High Court rules on confidentiality agreement

High Court rules on confidentiality agreement

Published:

Author: Sarah Livestro

Judgment was given in the case of Jones v IOS in the High Court, on 2 March 2012.

The case is a useful reminder of the rules on severability and the extent to which confidentiality agreements are permitted under EU competition law.

The High Court had already given summary judgment on one issue in the case.

On 14 July 2010, it ruled that a 'no contact' clause in the agreement breached EU competition law. The clause was very widely drafted. It prohibited the defendant company, and all its group companies, from dealing with a very wide range of customers and was unlimited in time and geographic scope.

It therefore went further than was necessary to protect the claimant's confidential information. For that reason, the court ruled that the clause was anti-competitive and so void and unenforceable.

In the main hearing, the defendant argued that this non-contact clause could not be severed from the remainder of the agreement, which was therefore also void and unenforceable.

The court confirmed that, where a clause in an agreement is found to be void as a matter of EU law, it is for English contract law to determine whether the remainder of that agreement can nevertheless remain in force.

The clause cannot be severed where this would: 'fundamentally change the character, purpose, scope, substance or intention of the relevant agreement'.

In this case, the court found that the no-contact clause could be severed from the rest of the agreement. It was separate and distinct from the remaining provisions of the agreement, which were intended to protect the claimant's confidential commercial information. Without the no-contact clause, the agreement continued to operate to prevent the defendant from disclosing, and misusing, that information.

The court also ruled that the remaining provisions of the confidentiality agreement, which ensured 'the narrow protection of information of an inherently confidential nature, which would be of potential value to [the defendant]', were not anti-competitive.