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Confidential Information, Covenants, Injunctions & Russian Law

All property is theft.  Official.  Well, all of us card-carriers and fellow travellers have known this to be true since Comrade Karl told us so a long time ago.  Now Sir Andrew Morritt has given his qualified judicial endorsement of this position, at least so far as it relates to confidential information governed by Russian Law.

 It is a decision with significant ramifications for post-termination covenants as well.

In OJSC TNK-BP Holding v Lazurenko [2012] EWHC 2781 (Ch), the Claimants sought to enforce a contractual confidentiality clause contained in a former employee’s contract of employment.  The contract also expressly provided that Russian law was to govern the resolution of any disputes between the parties.  The Defendant resigned from his employment with one of the Claimants after being made the subject of an inquiry as to having taken bribes. He then met the employer’s Chief Legal Officer and submitted draft statements, with supporting documents which he understood would blow the whistle on alleged high level corruption.  

It was these documents that were the subject of proceedings started in England.  The Claimants claimed that the documents contained confidential information, and sought orders for delivery up and to restrain the disclosure of documents in his possession.

Sir Andrew Morritt held that the dispute was governed by Russian law.  The Claimants could not get round that by relying on an equitable duty of confidence.  Either such a duty was so closely linked to the contract as to be regarded as a contractual obligation, or it was a non-contractual obligation in which case, by virtue of Art 4(3) of the Rome II Regulation, Russian law would apply. 

Following the receipt of expert evidence, the Judge concluded that under Russian law the protection of confidential information required proof that the owner had taken certain steps to protect it.  Having regard to the evidence more generally, he held that there was no evidence to show that the information in question was protected under Russian law.

Moreover, the experts in Russian law made clear to the court that under that system of law, there was no provision for quia timet injunctions – whether interim or final.  So under Russian law, the relief that had originally been granted to the Claimant was an unknown legal beast.  Consequently, the orders which had been granted were set aside, and the action was struck out.

As Sir Andrew Morritt noted, before the Rome I and Rome II Regulations, the availability of remedies was a matter for the lex fori.  However the Rome I Regulation (on the law applicable to contractual obligations) now provides that it is the law of the contract which governs the consequences of a breach, subject to the limits on the Court’s procedural powers (Art 10).  There is a similar provision in the Rome II Regulation for the substantive law to determine the measures a Court can take to prevent or terminate injury or damage.  The Judge noted that there is a lack of clear authority, and some academic controversy, as to whether the substantive law now governs the grant of injunctive relief.  He did not need to reach a concluded view on the issue.  It was sufficient, given that the restraint on publication would affect the right to exercise freedom of expression, that the Claimants could not demonstrate a sufficient likelihood of success at the final hearing (s.12(3) Human Rights Act 1998 (HRA)).  But in any event, under the Rome Regulations the substantive law would determine the final remedies that could be granted.   That in turn would be likely to be dispose of the question of whether there is a sufficiently arguable claim on which to found interim relief.  That is so even if the interim relief is a matter of procedure and so a matter for the lex fori, and even if the test under s.12(3) HRA does not apply.

The implications of a quia timet injunction not being available under Russian law extends beyond confidentiality clauses in contracts of employment.  It impacts also on post-termination covenants.  Asserting that the “Defendant threatens and intends” to break those covenants is a matter of supreme indifference to the Russian law.

The principal learning point is not difficult to spot for those acting on behalf of Russian companies.  Take into account that choice of law really matters to the protection of your client’s intellectual property and to the protection of goodwill and customer connection. 

That said, if you are left having to cope with a  Russian law choice of law, and faced with an employee having made off with confidential information, there may yet be other avenues to pursue to obtain the extent interim relief needed.  Given the nature of the information in question in OJSC TNK-BP Holding v Lazurenko, the focus was only on obligations in contract and equitable duties of confidence.  Other cases where an employee makes off with sensitive commercial information may allow more scope for intellectual property rights to be advanced, such as copyright or database rights.    Subject to the territorial limits of those claims (see eg Reg 18 of the Copyright and Rights in Databases Regulations 1997), that re-opens the door to quia timet injunctive relief relying on the different regime choice of law regime applicable to such claims (see Art 8 of the Rome II Regulation).

To read a transcript of this judgment, please click here.
Related link:  Profile of Jeremy Lewis
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