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Breach of Non-Disclosure Agreements (NDAs): How has Brexit changed your ability to protect your sensitive information?

  • United Kingdom
  • Brexit
  • Commercial litigation
  • Litigation and dispute management

16-09-2021

NDA breach and protecting your sensitive information: What is the position after Brexit?

An NDA only has teeth if the provider of the confidential information is able to get urgent relief to compel the recipient of their confidential information from misusing it.  Prior to Brexit, English judgments giving interim or final injunctions were automatically recognised and enforced within the European Union (“EU”) as if they were judgments of other EU Member States.  Since the 1st of January 2021, that is no longer the case.  This leaves UK companies entering into cross border NDAs with EU based counterparties having to plan more deeply their enforcement strategy.

A pro-active approach to considering what should a NDA’s dispute resolution clause provide for in order to protect a UK company’s sensitive information (whether it is technical, commercial or financial) in the event it is leaked by an EU based company, having considered the plan for enforcement in advance, is now required to avoid losing time and making a false step if an injunction is required.   Courts provide one route but is the emergence of the emergency arbitrator a true alternative? In answering this question, two major considerations enter into play: (i) urgency and (ii) ease of enforcing an injunction issued by a court or an interim award issued by an emergency arbitrator. 

The balancing exercise of weighing the pros and cons of either litigating or arbitrating breach of NDAs is less straightforward since Brexit, whose direct effect was that since 1 January 2021, EU regulations simplifying cross-border litigation (in connection with jurisdiction and enforcement) no longer apply in relation to the UK.

We set out below some key factors to consider from a dispute resolution perspective when entering into NDAs in a post-Brexit world.

Court Injunction vs Emergency Arbitrator’s Order: speed of remedy

Applying for an interim injunction before English Courts

The English rules of civil procedure allow a party to make an urgent (ex parte in exceptional circumstances) application for an interim order before the English courts. In practical terms, such an application can be made at very short notice (i.e. within less than 24 hours) and a judge could be reached outside of business hours if needed.

That order may be made at any time, including before proceedings are started provided that the matter is urgent and it is otherwise desirable to do so in the interests of justice.

Generally speaking, English courts do not make an order without notice unless giving notice would enable the defendant to take steps to defeat the purpose of the injunction (as in the case of a freezing order or search order), or where there is some exceptional urgency such as when the dissemination of sensitive information can cause significant harm to the applicant, which means there is no time to give notice before the injunction is required to prevent the threatened wrongful act.

Seeking an order from an Emergency Arbitrator

As a starting point, a confidential arbitration process is perhaps a rational place to resolve a dispute concerning confidential information.  Many leading arbitral institutional rules include provisions for the appointment of an emergency arbitrator to hear such applications.  For example, under the International Chamber of Commerce (“ICC”) arbitration rules 2012, 2017 and 2021, the emergency arbitrator may grant urgent or emergency interim measures or relief (article 29(1)).  The London Court of International Arbitration (“LCIA”) arbitration rules and the Stockholm Chamber of Commerce (“SCC”) arbitration rules also grant the emergency arbitrator the same powers as a fully constituted tribunal would have under the relevant rules (article 9.8 LCIA Rules 2014 and 2020; articles 37(1)-(3), and article 1(2) of Appendix II, SCC Rules 2017; and articles 26(1) and 43(1)).

The emergency arbitrator has a wide discretion to order whatever relief they consider necessary. However, it is important to note that unlike before English Courts, the appointment of an emergency arbitrator occurs within a longer timeframe, usually within one to three business days from the time the application is received by the institution.

Several institutions specify the timeframe in within which the emergency arbitrator is expected to make their decision. For example, the LCIA arbitration rules for 2014 and 2020 provide that such a decision shall be made no later than 14 days following the appointment of the emergency arbitrator.  Whilst this timeframe may be considered “short” from an arbitration perspective, by the time the emergency arbitrator is appointed and their decision is made, the defendant’s continued misuse of the confidential information may have irreparable harm that cannot be quantified into a solid claim for all the different losses suffered.

Enforcement in the EU post-Brexit (since 1 January 2021)

Enforcement of an interim injunction handed down by English Courts

The EU regulation that allowed automatic recognition and enforcement of English judgements (e.g. the Brussels Recast Regulation and the Lugano Convention) ceased to apply since the 1st of January 2021.

As a result, as at the date of this note, the beneficiary of an interim injunction by the English courts will have to follow the applicable law relating to enforcement of foreign judgements in the EU member State within which it seeks to enforce its injunction.

Such applicable laws and the speed at English court decisions can be enforced in the EU, varies from one EU member State to another. 

Enforcing an Interim Arbitration Award

Generally speaking, the enforcement of arbitral awards have a much greater chance of enforcement around the globe and therefore the procedure for enforcement in the local courts of EU member states will likely be much smoother.

The UK’s withdrawal from the EU has no impact on the enforcement of English arbitral awards within the EU as both are signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

However, an emergency arbitrator does not have the power or ability to compel compliance with his or her order or award.  Whether an EU member State’s courts will enforce the decision of an emergency arbitrator will depend on the particular provisions of that country's arbitration laws.  

Conclusions / Recommendations

  • the choice of the dispute resolution mechanism in your NDA is of crucial importance in impacting the speed of obtaining remedy and its ease of enforcement. The UK’s withdrawal from the EU has required businesses to reconsider dispute resolution clauses in their contractual agreements
  • injunctive relief from the English courts is generally a quicker remedy to protect a party’s position for breach of an NDA, but since 1 January 2021 there is no automatic recognition of enforcement in EU Member States. As a result, before signing an NDA, a UK party should obtain local law advice in the relevant EU Member State regarding the procedure for recognising and enforcing English judgements
  • parties may increasingly turn to arbitration as an alternative method which provides a reliable enforcement regime under the New York Convention, however, the speed to obtain such remedy from an emergency arbitrator is slower and the breaching party cannot be compiled to comply with the interim award
  • there is no one-size fits all approach.  Eversheds Sutherland has a team of dispute resolution specialists which can advise you on the best approach for your business