British court: "we can't enforce Russian secret service contract"

Kats know plenty about secrets
-- but they won't tell you what!

From time to time, businesses whinge about the failure of the European Union to provide a proper legal environment for them to trade with confidence, knowing that their innovations, their creations and their data are secure from the predations of third parties and insiders.  Many of these whinges are justified, but it is salutary to remember that, however bad things may seem in the New Europe, there are plenty of places where things are even worse.  Arguably, one such place is clearly the Russian Federation, as appears from jsc Tnk-BP Holding & Ojsc Tnk-BP Management v Lazurenko [2012] EWHC 2781 (Ch) (16 October 2012), a Chancery Division, England and Wales, decision last month of the Chancellor, Sir Andrew Morritt.

Ojsc Tnk-BP Management, a Russian oil company, engaged Lazurenko under a contract of employment which contained a confidentiality clause, as well as a dispute resolution clause which nominated the Russian courts and Russian law in the event that any dispute could not be resolved by direct negotiation. Lazurenko subsequently resigned from the company amid allegations of corrupt receipt of sums and Ojsc instituted proceedings in England to recover the allegedly pocketed cash. Lazurenko showed Ojsc two files containing documents which purportedly revealed corruption at a high level within the company, following which Ojsc alleged that Lazurenko was threatening to disclose the documents to third parties, including the media, in breach of confidence and in order to put pressure on Ojsc to settle the proceedings against him.

Things started well for Ojsc, which first secured an interim injunction restraining Lazurenko from disclosing the documents; a second order was then obtained, varying the first order to the extent that it now permitted disclosure to law enforcement agencies in the United Kingdom, the United States and Russia. However, Lazurenko applied to have the order set aside on the basis that the British courts had no jurisdiction or, even if they did have jurisdiction, that they should not exercise it. He also sought the setting aside of Ojsc's claim.

Sir Andrew Morritt discharged the interim orders and struck out Ojsc's claim.

First, he asked which system of law -- Russian or English -- was the applicable law under which Ojsc's claims fell to be determined.  If it was to be Russian law, what were the relevant principles to be applied? It was accepted by both sides that the contract of employment opted for Russian law for the purposes of the Contracts (Applicable Law) Act 1990. In any event, Article 6 of Regulation 593/2008 on the law applicable to contractual obligations ('Rome I') required the application of the laws of Russia since that was the country in which Lazurenko habitually carried out his work in fulfilment of his employment duties.  The law to be applied was therefore that of the Russian Federation.

The learned judge then looked to expert evidence as to what the Russian law actually provided.  From this exercise it was ascertained tha,t in order for confidential information to be protected as confidential, the holder of the commercial secret had to take special steps to preserve confidentiality.  These steps included the express identification of the information and the marking of it as beingconfidential. If this was not done, confidentiality was lost.

Now, turning to the facts, in this case there was no evidence to suggest, or even pleading to aver, that any of the documents contained any information which was marked confidential and therefore capable of being protected under Russian Law. What's more, Russian law made no provision for the grant of quia timet injunctions, whether on an interim basis or after a full trial, to restrain a threatened disclosure of confidential information. This being so, Ojsc had shown no cause of action or serious question to be tried in respect of its claim for interim quia timet restraint.

The IPKat wonders how many employers will be rushing to make Russian law their number one choice with regard to any contract with a confidential element to it, bearing in mind particularly that, not just in employment contracts but in know-how licences and other information-based consensual arrangements, there may be a constant flow of confidential information -- both in documented and non-documented formats -- and that it may be quite impossible to sustain the high level of discipline needed to have everything marked "confidential" before it stands a chance of being recognised as such by a court.