would adversely affect—
(e) the confidentiality of commercial or industrial information where such confidentiality is provided by law to protect a legitimate economic interest

The underlying purpose of the exception is to protect the legitimate economic interest that is being protected by commercial confidentiality. It incorporates elements of both s41 and s43 of the FOIA. However, the exception differs from those sections in some key respects and case officers should take care when reading across arguments made under s41 or s43. In particular, it is not enough to argue that disclosure would adversely affect the commercial interests of any person. There must also be confidentiality provided by law, which may include consideration of some of the factors relevant to s41 but is not an identical test.

The Commissioner considers that this exception can be broken down into four elements, all of which are required in order for the exception to be engaged:

  • Is the information commercial or industrial in nature?
  • Is the information subject to confidentiality provided by law?
  • Is the confidentiality provided to protect a legitimate economic interest?
  • Would the confidentiality be adversely affected by disclosure?

In South Gloucestershire Council / Bovis Homes (EA/2009/0032), the Tribunal indicated that there were three elements to the exception:

  • The confidentiality of the commercial or industrial information.
  • The confidentiality is provided by law to protect a legitimate economic interest.
  • Disclosure would adversely affect the confidentiality.

The Commissioner considers that there is no conflict between these tests and they essentially cover the same ground. However, he will adopt the four-stage approach for clarity, to avoid any confusion about whether confidentiality should be considered under the first or second limb and also to ensure that clear consideration is given to both the question of confidentiality in law and to the legitimate economic interests at stake in the particular case.

Note that regulation 12(9) provides that the exception is not available for information relating to emissions.

See also LTT161 for more information on the public interest test for regulation 12(5)(e).

(1) Is the information commercial or industrial in nature?

The exception only protects the confidentiality of commercial or industrial information.

The Commissioner considers that for information to be commercial or industrial in nature it will need to relate to a commercial activity, either of the public authority or a third party. The essence of commerce is trade, and a commercial activity will generally involve the sale or purchase of goods or services, usually for profit. It should be remembered that not all financial information is necessarily commercial information. For example, a lot of information about a public authority’s finances or resources will not be commercial information.

The Commissioner’s view is that “industrial” in this context can be taken to refer to any business activity or commercial enterprise, and is unlikely to expand the scope of the exception to encompass non-commercial information. However, he will consider arguments that non-commercial information is nevertheless industrial information on the facts of a particular case.

(2) Is the information subject to confidentiality provided by law?

The Commissioner considers that “provided by law” will include confidentiality imposed on any person under the common law of confidence, contractual obligation, or statute.

There is no need under regulation 12(5)(e) for the information to have been obtained from another. The exception can therefore also cover information created by the public authority and provided to another, or to information jointly created or agreed between the public authority and a third party.

However, no confidentiality can attach to information generated by the public authority itself if it has not been shared with a third party, unless there is a specific statutory provision requiring it not to be disclosed.

Common law of confidence

When considering whether the common law of confidence applies, the Commissioner’s approach will be similar in some respects to the test under s41, although there are also some key differences. The key issues the Commissioner will consider when looking at common law confidences under this heading are:

  • Does the information have the necessary quality of confidence? This will involve confirming that the information is not trivial and is not in the public domain. See LTT94 for more discussion on this point.
  • Was the information shared in circumstances importing an obligation of confidence? This can be explicit or implied, and may depend on the nature of the information itself, the relationship between the parties, and/or any standard practice regarding the status of information. A useful test is likely to be to consider whether a reasonable person would have considered that the information had been shared in confidence. See LTT95 for more discussion on this point.

However, in contrast to the Commissioner’s approach under s41, there is no need to consider here whether there would be an unauthorised disclosure to the detriment of the confider. This is because there is no need to establish an actionable breach of confidence for the purposes of this exception. This approach is also supported by the fact that the element of detriment will need to be considered under the third heading below.

As there is no need to establish an actionable breach of confidence, there is no need to consider whether there would be a public interest defence to any breach of confidence. On a practical level, as the exception is subject to the usual public interest test under regulation 12(1)(b), the balance of the public interest will still be fully considered before any decision on disclosure can be reached. Any prior consideration of a public interest defence could not ultimately change the outcome of the case and would therefore cause unnecessary duplication. The Commissioner considers that this redundancy supports his view that there is no need to consider the public interest defence as part of the engagement of this exception.

Contractual obligations of confidence

For the purposes of this exception, the Commissioner will also accept obligations of confidence imposed by contract. If the public authority can establish that there is a binding confidentiality clause covering the requested information, there is no need to consider the common law test of confidence.

Although this potentially widens the scope of the exception, confidentiality is just one element and is not enough on its own to engage the exception. The Commissioner does not consider that this approach will allow public authorities to contract out of their obligations under the EIR, as to use the exception they will still have to show that the confidentiality is protecting a legitimate economic interest, and also that the public interest in maintaining the confidentiality in the particular circumstances of the case outweighs the public interest in disclosure. However, if the confidentiality is self-imposed by contract, this may affect the weight accorded to maintaining the exemption when conducting the public interest test.

Statute

Although regulation 5(6) disapplies any statutory bars on disclosure for the purposes of the EIR, a statutory bar will still mean that confidentiality is provided by law for the purposes of this exception. However, the other limbs of the exception — and the public interest test — will still need to be satisfied.

(3) Is the confidentiality provided to protect a legitimate economic interest?

The Commissioner considers that, to satisfy this element of the test, disclosure would have to adversely affect a legitimate economic interest of the person the confidentiality is designed to protect. This will require a consideration of the sensitivity of the information and the nature of any harm that would be caused by disclosure.

Broader arguments that the confidentiality provision was originally intended to protect legitimate economic interests at the time it was imposed will not be sufficient. The Commissioner considers that, taking into account the duty in paragraph 4.2 of the Directive to interpret exceptions in a restrictive way, the wording “where such confidentiality is provided to protect a legitimate economic interest” (as opposed to “was provided’) indicates that the confidentiality of this information must be objectively required at the time of the request in order to protect a relevant interest.

It is not enough that some harm might be caused by disclosure. The Commissioner considers that it is necessary to establish (on the balance of probabilities) that some harm would be caused by disclosure.

In support of his approach, the Commissioner notes that the implementation guide for the Aarhus Convention (on which the European Directive on access to environmental information and ultimately the EIR were based) gives the following guidance on legitimate economic interests: “Determine harm. Legitimate economic interest also implies that the exception may be invoked only if disclosure would significantly damage the interest in question and assist its competitors.”

Arguments under this limb may include arguments about prejudice to commercial interests similar to those relevant to s43. However, the Commissioner considers that economic interests are wider than commercial interests, and can also include financial interests. For example, this could include arguments that disclosure would adversely affect the finances or tax revenue of a public authority (even if we would not accept that this constituted a commercial interest). However, it will not include pure personal privacy concerns.

Whose interests must be affected?

If the information was provided by one party to another under the common law of confidence, it would be the interests of the confider that are relevant here.

However, if the information was jointly agreed or else was provided under a contractual obligation of confidence, either party’s interests could be relevant, depending on whose interests the confidentiality is intended to protect. For example, in the South Gloucestershire Council case, the information (appraisal reports on potential development sites) was provided by a third party to the council under a contractual obligation of confidence, but the confidentiality clause was designed to protect the council’s interests (its bargaining position in planning negotiations with developers) rather than the confider’s interests. The Tribunal accepted in that case that the confidentiality was to protect the council’s legitimate economic interests.

If it is a third party’s legitimate economic interests that are at stake, the Commissioner will expect a public authority to provide some evidence from the third party about its concerns, in line with his approach to s43 arguments. It will not be sufficient for the public authority to speculate about potential harm to a third party’s interests without some evidence that the arguments genuinely reflect the concerns of the third party. See LTT55 for more information.

(4) Would that confidentiality be adversely affected by disclosure?

Although this is a necessary element of the exception, the Commissioner considers that once the first three elements are established it is inevitable that this limb will be satisfied. Disclosure of truly confidential information into the public domain would inevitably harm the confidential nature of that information by making it publicly available, and will also inevitably harm the legitimate economic interests that have already been identified.

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