Parliamentary and Health Service Ombudsman / Improving Services / Selected Cases / Investigations Completed April-December 2000 Case No. A.31/00

Mr E, legal adviser to an interest group, complained that ECGD failed to provide him with copies of the export credit support application and supporting documents, submitted by Company X in relation to the Ilisu Dam project in Turkey. ECGD said that the application and its supporting documents could be withheld under Exemptions 13 and 14a of the Code, and that the information was also protected by the law of confidence. The Ombudsman widened the scope of the investigation to include all correspondence between ECGD and Company X, including an Environmental Impact Assessment Report (EIAR) submitted by them in support of their application. However, the EIAR had already been the subject of another request to ECGD by the interest group, which ECGD had refused under the Environmental Information Regulations 1992. The Ombudsman said that he could not consider the EIAR under the Code since it had already been dealt with under the 1992 Regulations, which took precedence. Turning to the remaining information, the Ombudsman accepted that Exemption 13 was relevant to the type of information sought by Mr E but that, if the matter were being considered solely in terms of the Code, he believed that the wider public interest should override the provisions of Exemption 13. However, the Code cannot set aside statutory or other restrictions on disclosure. The Ombudsman noted legal advice obtained by ECGD that, if they disclosed the information sought by Mr E without the consent of Company X, a court would be likely to conclude that ECGD had unlawfully disclosed confidential information. The Ombudsman concluded that ECGD were justified in refusing to supply the specific information sought by Mr E. Consideration of the applicability of Exemption 14(a) was therefore unnecessary. ECGD did agree to provide Mr E with a separate paper detailing, in general terms, the type of information included in the application for export credit support and the considerations that Company X would need to address in order to satisfy ECGD's requirements. The Ombudsman saw this as a reasonable response to the request for information.

5.1 Mr E, legal adviser to an interest group, complains that the Export Credits Guarantee Department (ECGD) has failed to provide him with information which he believes he is entitled to under the Code of Practice on Access to Government Information (the Code). My investigation began in May 2000 when I received the comments of the Chief Executive of ECGD. I have not put into this report every detail investigated by my staff; but I am satisfied that no matter of significance has been overlooked.

Background

5.2 On 11 February 2000, Mr E wrote to the Minister for Trade at the Department of Trade and Industry (DTI) about a reply the Minister had made to a Parliamentary Question on 9 February. The question concerned an application for export credit support that had been made by Company X, a major power, engineering, and construction company, in respect of the Ilisu Dam project in Turkey. In his reply to the Question, the Minister said that the application had been made under Section 1 of the Export and Investment Guarantees Act 1991 (the Act), and that he was unable to place copies of the application and its supporting documents in the House of Commons library because they were classified as "Third Party's Commercial Confidence", and were therefore exempt under Exemption 13 of the Code. In his letter to the Minister, Mr E argued that the Code had not been applied correctly, and asked for copies of the application and all supporting documents in accordance with the Code's requirements.

5.3 The Minister for Trade replied on 23 February. He noted Mr E's views in respect of Exemption 13, but said that his officials had reviewed the matter and that he and they still remained of the opinion that Exemption 13 applied. He added that the contract for the project was still under negotiation and that there was a risk that disclosure might harm the competitive position of the applicant, their consortium partners, and any potential sub-contractors. The Minister also said that when the applicants became aware that a Parliamentary Question was due to be asked, they had contacted his officials and asked that their application should continue to be treated as 'Commercial in Confidence'. The Minister said that, in considering disclosure, he had weighed the risk of potential harm against the public interest in the information in the application form and had concluded that Exemption 13 still applied. In addition, he said that Exemption 14 (a) also applied to the information sought. He concluded by saying that some information on the environmental aspects of the dam project was already in the public domain and that more was to be made available.

The Chief Executive's comments

5.4 Commenting on the complaint, the Chief Executive of ECGD said that he knew that the Ilisu Dam project had aroused strong feelings in a number of quarters, including the interest group, who were arguing that the government should withhold support for it. He said that ECGD had published information where they were able to do so. For example, in December 1999, two reports commissioned by DTI Ministers had been published ("Stakeholders' Attitudes to Involuntary Resettlement in the Context of the Ilisu Dam Project in Turkey" and "Environmental Review of Ilisu Dam Project: Desk Review of EIA and Associated Documents"). The Chief Executive went on to say that ECGD had to consider the interests of those parties with whom they undertook business and whose rights were protected by English law, the Code, and the Environmental Information Regulations 1992 (the Regulations). As a result, they had turned down an earlier request by the interest group for a copy of the Environmental Impact Assessment Report (EIAR) produced by the project's main contractor, a decision the Interest Group had not challenged.

5.5 With regard to the interest group's current complaint, the Chief Executive said that Company X's application for export credit support should not be disclosed under Exemptions 13 and 14(a) of the Code, and that the information was also protected by the law of confidence. The contract had still not been awarded. He considered therefore that the disclosure of information on pricing and sourcing matters could prejudice the position of Company X, their consortium partners and potential subcontractors and, as such, fell within the requirements of Exemption 13 of the Code. He noted that when notice had been received of the Member's Parliamentary Question, Company X confirmed to ECGD that they wished their application to be treated as confidential. He went on to say that in April Company X again confirmed to ECGD their expectation that their application would be treated as commercially confidential, and ECGD took the view that this fulfilled the requirements of Exemption 14(a) of the Code. He concluded by saying that ECGD owed a duty of confidence to commercial parties outside government, and that there was a substantial likelihood that this would be breached if they complied with the Interest Group's request.

The Code of Practice on Access to Government Information

5.6 Exemption 13, which concerns a 'Third party's commercial confidences', covers:

'Information including commercial confidences, trade secrets or intellectual property whose unwarranted disclosure would harm the competitive position of a third party'

In this context it should be noted that the second paragraph of Part II of the Code contains the following general paragraph:

'...References to harm or prejudice include both actual harm or prejudice and risk or reasonable expectation of harm or prejudice. In such cases it should be considered whether any harm or prejudice arising from disclosure is outweighed by the public interest in making information available...'

5.7 Exemption 14 is headed 'Information given in Confidence'. Exemption 14(a) covers:

'Information held in consequence of having been supplied in confidence by a person who:

gave the information under a statutory guarantee that its confidentiality would be protected; or
was not under any legal obligation, whether actual or implied, to supply it, and has not consented to its disclosure.'

5.8 The Code does not set aside statutory or other legal restrictions on disclosure. The latter category covers restrictions on disclosure imposed by the law of confidence which has been developed by the courts. A claim for breach of confidence may be brought where the information concerned has the necessary quality of confidence, the information was communicated in confidence and the defendant is using the information in an unauthorised way. Disclosure is not prohibited where the information is already in the public domain or where there is a public interest in disclosing it which outweighs the interest in maintaining the confidence. However, the determination of the public interest in individual cases is a matter for the Courts.

Statutory Background

5.9 Section 1 of the Export and Investment Guarantees Act 1991 states:

(1) The Secretary of State may make arrangements under this section with a view to facilitating, directly or indirectly, supplies by persons carrying on business in the United Kingdom of goods or services to persons carrying on business outside the United Kingdom.(2) The Secretary of State may make arrangements under this section for the purpose of rendering economic assistance to countries outside the United Kingdom.(3) The Secretary of State may make arrangements under this section with a view to facilitating—

a) the performance of obligations created or arising, directly or indirectly, in connection with matters as to which he has exercised his powers under this section or section 2 of this Act, or

(b) the reduction or avoidance of losses arising in connection with any failure to perform such obligations.

(4) The arrangements that may be made under this section are arrangements for providing financial facilities or assistance for, or for the benefit of, persons carrying on business; and the facilities or assistance may be provided in any form, including guarantees, insurance, grants or loans.

Regulation 4 of The Environmental Information Regulations 1992 reads;

' Exceptions to right to information (3) For the purposes of these Regulations information must be treated as confidential if, and only if, in the case of any request made to a relevant person under regulation 3 above-.............

(iii) has not consented to its disclosure;'

Export Credits Guarantee Department

5.10 ECGD's primary aim is to help exporters of UK goods and services to win business, and UK firms to invest overseas, by providing guarantees, insurance and reinsurance against loss. It is responsible to the Secretary of State for Trade and Industry. As the world's first Export Credit Agency, ECGD was established in 1919 to help British exporters re-establish their trade after the First World War. ECGD's main function has always been to provide insurance cover or guarantees for commercial transactions. Export credit insurance cover protects against the risk that British exporters (or banks who finance loans in favour of British exporters) will not be paid by overseas banks or borrowers. Under their Overseas Investment Insurance scheme, ECGD also insure investors against the risk that a range of political events may adversely affect their overseas investments. ECGD charges its customers a premium when they take on risk. If a borrower or buyer defaults on repayments, ECGD pays (valid) claims under the policy or guarantee. It makes recoveries, if it can, of amounts paid out in claims in the same way as any ordinary insurer would.

The Interest Group

5.11 The interest group is one of the leading environmental pressure groups in the United Kingdom and forms part of the largest international network of environmental groups in the world, represented in 61 countries.

General Background—The dam at Ilisu

5.12 The Turkish Government has for many years been developing plans for hydro-electric power generation in South Eastern Anatolia (the "GAP" project). As a result of an increased demand for electricity following greater urbanisation and industrial and commercial development, those plans are now being implemented. A large dam is planned at Ilisu on the River Tigris, 65 kms upstream from the borders with Iraq and Syria. In 1997 the Turkish Government invited Company Y of Switzerland to form a consortium to build a power plant there, on the understanding that a 100% debt financing package would be arranged by the consortium and its banking advisers. The export credit agencies of the main countries represented in the consortium have been approached for credits.

5.13 Once construction starts, it is expected that the project will take at least seven years to complete. The sponsors of the project are the Turkish Government, through the Agency for State Hydraulic Works (Devlet Su Isleri or "DSI"). The total cost is likely to be around $2 billion, half of which would be for imported elements. Company X are to lead the civil works element of the project. Although prices have yet to be finalised, their potential share of the contract value is estimated at around $315million: $215million from the UK and $100million from a US subsidiary. Much of the $215 million will be spent on equipment and services to be exported from the UK.

5.14 Company X first formally approached ECGD with details of the proposed venture in January 1998. A preliminary application for export credit was made in June 1998, and a formal application in October of the same year. In April and May 1999, Ministers commissioned two reports through ECGD; an independent evaluation by a firm of environmental consultants of the environmental components of the EIAR commissioned earlier; and a report on resettlement issues conducted by an academic from the University of Bradford. On 21 December 1999, in a press release, the Secretary of State released the two reports and announced that he was;

"...minded to grant export credit conditional on the Turkish authorities agreeing to address the concerns we have about the environmental and social impact of the project...

"Those concerns, identified as areas where changes would be required before the British Government could consider export credit support, were: a) the need to draw up a resettlement programme which reflected internationally accepted practice and included independent monitoring; b) provision being made for upstream water treatment plants capable of ensuring the maintenance of water quality; c) an assurance that adequate downstream water flows would be maintained at all times; and d) the production of a detailed plan to preserve as much of the archaeological heritage of the historical town of Hasenkeyf as possible.

Investigation

5.15 The complaint as put to this Office by the interest group requested copies of the application by Company X and all supporting documents. The Code gives no right of access to documents: the right, subject to any relevant exemption, is only to information. Both the present Ombudsman and his predecessor have, however, taken the view that the release of actual documents is often the best way of making available information we are recommending for disclosure. With that in mind, my initial consideration was therefore to establish what this request could be interpreted as covering in terms of information sought. In response to the complaint, ECGD provided this Office with a copy of Company X's formal application for Buyer Credit Finance and their covering letter, both dated 9 October 1998. The covering letter sets out the background to the application. The application itself, which is marked "Restricted—Commercial" and consists of nine pages, includes information about the composition of the joint venture, details of the buyer and borrower, and a summary of the project (including an estimate of costs). In addition, details are provided of the extent of the suppliers' and buyers' contractual responsibilities. ECGD also provided a copy of the Council of Ministers' Decree, accompanied by a translation provided by Company Y to Company X on 5 December 1997. Finally, a copy of a letter from the Director General of DSI to the German Government demonstrating the importance of the Ilisu dam to Turkey was also attached, since this had been referred to in Company X's covering letter.

5.16 While these papers can fairly be regarded as 'the application and all supporting documents' in a narrow interpretation of those words, I took the view that this Office's investigation should range more widely. I therefore decided that the investigation should also consider other relevant documentation, and include any relevant papers leading to the application and any subsequent correspondence serving to clarify or support the application after its submission. To this end, my staff examined in detail 38 files of documentation before narrowing the focus of the investigation to the correspondence (in which I also include facsimile messages and e-mail printouts) between Company X and ECGD since the company's initial approach in January 1998. I have excluded internal memoranda and communications between government departments as these did not feature in the information request.

5.17 The papers examined include two draft Buyer Credit Finance applications to ECGD before the formal application was submitted in October 1998. Other correspondence I have examined seeks to clarify issues such as export insurance policy cover rates quoted by ECGD, and changes to the composition of the original application brought about by a variety of factors (e.g. the identification of the need to purchase additional equipment from other countries not previously involved). An important document identified during the examination of ECGD's files is a Preliminary Costing Indication from ECGD dated 3 July 1998, which sets out a range of conditions that Company X would be required to meet if their application for export credit were to be approved. One of the criteria set out in the Preliminary Costing Indication was the need for careful consideration of the environmental aspects of the project. To this end, ECGD asked to be furnished with a copy of the original EIAR commissioned by Company Y. This was provided by Company X on 14 August 1998.

5.18 It is because ECGD clearly thought they needed to see it, that I have decided that the original EIAR should also be considered as a relevant supporting document. I have therefore considered whether or not the EIAR is a document which falls within the ambit of the Environmental Information Regulations 1992 (the Regulations). This is an important consideration since the Code (as a non-statutory document) cannot take precedence over a statutory prohibition or requirement. Consequently, if the EIAR is covered by the Regulations it would not be covered by the Code and would therefore fall outside my jurisdiction.

5.19 This matter was considered very carefully by ECGD when the interest group requested from them a copy of the EIAR. Their view was that, as Company Y wished ECGD to treat the EIAR as confidential, Regulation 4(3)(c) prevented them providing the interest group with a copy: these regulations govern the question of consent to disclosure. This decision was not subsequently challenged by the interest group. On that basis, the question of the disclosability or otherwise of the EIAR under the Code becomes immaterial: I cannot consider it as the matter has already been dealt with under the Regulations, which take precedence.

Assessment

5.20 I now therefore consider the applicability or otherwise of the Code to all the information contained in Company X's process of application (less the EIAR) and how the Code exemptions ECGD have cited apply to that information. ECGD have argued that Exemption 13 is the key applicable exemption. They have said that, as the contract has still not been awarded, the disclosure of information on pricing and sourcing could prejudice the position of Company X, their consortium partners, and their potential sub-contractors. Exemption 13 deals with the need to protect sensitive commercial information from disclosure in circumstances that would adversely affect those to whom the information relates; and no distinction is drawn between whether the information was provided under a statutory obligation or provided voluntarily.

5.21 It is entirely understandable that any company providing information to government on a confidential basis (as was the case here) would need to be sure that the government would not apply its general commitment to openness in such a way as to damage the company's legitimate interests or to undermine the trust they had placed in the government. In that context, I note that Company X continue to take the line that the information they have provided should remain confidential. They argue that they are still engaged in contractual negotiations with the buyer and that the documents contain information which could prejudice the consortium's negotiating position with the Turkish authorities.

5.22 Exemption 13, however, also incorporates a harm test; that is, a test whether any harm likely to arise from the disclosure of the information requested would be outweighed by the public interest in making the information available. In this instance, the harm referred to is the damage disclosure would do to the negotiating position of Company X and to the other elements of the civil works joint venture led by them. In considering whether the public interest in this particular project outweighs the potential harm that Company X may face if the information contained in their application (and any documents which I believe should be classified as supporting that application) were to be released, I have taken into account the following considerations.

5.23 There is no doubt that the Ilisu Dam project has generated a good deal of public debate. Those in favour of the project, and those against it, have had their views reported widely in the media; and information about the project can be obtained from many sources including a range of internet websites. Much information about the project is therefore already in the public domain. The matter has been the subject of Parliamentary Questions and debated in the House of Commons; it has also been considered by both the House of Commons Trade and Industry Select Committee and the International Development Select Committee, whose reports have been published. This shows that the Ilisu Dam project is regarded by both the government and Parliament as a matter of legitimate public interest: it also seems to me reasonable to suppose that proper debate cannot take place without the wide availability of all relevant information. In my view, this is a case where the wider public interest in the release of the majority of the information sought should override the provisions of Exemption 13, if the matter were to be considered solely in terms of the Code.

5.24 However, I have noted earlier (paragraph 5.8) that the Code does not set aside statutory or other restrictions on disclosure. I am therefore obliged to have regard to the possibility that the release of the information provided to ECGD by Company X could found an action for breach of confidence, if it were to be revealed without the latter's consent. Company X have been consulted by ECGD and have maintained their view that they regard all the material as provided in confidence and that they do not consent to its release. In this context, I took note of the legal advice provided to ECGD (and passed on to this Office) that, if they disclosed the information sought in the absence of such consent, a court would be likely to conclude that ECGD would thereby be unlawfully disclosing confidential information.

5.25 ECGD have also sought to rely on Exemption 14(a) of the Code. However, as will be seen in the preceding paragraph, all the information supplied to ECGD by Company X was supplied in confidence and would be protected from disclosure by ECGD by the law of confidence. I have not therefore considered the question of whether or not ECGD are entitled to rely on Exemption 14(a).

Conclusion

5.26 While I recognise that there is a strong public interest in the release of information about this controversial project, I am unable to recommend the release of information which could found an action for breach of confidence. I have however agreed a proposal by ECGD that they should provide the interest group with a separate paper detailing in general terms the type of information included in the application for ECGD cover and the considerations which Company X would need to address in order to satisfy ECGD's requirements.

5.27 I conclude that ECGD were justified in refusing to disclose the specific information sought by the interest group on the basis that its release, in the absence of consent by Company X, could found a legal action for breach of confidence. However, I consider the decision of ECGD to release a separate paper providing general information on the application to be a reasonable response to this information request. I note also that it has been agreed that the revised EIAR will be made publicly available before any final decision is taken.

Total screening and investigation time = 34 weeks

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Last updated: 4 April 2005