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08 September 2016

FOIA and commercial interests: lessons from Zola

5 mins

The Court of Appeal’s judgment in Department for Work and Pensions v Information Commissioner and Zola [2016] EWCA Civ 758 (‘Zola’) provides an authoritative restatement of key freedom of information principles of relevance to businesses, campaigners and anyone with an interest in information rights.

By way of very brief background, the Department for Work and Pensions (‘DWP’) had refused to disclose the names of organisations participating in certain ‘workfare’ schemes, including the controversial ‘Mandatory Work Activity’ scheme. Among other things, DWP argued that disclosure would prejudice its own commercial interests and those of the volunteering organisations, and that the public interest in withholding the information outweighed the public interest in its disclosure.

Those arguments failed before the Information Commissioner and then in two appeals in the First-tier and Upper Tribunals, which ruled that the exemption relating to commercial interests (explained below), was not even engaged. Next stop: the Court of Appeal.

The Court of Appeal rejected the DWP’s appeal by a 2:1 majority. Subject to any appeal to the Supreme Court, the names of participants in the DWP scheme will therefore be disclosed. For everyone other than the parties (who will no doubt ponder the application of the principles to their case), the ruling serves as a useful confirmation of already well-established principles that should inform their approach to safeguarding sensitive information and/or seeking disclosure.

Lesson 1: the meaning of ‘commercial interests’ is broad

Any commercial organisation engaging with a public body will be acutely aware that information imparted is vulnerable to disclosure under the Freedom of Information Act (‘FOIA’). This is increasingly being explicitly recognised in standard-form Government contracts in the form of ‘FOIA’ or ‘transparency’ clauses. On the other side of the coin, since its introduction, FOIA has equipped campaigners with a useful (if, on occasion, frustratingly blunt) tool with which to extract information from public authorities regarding their commercial activities, which are sometimes controversial.

Where a FOIA request is made, section 43(2) of FOIA allows the information sought to be withheld where disclosure would, or would be likely to, prejudice any person’s commercial interests (subject to a ‘public interest test’). It is on this basis that counterparties to public contracts are encouraged from the outset of negotiations to provide specific detail about what information is deemed commercially sensitive (and, as discussed later, how disclosure could bring about prejudice to those interests). Conversely, for those seeking information, if a respondent to a FOIA request does not explain how the information is commercially sensitive (and/or how prejudice would come about – see below), there may be grounds for appealing any refusal to the Information Commissioner.

In Zola, the Court confirmed the well-established principle that the term ‘commercial interests’ is to be broadly construed, and will encompass (among other things) loss of income, profits, donations and volunteer workers. This means that the ‘gateway’ for reliance on section 43(2) remains wide, which is encouraging for those seeking to prevent sensitive commercial information falling into the wrong hands. On the flip-side, regular FOIA requestors will already know that section 43(2) is one of the most commonly-relied-upon exemptions, and confirmation of its wide scope will be disappointing. Having said that, it is appears clear from Zola that the distinction between ‘commercial’ and ‘financial’ information remains key: the latter is not caught by section 43(2) and will not therefore be exempt from disclosure (at least not under section 43(2)). In Zola, that meant that the additional costs to the DWP of administering a social welfare scheme such as this, which would be passed on to the DWP because of withdrawal by placement hosts, would not engage the commercial prejudice exemption. It follows that parties dealing with public authorities should be careful to assess what information is purely financial (rather than commercial), and be aware that this may be more vulnerable to disclosure.

Lesson 2: Prejudice must be demonstrated

Another well-established principle was confirmed in Zola, the Court accepting (at least for the purposes of that case) the existing legal test (deriving from Christopher Martin Hogan and Oxford City Council v the Information Commissioner (EA/2005/0026 and 0030, 17 October 2006) for assessing ‘prejudice’ under the FOIA exemptions:

  • first, the relevant interest must be identified;
  • secondly, the nature of the alleged prejudice must be considered, with the relevant decision-maker having to show a causal link between disclosure and prejudice, which must be ‘real, actual, or of substance’; and
  • thirdly, as to the ‘likelihood’ of prejudice:
    • where the public authority claims there ‘would’ be prejudice (ie the first alternative limb of section 43(2)), such prejudice must be ‘more probable than not’; or
    • where it is alleged that prejudice ‘would be likely’ to occur (the second limb), it must be more than hypothetical or a remote possibility, and there must be a ‘real and significant risk’ of prejudice.

Entities concerned about disclosure should, at the very outset of their dealings with public authorities, consider precisely how disclosure of their commercially sensitive information could lead to prejudice to their (or others’) commercial interests. That potential prejudice should be flagged to the public authority in writing, giving sound reasons / justification for those assertions (both the Commissioner and the information tribunals are particularly unsympathetic to any form of blanket assertion to avoid disclosure). By way of contrast, anyone confronted with a blanket or unjustified reliance on section 43(2) should press the public authority to give reasons for its stance by reference to clear evidence. Where the public authority falls short in this respect, there may, again, be grounds for pursuing the matter with the Information Commissioner.


While the Court was divided on certain case-specific issues in Zola (namely whether the First-tier Tribunal’s ruling as to the application of section 43(2) had been ‘perverse’; and the balance of the public interest under the section 36(2)(c) FOIA exemption – not discussed here), it was unanimous on the legal principles underpinning section 43(2). Given the prominence of that exemption – both in public contracts and in the context of public authorities’ responses to FOIA requests – businesses and campaigners should take note.

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