Line to take - LTT173 - Impact of disclosure under FOIA on the voluntary supply of information to regulatory bodies

• FOI/EIR: FOI, EIR
• Section/Regulation: s31, s33, s41, s43, reg 12(5)(f)
• Issue: Impact of disclosure under FOIA on the voluntary supply of information to regulatory bodies
• Source: Information Tribunal, Decision Notice
• Details: FSA v ICO (16 February 2009); FS50184898, FS50193437
• Related Lines to Take: LTT13, LTT158
• Related Documents: EA/2008/0061, FS50193437, FS50184898
• Contact: SF
• Date: 09/04/2010
• Policy Reference LTT173
• © Copyright Information Commissioner's Office, re-used with permission
• Original source linked from here: LTT

Line to take

Where a public authority argues that the disclosure of requested information under FOIA would prejudice its functions by decreasing the amount of information supplied voluntarily from the firms it works with, there are two stages the Commissioner needs to consider:

• Firstly, ascertain that the disclosure would be likely to have an impact on the voluntary supply or free flow of information;
• Secondly, if so, would the change in the voluntary supply of information be likely to prejudice a function of a public authority?

In firstly considering whether the disclosure would (or would be likely to) have an impact on the voluntary supply of information, the following factors may be relevant (only consider the factors that are relevant to the circumstances of your case):

• The content of the information
• The timing of the request in relation to the stage of an investigation;
• The public authority’s statutory powers to compel engagement in the investigative process (for example — the power to issue information notices; sanctions for non compliance; search powers;);
• Incentives that encourage third party engagement;
• Whether the third party considers the disclosure would be damaging;
• Is there evidence of lower levels of engagement post-FOIA or are there any existing risks of publication?; and
• Is there a statutory bar for preventing disclosure of information provided in confidence? A lack of statutory protection for the information implies a greater likelihood of prejudice.

If there is evidence to suggest that the voluntary flow of information is affected, the Commissioner will then go on to consider whether this would (or would be likely to) prejudice a function of the public authority. In doing this, he will consider:

• What the impact of the disengagement and loss of information would be (i.e. the nature of the prejudice to the function);
• The likelihood of the prejudice identified occurring;
• The timing of the request in relation to the stage of the investigation may also have an impact on considering the likelihood and nature of the prejudice.

These factors are discussed in more detail below.

Further Information

Public authorities often rely on the voluntary co-operation of other organisations, including the voluntary supply of information, to enable them to carry out their functions. Some public authorities (generally regulators) have argued that the volume and quality of information provided voluntarily could be affected by disclosure of such information under FOIA, leading to the regulator not having the information it needs to carry out its functions effectively.

For example, in the Tribunal case of FSA v ICO (EA/2008/0061), the FSA put forward that the disclosure of information that the firms it regulates supplied to it on a voluntary basis would prejudice the exercise of its functions for the purposes listed in 31(2)(c) — “... ascertaining whether circumstances which would justify regulatory action in pursuance of any enactment exist may arise”; and (d) — “the purposes of ascertaining a person’s fitness or competence... in relation to any profession or other activity which he is, or seeks to become, authorised to carry on..." (*) The FSA maintained that “if information like the disputed material had to be disclosed under the Act, firms would be less likely than at present to be open with the FSA and voluntarily supply information raising possible regulatory issues about themselves” and “firms would be less likely to supply information about their competitors or about developments or conditions in the market generally” (paragraph 23).

Although this line focuses on s31 arguments and regulatory functions, it is not limited to these circumstances only; it may be relevant in considering the public interest test in relation to other exemptions/exceptions. This line focuses on scenarios involving regulators, but it is envisaged that the factors can equally be applied to other public authorities where appropriate.

The Commissioner’s approach

Where a public authority argues that the disclosure of requested information under FOIA would prejudice its functions by decreasing the amount of information supplied voluntarily from the firms it works with, there are two stages the Commissioner needs to consider:

• Firstly, ascertain that the disclosure would be likely to have an impact on the voluntary supply or free flow of information;
• Secondly, if so, would the change in the voluntary supply of information be likely to prejudice a function of the public authority?

In firstly considering whether the disclosure would (or would be likely to) have an impact on the voluntary supply of information, the following factors may be relevant (only consider the factors that are relevant to the circumstances of your case):

• The content of the information
• The timing of the request in relation to the stage of the investigation. For instance, if information was disclosed under FOIA during the early stages of an investigation, it may unfairly expose the third party to adverse publicity or criticism even though a conclusion on the investigation has not been reached. As well as harming the specific investigation in process, this reputational risk may be likely to deter firms more generally from cooperating on a voluntary basis.
• The public authority’s statutory powers to compel engagement in the investigative process (for example — the power to issue information notices; sanctions for non-compliance; search powers); although voluntary supply may be affected by disclosure, if the public authority possesses powers to compel engagement, it may reduce the likelihood of prejudice to a function occurring. Alternatively, using formal powers may incur greater use of resources, although whether this amount to prejudice of a function will be dependent on the facts of the case.
• Incentives that encourage third party engagement;
• Whether the third party considers the disclosure would be damaging; the more damaging the disclosure, the more likely it would discourage provision of information in the future;
• Is there evidence of lower levels of engagement post-FOIA or is there an existing risk of publication? For example, information submitted to FSA will ultimately come to be published under the s391(4) of Financial Services Market Act 2000 (FSMA); and
• Is there a statutory bar for preventing disclosure of information provided in confidence? A lack of statutory protection for the information implies a greater likelihood of prejudice.

If there is evidence to suggest that the voluntary flow of information is likely to be affected, the Commissioner will then go on to consider whether this would (or would be likely to) prejudice a function of a public authority. In doing this, he will consider:

• What the impact of the disengagement and loss of information would be (i.e. the nature of the prejudice to the function);
• The likelihood of prejudice identified occurring;
• The timing of the request in relation to the stage of the investigation may also have an impact on considering the level of likelihood and nature of the prejudice — eg disclosure at an early stage is likely to be more prejudicial as continued co-operation with a firm is likely to be more crucial during the early stages of an investigation. Also, disclosure during an investigation may prejudice the public authority’s ability to use publicity as an effective penalty in itself in appropriate cases, although this is only likely to affect the investigation in question rather than future investigations.

As the case examples will demonstrate, not all factors will be relevant to all cases; furthermore, the weight applied to the relevant factors will differ dependent on the circumstances of the case and will differ in each regulatory context.

Case examples

Although the following cases do not strictly follow the two-stage approach detailed above, they do broadly consider the some of the factors identified where relevant and present the type of arguments related to them, which may provide some helpful examples for caseworkers. As you can see, it is only necessary to consider factors relevant to the case.

FSA v ICO (EA/2008/0061)

The Tribunal in the case of FSA v ICO were not satisfied that the disclosure of the disputed information would create a real and significant risk of decreasing the amount of information voluntarily provided to the FSA by firms about themselves and found that of the functions at 31(2)(c) and (d) would not therefore be prejudiced. The Tribunal placed cumulative weight on the following factors (paragraph 24):

Incentives that encourage engagement

The Tribunal noted the incentives on firms to supply information about themselves and generally co-operate with the FSA, namely, Principle 11 of the FSA’s Principles for Business. They also considered that firms would have a desire to mitigate any steps taken against them and avoid formal enforcement action, noting that these would have remained in place even if disclosure of the disputed information led them to believe that FSA’s views on such information might possibly be disclosed.

Existing risk of publication

In addition, to this, for firms regulated by FSA, there is always a risk that information submitted by firms about themselves voluntarily, and the FSA’s view on such information will ultimately come to be published pursuant to s391(4) of FSMA.

Level of engagement post FOIA

There was no evidence that behaviour had changed to being less open since the introduction of the Act.

Is there a statutory bar to protect information provided in confidence?

The Tribunal disputed the PA’s argument that “firms would be less likely to supply information about their competitors or about developments or conditions in the market generally”, acknowledging that s348 of the Financial Services and Marketing Act 2000 (FSMA) exists to protect any information imparted on a confidential basis; therefore, in these circumstances, requests for such information would be exempt from disclosure under FOIA by virtue of s44.

Although the Tribunal found s31 was not engaged and therefore did not go on to consider the nature or likelihood of prejudice, they did emphasise that the conclusion relates to the specific circumstances of the case; highlighting that this decision “does not mean that s31 can never be relied on to resist disclosure of internal FSA views based on information supplied [to it]” (paragraph 26). They noted that there may have been a different outcome if the request was made during an ongoing investigation or the disclosure “would... have risked the identification of a confidential source or revealed something novel about the FSA’s methods of investigation” (paragraph 26).

Charity Commission (FS50184898)

This case concerned a request for all documents relating to complaints about a school run by a registered charity. The decision notice concluded that the majority of the withheld information was exempt from disclosure on the basis of s42(1) or s31(1)(g) by virtue of sections 31(2)(f) and (g) and that the public interest test favoured maintaining the exemption. On the engagement of s31(1)(g) by virtue of factors listed under 31(2), the Charity Commission argued that it was dependent on the voluntary co-operation of its trustees, charities and their advisors (paragraph 74). The Commissioner applied the factors identified above in his consideration of this argument at paragraphs 82-94 of the decision notice.

1. Would disclosure be likely to have an impact on the voluntary supply of information?

Stage of the investigation

The Commissioner noted that the investigation in question had been concluded but only relatively recently, and therefore the likelihood of disclosure impacting on the Charity Commission’s ability to gather information from organisations remained relatively high (paragraph 84).

Powers to compel engagement and incentives that encourage engagement

The Commissioner acknowledged the limited powers the Charity Commission has to compel trustees to provide it with information, particularly when compared to other regulators (paragraph 85). However, he also noted that the trustees of charities, and their advisors, have an in-built incentive to communicate with the Charity Commission in a free and frank manner to ensure their charity complies with the legal requirements of charity law (see paragraph 86 for further detail).

Level of engagement post-FOIA.

The Commissioner noted at paragraph 87 that the Charity Commission had presented no evidence to demonstrate that charities have been less willing to provide it with information since the Act came into full force in January 2005.

Is there a statutory bar to protect information provided in confidence?

In this case, the Commissioner acknowledged that there was no statutory bar preventing the disclosure of information received voluntarily by the Charity Commissioner, unlike in the FSA v ICO case (EA/2006/0061, discussed above), where such information was protected by s348 of the Financial Services Management Act 2000 (FSMA). Therefore the Commissioner concluded that this lack of protection increased the likelihood of prejudice occurring following disclosure under FOIA of information provided voluntarily (paragraph 92).

In considering this in more detail, mindful of the new approach set out above, it may be more precise to say that the lack of protection for information that was provided voluntarily to the Charity Commission means that disclosure under FOIA would be likely to have a greater negative impact on the free flow of information; and that this reduction in openness would be more likely to prejudice the Charity Commission’s functions of protecting charities against misconduct or mismanagement (31(2)(f) and protecting the property of charities from loss or misapplication (s31(2)(g)).

The factors of timing, the Charity Commission’s weak powers to compel engagement and the lack of statutory protection for the information were balanced against the statutory incentives for organisations to engage and the lack of evidence to demonstrate lower post-FOIA engagement in considering the impact of disclosure. In this case the Commissioner accepted that disclosure of the information would have an effect on the voluntary supply of information.

2. Would the change in the voluntary supply of information be likely to prejudice a function of the public authority?

As disclosure was found to be likely to have an effect on the voluntary supply of information, the next stage is to identify how likely prejudice to specified functions would occur. In this case the nature of prejudice was identified as the potential to slow down the Charity Commission’s regulatory process, which may lead to less timely regulatory action (paragraph 93). Rather than just suggesting that the disclosure of information in response to this request would result in trustees refusing to communicate with the Charity Commission at all, the public authority argued that the nature of communications would change. This change in communications would affect the Charity Commission’s formal and informal methods, as well as its ability to gather/receive wider intelligence (paragraph 94).

In considering the likelihood of prejudice, the Commissioner considered the significant number of charities the Charity Commission regulates; even if a small percentage altered their behaviour following the disclosure of the information under FOIA, there would be a real and significant impact on its ability to carry out the functions described at s31(2)(f) and (g).

FSA (FS50193437)

In this case, the complainant made a request to the FSA for information related to any concerns it may have regarding the management of a credit union; in contrast to the previous case examples, the public authority refused to confirm or deny that it held the information under s31 and s43. In relation to s31, the FSA put forward that if it were to confirm or deny that it holds this information, then the companies it regulates would be less likely to engage with it on an informal basis in the future (paragraph 44) which would prejudice functions detailed at 31(2)(a)-(d).

Incentives that encourage engagement and the existing risk of publication

The Commissioner was not satisfied that regulated firms would be less likely to engage with the public authority as a result of confirming or denying the requested information was held and found that s31(3) was not engaged. In reaching this decision, the Commissioner was mindful of the FSA Tribunal case (detailed above), highlighting the Tribunal’s findings on the incentives to provide information and the provision of s391(4) (as discussed above).The Commissioner was of the view that these factors carried even more weight in this case, given that the concern was what prejudice would be caused by merely confirming or denying if information was held, rather than disclosure of that information (paragraph 46-47).

Stage of the investigation

Furthermore, the Commissioner considered that if an investigation was taking place, then in the circumstances of this case, it would be likely to be at an advanced stage: “any investigation which the public authority may or may not be carrying out would be likely to be at an advanced stage or at least would be unlikely to be an elementary stage... informal co-operation with a firm is likely to be more important during the early stages of an investigation”. The Commissioner maintained that even if he were to accept that disclosure would lead to a lack of co-operation, it is unlikely this would cause any significant prejudice to an investigation which would in all likelihood be at an advanced stage (paragraph 48).

(*) Note: the Tribunal had found that s43 was engaged in relation to the requested information, but still went on to comment on the application of s31.