Thursday, 27 January 2011

DIFC Law of Confidence

The DIFC (Dubai International Financial Centre) is like a little bit of London in the Gulf. Covering an area of 45 hectares - slightly smaller than Kensington Gardens - it is a free zone for the banking, insurance, trading and other financial services industries with its own legal system. As I said in my article on The DIFC Courts, the interesting attribute of this legal system is that the laws are in English and its courts apply the common law.

There is now a comprehensive body of civil and commercial law for the Centre covering such matters as companies, contracts, insolvency, partnerships and data protection. DIFC Law No. 5 covers obligations which includes much of the law of tort (negligence, nuisance and deceit) and equitable obligations (fiduciary duties and confidence).

The DIFC law of confidence is set out in art 37 of this Law of Obligations. Paragraph (1) provides:
"Subject to Article 37 (4), a person has a duty not to misuse specific information which he has received from another (a "confidant"), directly or via an intermediary, and which can reasonably be regarded as confidential, where he knows or ought to know that the information is confidential."
It should be noted that the word "confidant" has a special meaning in this article in that it refers to the person imparting information rather than the person to whom information is confided (cf my note on "The Law of Confidence" in IP/IT Update). Art 37 (2) continues:
"If a person breaches his duty as defined in Article 37(1), he is liable to the confidant."
"Misuse" in the DIFC code includes but is not limited to disclosure (art 97 (4)). There is no attempt to define confidential but art 97 (3) provides that "unless non-confidentiality is otherwise expanded by agreement, information is not confidential if:
(a) it is in the public domain;
(b) it is trivial or useless; or
(c) it is in the public interest that the information should not be confidential."
The obligation of confidence is subject to the following limits in art 97 (4):

"(a) the confidant has consented, expressly or by implication, to its disclosure;

(b) its disclosure is required by law;

(c) its disclosure is required in the interests of the confidant;

(d) it is no longer confidential; or

(e) it is disclosed to a person who has a legitimate interest in receiving it."
Finally, it is no defence that the defendant did not know that he was misusing confidential information (art 97 (5)).

There does not appear to be any case law on the obligation of confidence. The only other relevant legislation that I have been able to find is art 29 of the DIFC Law of Contracts:
"Where information is expressly given as confidential by one party in the course of negotiations, the other party is under a duty not to disclose that information or to use it improperly for its own purposes, whether or not a contract is subsequently concluded. Where appropriate, the remedy for breach of that duty may include compensation based on the benefit received by the other party."
This provision would clearly apply to discussions between those with a business proposition such as inventors and potential backers such as angels or venture capitalists. However, it should be noted that the information must be disclosed "expressly in confidence" which implies a confidentiality agreement of the kind I have drafted for use in England (see my "Confidentiality Agreement" on the JD Supra website).

I should be glad to discuss this article with anybody who has any questions. He or she can contact me through my on-line form.

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