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Mr Gavin Sheridan and the Department of Communications, Energy & Natural Resources (FOI Act 2014)

Whether the Department was justified in its decision to refuse a request to which section 38 of the FOI Act applies, involving access to a contract relating to the third party (enet), on the ground that the record is exempt under section 35 and section 36 of the FOI Act and in refusing to confirm or deny the existence of a record relating to payments, under section 36(4) of the FOI Act

Conducted in accordance with section 22(2) of the FOI Act by the Information Commissioner (the Commissioner)

Note: "This decision was appealed to the High Court by the Department"

Background

This review arises from a decision made by the Department not to release records following an FOI request to which section 38 of the FOI Act applies. Section 38 of the FOI Act applies to cases where the public body has considered at some stage in the decision making process that the records in question qualify for exemption under one or more of the relevant exemptions in the FOI Act (i.e. sections 35, 36, 37 relating to information that is confidential, commercially sensitive or personal information about third parties, respectively) but that the records should be released in the public interest. Where section 38 applies, the public body is required to notify the affected third parties before making a final decision on whether or not the exemptions considered to apply should be overridden in the public interest. The requester or affected third parties, on receiving notice of the final decision of the public body, may apply for a review of that decision to my Office directly.

On 2 January 2015 the applicant made an FOI request to the Department for access to the following records:

"the assets registry of the Departments, including all lands, buildings and vehicles owned by the Department (first record)...; the lease registry, including all properties leased by the Department (second record)...an itemised record of any and all individual payments made to MAN provider enet in 2014, 2013 and 2012 (third record)...any contracts from 2009 between the Department and enet in relation to the provision of broadband services via Metropolitan Area Networks (fourth record)".

On 14 January 2015, the Department consulted enet under section 38 of the FOI Act. It informed enet that it was considering records which related to enet under both section 35 and section 36 of the FOI Act and had formed a preliminary view that it was in the public interest to release them, unless there were objective reasons to the contrary. It invited enet's views and received them by letter dated 3 February 2015.

By letter dated 21 January 2015, the Department released the first record and refused access to the second record on the ground that it did not exist. By letter dated 16 February 2015, the Department refused access to the third record (referred to as record number 3 in the Department's schedule) and the fourth record (referred to as record number 2 in the Department's schedule) on the grounds that they were exempt under section 35(1)(b) and section 36(1) of the FOI Act. On 2 March 2015, the applicant applied to my Office for a review of the Department's decision in relation to the third and fourth records.

In conducting my review, I have had regard to the Department's decision on the matter; the Department's communications with the applicant, enet and with my Office; the applicant's communications with the Department and with my Office; enet's communications with the Department and with my Office; and the content of the withheld records, provided to my Office by the Department for the purposes of this review.

Preliminary Matters

Before I consider the exemptions claimed, I wish to make four general points. First, section 22(12)(b) of the FOI Act provides that when I review a decision to refuse a request, there is a presumption that the refusal is not justified unless the public body "shows to the satisfaction of the Commissioner that the decision was justified". Therefore, in this case, the onus is on the Department to satisfy me that its decision is justified. Secondly, while I am required to give reasons for my decision under section 22(10) of the FOI Act, I am also required to take reasonable precautions to prevent disclosure of information in an exempt record, under section 25. This means that the extent to which I can describe the withheld information and elaborate on my reasoning is limited. Thirdly, section 18 of the FOI Act provides that if it is practicable, records may be granted in part, by excluding the exempt material. Section 18 shall not apply if the copy of the record provided would be misleading. I take the view that neither the definition of a record under section 2 nor the provisions of section 18 envisage or require the extracting of particular sentences or occasional paragraphs from records for the purpose of granting access to those particular sentences or paragraphs. Generally speaking, therefore, I am not in favour of the cutting or "dissecting" of records to such an extent.

Finally, references to sections 26 and 27 of the FOI Act 1997-2003 are to be read as references to sections 35 and 36 of the FOI Act, 2014 where they appear in this decision.

Scope of this Review

I should note that the schedule of records which the Department provided to my Office includes a contract which pre-dates 2009. This record does not fall within the scope of the applicant's original request and therefore does not fall within the scope of this review.

Furthermore, in the course of this review, the applicant agreed to exclude schedule 3 to the fourth record from the scope of his request. Accordingly, schedule 3 to the fourth record falls outside the scope of my review. In this decision, all references to the fourth record shall be taken to exclude schedule 3.

This review concerns the third and fourth records which the applicant sought in his original request. In its schedule of records, the Department refused to confirm or deny the existence of the third record under section 36(4) of the FOI Act. It refused access to the fourth record under section 35(1)(b) and section 36(1) of the FOI Act.

Analysis and Findings


Jurisdiction

Under the FOI Act, no internal review is required in respect of a decision to which section 38 of the FOI Act applies. In this case, the Department consulted enet under section 38 and subsequently claimed exemptions under section 35(1)(b) and section 36(1) of the FOI Act. I have examined enet's communications with the Department and the Department's submissions and it is clear to me that the Department's final decision took account of enet's views, provided under the section 38 consultation. Overall, this is a case to which section 38 applies. I have considered the fact that an FOI request only falls within the ambit of section 38 if it is one "to which section 35(3) or 36(3) applies or to which section 37(5) applies and which, apart from this section, would fall to be granted" [emphasis added]. In other words, exemptions which are not subject to those subsections are generally not relevant in section 38 cases. Section 35(3) applies the public interest balancing test to section 35(1)(a) and not to section 35(1)(b). The Department has claimed an exemption under section 35(1)(b) over the fourth record. However, in previous decisions, e.g. Case 98049 (Henry Ford & Sons Ltd, Nissan Ireland and Motor Distributors Ltd and the Office of Public Works (1999), available at www.oic.ie), this Office has acknowledged the overlap between the confidentiality requirements of sections 26(1)(a) and (b). I am satisfied that in the circumstances, I should consider both the confidentiality (section 35) and the commercial sensitivity (section 36) exemptions.

Section 15(1)(d) - information in the public domain

Certain parts of the fourth record are on enet's website (paragraphs 2.1 - 2.3.4 of schedule 4; schedule 16; and schedule 21). I therefore find that they are exempt under section 15(1)(d) of the FOI Act, on the basis that they are already in the public domain.

Section 36 - commercial sensitivity

The fourth record - the contract

By way of background, the State owns an infrastructure of fibre optic cables in towns and cities which are known as "Metropolitan Area Networks" (MANs). The MANs enable telecoms operators to provide services such as telephone and broadband to their customers. Following a tendering process, enet was awarded a concession agreement with the State to manage, maintain and operate the MANs. This agreement is set out in the fourth record. Enet effectively acts as a wholesaler of access to the MANS, selling various services to retail telecoms operators.

The Department refused access to the fourth record and any matters pertaining to it as, in its view, they are commercially sensitive records whose release

"could have a negative impact on the ability of enet to continue the business of managing the MANs on behalf of the State in a competitive environment and could result in a material financial loss to the company".


In the course of this review, the Investigator asked enet whether it considered all of the fourth record to be commercially sensitive, or only certain parts. The objective was to identify what the real issue of commercial concern was and to narrow the scope of the review if possible. In response, enet provided this Office with a heavily redacted version of the fourth record. It stated that it viewed all of the contract to be commercially sensitive and the redacted elements (which comprised the majority of the contract's content) to be the most commercially sensitive. Accordingly, it was not possible to narrow the scope of this review and I must consider the entire contract under section 36.
Section 36 of the FOI Act provides that access to a record shall be refused if access would involve the disclosure of commercially sensitive information. Specifically, section 36(1) of the FOI Act provides:

"Subject to subsection (2), a head shall refuse to grant an FOI request if the record concerned contains -
...
(b) financial, commercial, scientific or technical or other information whose disclosure could reasonably be expected to result in a material financial loss or gain to the person to whom the information relates, or could prejudice the competitive position of that person in the conduct of his or her profession or business or otherwise in his or her occupation".

However, section 36(1) does not apply if the public interest would, on balance, be better served by granting rather than refusing the request (section 36(3) refers).

In Cases 98049, 98056 and 98057 (Henry Ford & Sons Ltd and Others and Office of Public Works) - on www.oic.ie - the former Commissioner held that:

"the essence of the test in section 27(1)(b) is not the nature of the information but the nature of the harm which might be occasioned by its release".

The standard of proof in relation to the first limb of section 36(1)(b) is that the harm "could reasonably be expected" to occur. The question arising is whether the expectation is reasonable.

The standard of proof in relation to the second limb of section 36(1)(b) is not a particularly onerous one. All that is required is the possibility of prejudice. In Cases 98049 etc. cited above, the former Commissioner set out his view on the standard of proof needed:

"However, I am conscious that the only requirement which has to be met in this case is that disclosure "could prejudice the competitive position" of the person concerned. In my view the standard of proof necessary to meet this test is considerably lower than the standard required to meet the test of "might reasonably be expected to."".

The Department submits that release of the contract could prejudice the competitive position of enet and may result in a material financial loss to enet. It says that enet's competitors could leverage the information in the contract to gain competitive advantage over enet in the market. Finally, it submits that releasing the contract would penalise enet for transacting business with the State and could discourage future potential bidders.

Enet submits that although it cannot be certain that releasing the contract would cause it financial harm, it believes that it would suffer substantial losses. It has identified two types of harm which it could incur. First, it says that competitors for a future tender to manage and operate the MANs could use the information to their advantage in future tenders. Secondly, it says that its own customers could leverage the information to their advantage in relation to their agreements with enet. Enet submits that the contract could provide an incomplete and unbalanced picture to its customers in respect of enet's obligations to the Department.

Having considered these submissions and having examined the record at issue, I am not satisfied that the first limb of section 36(1)(b) applies. The parties have not demonstrated to my satisfaction that there is a "reasonable expectation" of "material loss" accruing to the third party.

However, the standard of proof necessary to meet the second test in section 36(1)(b) is considerably lower than the standard required to meet the test of "could reasonably be expected to" in the first part. The parties do not have to demonstrate that harm is certain to occur, but merely that there is a possibility of it occurring.

Enet is managing and operating what the Department has described to this Office as a "unique infrastructure". In contacts with this Office, enet acknowledged that there is no direct comparator to the service which it provides to the State under this contractual arrangement. Therefore, this is not a case of disclosing to the world at large the preferential rates which a private body charges a public body for the same service it provides to other customers. Furthermore, neither the Department nor enet identified for this Office particularly sensitive information within the contract, the release of which would disclose (for example) enet's internal business methodology. In the High Court case of Westwood Club v The Information Commissioner & anor [2014] IEHC 375, Cross J. held that a public body must do more than repeat the requirements of the exemption. It must engage with the question of why the particular documents, if disclosed, could prejudice the position of the third party. Having examined the submissions, I accept that in broad terms, the details provided point to a possibility that enet's competitors and/or customers could seek to use the information in the contract to their advantage, thereby prejudicing enet's competitive position. I am therefore satisfied that section 36(1)(b) applies to the fourth record.

Section 36(2) provides for the release of information to which section 36(1) is found to apply in certain circumstances. I am satisfied that none of the circumstances identified at section 36(2) arises in this case.

The Public Interest

Having found that section 36(1)(b) applies, section 36(3) of the FOI Act requires me to consider whether, on balance, the public interest would be better served by granting than by refusing the request. I take the approach that in considering the public interest in cases of this kind, I must consider the interests of each party. The FOI Act itself recognises the public interest in ensuring the openness and accountability of public bodies as to how they conduct their business. I take the view that there is a public interest in the proper administration of public contracts and in ensuring that value for money is obtained. I consider that opennness about the expenditure of public funds is a significant aid in ensuring the effective oversight of public expenditure and that the public obtains value for money, and in preventing fraud and corruption and the waste or misuse of public funds. This public interest is not limited to the expenditure of public funds; I also recognise that there is a public interest in transparency and accountability in the use of public property and public assets.

Set against that, section 36(1) itself reflects the public interest in protecting commercially sensitive information. There is a legitimate public interest in entities being able to conduct commercial transactions with public bodies without suffering commercially as a result. As my predecessor observed in Cases 98114, 98312, 98164 and 98183 (Eircom Plc & Department of Agriculture and Food & Ors), the public interest in openness about the expenditure of public funds is not absolute; for example where the effect of disclosure would be to totally undermine the business of the company and thereby deter public bodies from transacting business with the State.

The MANs are a valuable State asset. In my view, it is in the public interest to disclose the terms and conditions under which enet has agreed to manage, maintain and operate this valuable State asset. In reaching this conclusion, I have had regard to the finding of the former Commissioner in Case 080232 (Mr Colin Coyle, Sunday Times & Dublin City Council). That case related to a concession agreement concerning the provision of outdoor advertising and public amenities in Dublin City, sometimes referred to as the "bikes for billboards" scheme. The Commissioner referred to the "significant public interest in openness and transparency in the matter of contracts which public bodies enter into in connection with managing land and other assets on behalf of the public". She observed that there was a need for transparency and accountability in the usage of public property and assets and that there was a strong public interest in the proper administration of public contracts and ensuring that value, in the broadest sense of that term, was obtained.

I have also had regard to the findings in Case 99183 (McKeever Rowan Solicitors & The Department of Finance). In that case, the former Commissioner held that there was a "significant need for openness and accountability" in relation to a contract for services between the Minister and advisors on the sale of a valuable State asset. He also stated that the public body in that case "could not reasonably be expected to keep that information or any of the other contract terms confidential in the absence of exceptional circumstances". In Cases 98049 etc. cited above, the former Commissioner commented that:

"one would have to question, having regard to the coming into force of the Freedom of Information Act, how any public body could have an understanding that the details of its expenditure of public money would be kept confidential".

These findings were made under section 26, which deals with confidentiality. Nonetheless, I believe that they identify a principle of openness about the use of public funds and assets which applies equally to the consideration of the public interest under section 36. I adopt the views espoused in the cases referred to above. The parties have not pointed to any exceptional circumstances that apply in this case such as to override the need for transparency. In my view, enet was the successful bidder in a tender process for the use of a State-owned asset which generates revenue and there should be transparency around this transaction.

In the first place, I do not accept that the release of this information would deter future potential bidders from seeking to manage, maintain and operate this revenue-generating asset on behalf of the State. Indeed, as the former Commissioner observed in Case 98049 cited above, there would appear to be a contradiction between the arguments that on the one hand, competitors will use the information in future tenders, and yet on the other hand, competitors will be deterred from entering into future tenders.

Secondly, in any event, I do not accept that the information contained in the records would automatically benefit future tenderers. This contract relates to one particular phase of the MANs; it does not follow that the State's requirements for any future phase will be exactly the same. Moreover, I note that the current prices in respect of part of the services are on enet's website. Thirdly, neither the Department nor enet has demonstrated to me that releasing the contract would "totally undermine" enet's business (see Case No. 98114 above). Finally, I agree with the findings of the former Commissioner in Case No. 98114 that the possibility of information being misunderstood is not a good reason to refuse access to records. It would be open to the Department and/or enet to put further information in the public domain, if that were necessary to clarify enet's contractual relationship with the State or any other aspects of enet's operations.

Furthermore, I am mindful that section 11(3) of the FOI Act requires public bodies to have regard to the need to achieve greater openness in their activities and inform scrutiny, discussion, comment and review by the public of their activities. I consider this to be relevant here in that it is a public interest which equates with "a true public interest recognised by means of a well known and established policy, adopted by the Oireachtas, or by law " as referred to by Macken J. in Rotunda Hospital v Information Commissioner [2011] IESC 26.

Having regard to the above, I find that, on balance, the public interest would be better served by the release of the fourth record.

Section 35 - confidentiality

The fourth record - the contract

Section 35(1)(b) of the FOI Act provides:

"a head shall refuse to grant an FOI request if -

...

(b) disclosure of the information concerned would constitute a breach of a duty of confidence provided for by a provision of an agreement or enactment (other than a provision specified in column (3) in Part 1 or 2 of Schedule 3 of an enactment specified in that Schedule) or otherwise by law.".

The Department also refused access to the fourth record on the basis that a duty of confidence existed between the parties to the concession agreement. In its submissions to my Office, it specified that disclosure of the fourth record would breach clause 32 of the contract. On examining clause 32, I note that it is itself subject to the FOI Act. Indeed, although enet stated to this Office that it understood that the contract would remain confidential, in its submissions to the Department, enet accepted that it was clear that the confidentiality clause did not exempt the fourth record under the FOI Act. Instead, enet submitted that its inclusion indicated a mutual understanding of the commercially sensitive nature of the fourth record and the likely potential harm arising as a result of commercially sensitive and/or confidential information.

In the circumstances of this case, I am not satisfied that releasing the fourth record would breach a duty of confidence for the purposes of section 35(1)(b) of the FOI Act.

First, as the former Commissioner noted in Case 080232 cited above, section 35(2) of the FOI Act disapplies section 35(1) in the case of agreements between public bodies and service providers. I consider that in managing, maintaining and operating the MANs in accordance with the concession agreement, enet is providing a service to the Department under a contract for services.

Secondly, in any event, I do not accept that the parties could have had a mutual expectation of confidentiality in respect of the contract, which would be required for section 35(1)(b) to apply. Although clause 32(1) of the contract requires the parties to keep the contract confidential, clause 32(2) disapplies this obligation to disclosures which are required under the FOI Act, while obliging the State to use reasonable endeavours to prevent disclosure of "Confidential Information" (defined as information which is agreed by the parties from time to time as being confidential). The parties did not refer my Office to any "Confidential Information" in respect of which they had a mutual expectation of confidence. Instead they sought to apply section 35(1)(b) to the entire contract. Over a decade after FOI legislation came into force, enet entered into a contract with the State to manage a valuable State-owned asset which would bear income for them. Having regard to my predecessor's findings in Case 98049 cited above, I do not accept that the parties could reasonably have expected that the terms and conditions of this agreement could remain confidential. Moreover, as I have noted, enet accepted in its submissions to the Department that clause 32 did not put the contract out of reach of the FOI Act. As I have also noted, the Department's initial proposal was to release the contract in the public interest. In my view this undermines any assertion that the parties could have felt bound by a mutual expectation of confidentiality.

Therefore, even if section 35(2) does not operate to disapply section 35(1), I would find that section 35(1) does not apply. Accordingly, I find that the Department was not justified in refusing access to the fourth record under section 35(1)(b).

Section 36(4) - commercial sensitivity: neither confirm nor deny

The third record - itemised record of any and all payments made to enet (neither confirmed nor denied)

Section 36(4) provides that a public body shall not disclose the existence of a record where it is satisfied that the disclosure of the existence or non-existence of the record could have an effect specified in section 36(1) of the FOI Act. This provision is usually invoked in circumstances where, even if the records are not themselves released, knowledge that they exist could prove damaging. In the schedule of records which the Department provided to my Office, the Department refused to confirm or deny the existence of the third record. I must decide whether it was justified in doing so. Having regard to section 25 of the FOI Act, I must take all reasonable precautions not to disclose whether such a record exists.

I accept that the disclosure of the existence or non-existence of a record of payments made to enet could prejudice enet's competitive position and would therefore be commercially sensitive under section 36(1)(b) of the FOI Act. However, having regard to my conclusions above and in particular the public interest in ensuring the maximum openness in relation to the use of public funds and assets, I find that the Department was not justified in refusing to confirm or deny the existence of a record of payments made to enet by the State.

I therefore annul the Department's decision under section 36(4) and direct the Department to confirm or deny the existence of the third record. If the Department confirms the existence of such a record, I direct it to conduct a fresh decision-making process in accordance with the requirements of the FOI Act. I would remind the Department that if it confirms the existence of the third record but refuses access to it, it will be obliged to give reasons for its refusal, under section 13 of the FOI Act.

Decision

Having carried out a review under section 22(2) of the FOI Act, I hereby vary the decision of the Department. I annul the decision in respect of the fourth record and direct its release (with the exception of paragraphs 2.1 - 2.3.4 of schedule 4; schedule 16; and schedule 21 to the fourth record). I direct the Department to confirm or deny the existence of the third record and if the third record exists, to decide whether to grant access to it.

Right of Appeal

A party to a review, or any other person affected by a decision of the Commissioner following a review, may appeal to the High Court on a point of law arising from the decision. Such an appeal must be initiated by the applicant not later than eight weeks after notice of the decision was given, and by any other party not later than four weeks after notice of the decision was given.

Peter Tyndall
Information Commissioner