Guidance Note: Confidentiality in Public Procurement Challenges

Introduction

Confidentiality is a highly pertinent issue in public procurement challenges. Challengers often seek disclosure of the winning bidder’s tender, together with all of the contracting authority’s associated evaluation and scoring materials. This documentation inevitably contains commercially sensitive information that the winning bidder wishes to keep confidential and out of sight of its competitors (including the challenger).

The principle of open justice (a common law principle that proceedings and any related documents should be open to the public) normally requires disclosure of all documents relevant to the issues in the case. However, disclosure of commercially sensitive information to a competitor might result in commercial advantage and/or distortions in the market. A tension can occur between the need for open justice and the preservation of confidentiality. This creates difficult issues for the case management of public procurement cases: the courts do not want to prejudice any of the parties by forcing the disclosure of commercially sensitive information, but they must also uphold the principle of open justice. The courts’ difficulty is summed up in paragraph 27 of Appendix H to the Technology and Construction Court Guide (‘Appendix H’):

“The need to protect confidential information needs to be balanced by the basic principle of open justice.”

This guidance note focuses on how the courts approach this balancing exercise and reflects on our recent experiences in this area. It also provides guidance on how the disclosure of commercially sensitive information can take place in a way which provides sufficient protection.

What is commercially sensitive information and how can it be protected?

Confidential information is that which is sensitive and meant to be kept secret or private. Commercially sensitive information can be protected, provided that it is confidential and has not been released into the public domain. In the past, the courts have arguably prioritised the need to keep confidential information private over the requirement to uphold the principle of open justice. Prior to the judgment of Bombardier Transportation Limited v Merseytravel in 2017, the courts often marked entire court files in public procurement challenges as private. The Bombardier case marks a shift towards protecting both confidentiality and the principles of open justice by allowing limited disclosure through a variety of mechanisms. These mechanisms are discussed later in this note.

The shift towards a balanced approach to disclosure is further evidenced by Appendix H.  Appendix H contains guidance on the court procedure for public procurement cases. When the 2017 Bombardier case was heard, Appendix H was in draft form. However, Mr Justice Coulson expressly affirmed the draft provisions surrounding confidentiality in Appendix H in his judgment. Appendix H, including the provisions affirmed by Coulson J, have subsequently been introduced as guidance in public procurement cases; the courts expect parties to comply with Appendix H.

Documents can be redacted in order to protect confidential information. However, the redacted parts of the winning party’s tender document, and the associated evaluation and scoring materials, are often precisely the parts that the challenger wishes to see. Consequently, redaction may mean that relevant documents are not made available, which could tip the balancing act between open justice and confidentiality too far in favour of the latter. In these circumstances, the primary mechanism that the courts deploy is the use of confidentiality rings.

Confidentiality rings

A confidentiality ring imposes restrictions on the disclosure of certain documents. These restrictions include:

• Who can access the documents.
• How the documents may be copied.
• Where the documents may be viewed.
• The dissemination of information contained within those documents.

Restrictions are usually enforced by undertakings from the individuals within the ring to minimise the risk of a breach of confidentiality.

The parties themselves have often been excluded from confidentiality rings in order to protect commercially sensitive data, and corporate secrets, being passed between rival companies. In the IPCom case (IPCom GmbH & Co KG v HTC Europe Co Ltd [2013]) Mr Justice Floyd provided guidance on when a party to proceedings should be excluded from a confidentiality ring:

• Where allowing inspection to key commercial documents within the ring would cause unnecessary harm to the other parties to proceedings.
• Where allowing inspection may affect the interests of third parties.
• Where the confidential information, once provided to a party to proceedings could not be forgotten, and could therefore inadvertently be used in future business dealings.

The IPCom case actively encouraged the use of ‘lawyers-only’ confidentiality rings, where lawyers are the only parties to the confidentiality ring, reasoning that lawyers are bound by a professional code of conduct. This is perceived as ensuring the confidentiality of commercially sensitive documentation. Lawyers-only rings were commonplace.  However, this position has increasingly been seen as inadequate for the reasons outlined below.

First, where only lawyers can access the evidential information, it is not always possible to call fully informed witnesses of fact. Lay witnesses may not be availed with the full facts, as they would have been denied access to the confidentiality ring. Solicitors, with access to the confidentiality ring, may act as a witnesses of fact. However, a solicitor may not understand the context and content of the documents, particularly if they are in niche or technical business areas. It is also possible that a conflict of interest will arise where a solicitor is called by their own client to give evidence.

Second, if there are no witnesses of fact to give evidence on key documents, or the witnesses do not fully understand the documents on which they are asked to give evidence, then it is unlikely that the court would be fully appraised of the material facts.

Third, a party that cannot see the confidential documentation is not able to give proper, fully informed, instructions to their lawyers. This can result in cases not being settled at the appropriate time, or conversely cases being discontinued when they should not have been. Ultimately, this can prejudice claimants and deny them access to justice.

Lawyers-only rings may not meet the principles of open justice and can potentially be prejudicial to the proper administration of justice. The case law has therefore shifted towards more frequently allowing employees and experts to join confidentiality rings, or be parties to separate confidentiality rings.In the case of Geodesign Barriers Limited v The Environment Agency in 2015, Mr Justice Coulson agreed with the claimant’s counsel that experts should be permitted to a confidentiality ring that previously only contained lawyers. Coulson J thought that:

“It would be wrong to hobble the claimant’s preparation of its case by refusing to allow documents disclosed into the confidentiality ring to anyone other than lawyers.”

Allowing experts into the confidentiality ring removes the issue of lawyers having to act as witnesses of fact on matters which, in the words of Coulson J, “lawyers are simply unable to address.” This development went some way to alleviate the procedural issues surrounding a lack of evidence from witnesses of fact. However, it did not allow anyone into the ring who would understand the context of the documentation – an employee or director. Therefore, some uncertainty over the facts of a case could remain.More recently, in the case of SRCL Limited v The National Health Service Commissioning Board (also known as NHS England) (2018), Mr Justice Fraser made it clear that solicitors acting as witnesses of fact is “highly unsatisfactory” and “could have been avoided if the same evidence had been called from a director (say) of SRCL, or someone else involved at the time.”

This development builds on the principle established in Geodesign, expanding the membership of confidentiality rings. It also solves the three problems discussed above. If an employee of a party is called as a witness of fact then the circumstances and the technical detail of the evidence can be cited to the court. Additionally, having an employee or director in a confidentiality ring allows properly informed instructions to be given to lawyers.The use of confidentiality rings is not confined to the Technology and Construction Court (“TCC”). The Pilot Practice Direction on Disclosure in the Business and Property Courts also expressly discusses the use of confidentiality rings. This shows that the shift in the balance between confidentiality and open justice towards a more flexible approach to disclosure is not confined to public procurement challenges, but is central to judicial thinking on confidentiality generally. Consequently, we believe that this trend of allowing confidential documents to be disclosed more widely will continue.

Open Justice

The 2017 case of Bombardier Transportation Limited v Merseytravel marked a profound shift away from blanket confidentiality towards significant, but controlled, disclosure. In his judgment, Mr Justice Coulson concluded that:

“Merely because the case in question is a procurement dispute is no reason for the case to be labelled as "private", with all of the documents on the court file being kept secret and not made available to non-parties.”

Coulson J made clear that the previous policy of retaining confidentiality on the whole file in public procurement matters was inappropriate. He went on to find “clear and practical answer[s]” in Appendix H. Since Coulson J’s judgment, and the final publication of Appendix H, there has been a significant shift away from entire case files being marked as confidential. Consequently, an increasing number of documents are being disclosed in a non-redacted form.

Additional protections

Additional mechanisms for protecting confidentiality are discussed to a significant extent in Appendix H. Appendix H confirms the move toward a commensurate approach between open justice and confidentiality, and a move towards more flexibility in the methods of disclosing confidential information. In the first instance Appendix H expressly recommends, at paragraphs 28 to 30, the following mechanisms to allow for carefully controlled, but nonetheless extensive, disclosure:

• All confidential documentation should be passed through the Judge’s clerks to limit the risk of inadvertent disclosure.
• Confidential documents delivered to the court and Judge’s clerks should clearly be marked as confidential.
• Appendix H also recommends that confidential papers are provided on coloured paper so that their confidential status is immediately apparent.

Despite these new mechanisms, paragraph 31 of Appendix H still expressly affirms the  court’s power to make an order restricting inspection of court files – although only where ‘necessary.’ However, open justice does get an additional layer of protection as:

“Any member of the public may seek an order from the court varying any such restrictions.”

Annex H goes on to state that the court should consider providing appropriately redacted pleadings for the court file so the public can access them.Paragraphs 32 and 33 of Appendix H discuss redactions, including to confidential material.  Redactions on grounds of confidentiality must be justified to enable documents to be more widely disclosed outside of confidentiality rings. Where this justification is met, a schedule should be prepared to explain the reason for the redactions. Additionally, the court should be provided with the documents in an unreacted form, with the redactions highlighted so that the text below can still be clearly seen. Each page of the highlighted document must include in the header “CONTAINS CONFIDENTIAL INFORMATION.” Again, Appendix H illustrates a move towards a more flexible mechanism to disclosure – withholding the whole file is the last resort. Additionally, the fact that all redactions must be individually justified shows the lengths at which Appendix H goes to minimise non-disclosed content.

Our experience

Recently we advised on a case where a dispute had arisen about a lawyers-only confidentiality ring.  The challenger wished to add employees to the ring, whilst the contracting authority and winning bidder opposed it on the grounds of the risk of commercial advantage and/or market distortion. We therefore proposed two layers of confidentiality rings: one for lawyers and the other for designated employees of the challenger. More stringent requirements were placed upon the designated employees through appropriate undertakings, in order to protect confidential information. This enabled documents crucial to the factual matrix of the case to be disclosed into the ring for designated employees. The approach, envisaged by Appendix H, led to the challenger’s legal team receiving fully informed instructions from their client, and ultimately the proper pleading of the claim. It also protected confidentiality through the imposition of stringent undertakings (more on this below).

Finally, it avoided a costly dispute over the disclosure of confidential materials and eliminated the risk of adverse costs orders being made against the contracting authority and/or winning bidder.Our solution reflected a move in recent cases in the TCC towards finding mechanisms to allow for disclosure of confidential material. There is a move away from lawyer-only rings in order to allow experts and employees of the parties to either join a single ring, or be parties to a separate ring. It is our view that the rapidly developing case law in this area will continue to develop and that a pragmatic approach towards the disclosure of confidential information is required.

Conclusion

The courts are moving away from wholesale protection of confidential information. There is an emphasis on ensuring open justice through mechanisms that seek to protect trade secrets and prevent rival companies gaining a competitive edge on future tenders.

There are complex considerations on whether documents can be disclosed, un-redacted, into confidentiality rings. However, in many cases, the courts will take the view that the parties should do all they reasonably can to agree how this takes place, not whether it should.

For more information please contact Mark Gudgeon at [email protected]  or on 0345 166 6305.