Can you keep a secret? As a result of key decisions by the UK's information commissioners, firms competing for public contracts could routinely use the law to extract sensitive data on rival bidders. As "the public interest" increasingly outweighs the case for confidentiality, Neil Hodge considers how to shield your affairs from prying eyes

Financial Management (UK),  Oct, 2007  by Neil Hodge

• E-mail
• Print
• Link

[ILLUSTRATION OMITTED]

When the Freedom of Information Act 2000 came into force on January 1, 2005, public bodies such as NHS trusts and district councils braced themselves for a deluge of public requests for information. Yet private companies--totally exempt from the legislation--have found that their dealings with the public sector are also being disclosed and examined. Furthermore, recent judgments by the information authorities of England and Scotland mean that some of the content of "confidential" agreements made between public bodies and businesses will not be exempt from potential wider scrutiny.

Council pension schemes are estimated to hold 90bn [pounds sterling] or more in assets. In July 2006 Sir Michael Lyons, acting chairman of the Audit Commission, called for more information on where the money was being invested. Two local authorities--Hertfordshire County Council and Tameside Metropolitan Borough Council--refused to comply, citing confidentiality agreements with the fund managers. The legislation exempts confidential information from disclosure, but in February this year Richard Thomas, the information commissioner for England and Wales, decided that the balance between the confidentiality of this commercially sensitive information and the public interest in disclosing it rested firmly in favour of the latter. He stated in his judgment that the funds invested were public, adding: "There is, therefore, a clear public interest in the general public's ability to scrutinise the councils' investment strategies."

Usha Jagessar, an associate in the technology, media and commercial group at law firm DLA Piper, believes that the decision sets a "potential precedent for the future disclosure of investment details that have until now been deemed confidential".

Under the act, private companies are under no obligation to comply with any request for information made directly to them, because the legislation applies only to public bodies. But information is still deemed to be in the possession of a public authority even if it is "held by another person on behalf of the authority". This means that a council would be required, if requested, to hand over any information held on its behalf by a contractor. More crucially, the council would also have to deliver any of the contractor's information it has in its possession, apart from where that information falls within one of the act's 23 exemptions, or where the authority holds the information on behalf of the contractor rather than on its own account. Although there is an exemption for information that is "commercially sensitive", there may still be a strong public-interest case for releasing financial data submitted by a contractor, even at the tendering stage.

According to Liz Fitzsimons, a senior associate in the information law team at Eversheds, the council pension cases are the latest to show that companies can no longer assume that a confidentiality agreement will protect them from having to make disclosures. "This ruling does not say that confidentiality agreements aren't worth the paper they are written on. Instead, it says that public bodies and private companies need to reconsider what constitutes confidential information and public information when they enter these kinds of agreements," she says. "They now need to recognise that not all information contained in a confidential agreement is actually going to be classed as confidential."

Fitzsimons points out that many organisations, in both the public and private sectors, "have often stamped the word 'confidential' on agreements as a matter of course, even when a proportion of the information contained within them is not commercially sensitive. Local authorities and companies will have to consider what material really is confidential and assume that a lot more of it is now likely to be open to the public--and their competitors--on request."

Richard Thomas's counterpart in Scotland also recently ruled that confidential deals between public- and private-sector organisations are not immune from scrutiny where public money is involved. On June 20 Kevin Dunion, the Scottish information commissioner, ruled that VisitScotland (formerly the Scottish Tourist Board) had failed to act in accordance with the Freedom of Information (Scotland) Act 2002 when it refused to supply copies of contracts between itself and its web site operator, eTourism. VisitScotland had argued that a disclosure would have constituted an actionable breach of confidence, but it must now release all the requested information.

And back in March 2006 the Royal Statistical Society successfully appealed to Dunion to compel the Scottish Prison Service to disclose statistics on how safely and effectively its prisoner-escort service was being run by a private firm called Reliance. He wrote in his decision notice: "I agree in principle ... that private companies which deliver public services should be scrutinised to at least the same level as are public servants ... I do not regard it as being in the public interest that the public should receive less information about the performance of a public service simply because that service is provided by an external contractor on the relevant authority's behalf."