The preservation of commercially sensitive information during litigation

(Image by 726056 by pixabay)

Issues of confidentiality often arise in litigation under procurement challenges, as illustrated in the recent case of Bechtel v High Speed Two (HS2) [2021] EWHC 458.

In this case Mr Justice Fraser noted, “[I]n my judgment, the level of profit in percentage terms that a tenderer included in its bid in this procurement competition is properly described as commercially confidential, and is also something that any tenderer, whether a claimant in proceedings or otherwise, would wish to keep confidential for justifiable reasons.”[35]

In terms of how to retain the confidentiality of such information during litigation, it is contrary to open justice and transparency to have trials conducted (even partially) in secret for all but those legal representatives who sit within a court’s prescribed ‘confidentiality ring’.

At the same time judgements need to be readily comprehensible and include reference to all relevant material and reasoning of the the judge, so having a separate confidential appendix or schedule in a judgement should only occur when there is no viable alternative.

In the circumstances of the present case Mr Justice Fraser concluded there was no viable alternative available to him, for without such a confidential appendix to his judgement (available only to those within the ‘confidentiality ring’), he “would run the real risk of destroying justified confidentiality in commercial issues.”[34]

The affair of the century? France’s Urgenda Moment.

In March 2019, various NGOs lodged four charges before the administrative court of Paris against the French State in respect of its deficiencies in the fight against climate change, and sought reparation for their moral damage, for ecological damage. Last Wednesday the court ruled that the action for compensation for ecological damage, provided for by the civil code, was admissible and open against the State. The court held that the State should be held responsible for part of this damage if it had not respected its commitments in terms of reducing greenhouse gas emissions. It rejected the claim for compensation for ecological damage and stressed that such compensation is primarily in kind, the damages being pronounced only in the event of impossibility or insufficient repair measures. 

However, the applicants were justified in requesting compensation in kind for the ecological damage caused by non-compliance with the objectives set by France in terms of reducing greenhouse gas emissions. A two month period for additional investigation was ordered to determine the measures to be ordered to the State to repair the damage caused or prevent its aggravation.

Finally, the court considered that the shortcomings of the State in respecting its commitments in the fight against global warming undermined the collective interests defended by each of the applicant associations, and awarded each of the NGOs the sum of one euro which each had requested by way of compensation. 

The judgment, in French, is to be found here: 1904967-1904968-1904972-1904976

Last year’s New Year’s Day it was Sulphur – this year it’s Cyber

As from today, the IMO’s Resolution MSC.428(98) – Maritime Cyber Risk Management in Safety Management Systems – kicks in. The resolution encourages administrations to ensure that cyber risks are appropriately addressed in existing safety management systems (as defined in the ISM Code) no later than the first annual verification of the company’s Document of Compliance after 1 January 2021. The IMO’s Guidelines Present five functional elements that support effective cyber risk management, which are not sequential – all should be concurrent and continuous in practice and should be incorporated appropriately in a risk management framework:

1 Identify: Define personnel roles and responsibilities for cyber risk management and identify the systems, assets, data and capabilities that, when disrupted, pose risks to ship operations.

2 Protect: Implement risk control processes and measures, and contingency planning to protect against a cyber-event and ensure continuity of shipping operations.

3 Detect: Develop and implement activities necessary to detect a cyber-event in a timely manner.

4 Respond: Develop and implement activities and plans to provide resilience and to restore systems necessary for shipping operations or services impaired due to a cyber-event.

5 Recover: Identify measures to back-up and restore cyber systems necessary for shipping operations impacted by a cyber-event.

Happy New Year!

It has been a challenging and in many ways difficult year for us all! But, the Institute of International Shipping and Trade Law has continued its activities doing what it does best: publishing academic work, organising events and contributing to the development of law and policy.

We would like to wish all of our friends, colleagues and followers a happy new year and we hope everyone safely enjoy the festive season! It is our expectation that 2021 will be a better year for us all!

The Third Group of Amendments to the Maritime Labour Convention 2006 Enters into force Later this Month

Later this month, the third group of amendments to the Maritime Labour Convention 2006 will be entering into force (26 December 2020). While these amendments have been discussed in a previous post on this blog https://iistl.blog/2020/06/10/singapore-passes-legislation-to-give-effect-to-the-third-group-of-amendments-to-the-maritime-labour-convention-2006/ , it may be worth reminding that they relate to Standard A 2.1, Standard A 2.2 and Regulation 2.5 of the Convention. The amendments ensure that a seafarer’s employment agreement (SEA) shall continue to have effect, wages and other contractual benefits under the SEA, relevant collective bargaining agreements or applicable national laws shall continue to be paid and the seafarers’ right to be repatriated shall not lapse for as long as a seafarer is held hostage on board a ship or ashore by pirates and armed robbers.

IISTL Celebrating Its 20th Anniversary with Sir Peter Gross!

This year we are celebrating our 20th anniversary! Yes it has been 2 decades since the foundation of the IISTL in 2000 by Professor DR Thomas! The current Director Professor Soyer on behalf of every IISTL member and the School of Law wishes to invite you to join us to celebrate this great occasion that also coincides with our University’s Centenary!

7 December 2020 at 6.00 pm (online)

Book your place online: https://lnkd.in/daRxurN

The Deepwater Horizon liability insurance case. The arbitrator’s duty of disclosure and removal under s.24 of the Arbitration Act 1996.

Halliburton Company (Appellant) v Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) (Respondent)  [2020] UKSC 48 was a dispute relating to the appointment of Mr Ken Rokison QC as sole arbitrator under a liability insurance policy which arose out of damage caused by an explosion and fire on the Deepwater Horizon drilling rig in the Gulf of Mexico. The relevant parties were BP Exploration and Production Inc. (“BP”) the the lessee of the Deepwater Horizon rig, Transocean Holdings LLC (“Transocean”) the owner of the rig and provider of crew and drilling teams to BP, and, Halliburton Company (“Halliburton”)who provided cementing and well-monitoring services to BP.

Halliburton and Transocean both entered into a Bermuda Form liability policy with the respondent, Chubb Bermuda Insurance Ltd (“Chubb”). A  US judgment was given apportioning blame between the parties, and Halliburton settled the claims against it. Chubb refused to pay out  under the liability policy, contending that Halliburton’s settlement was not a reasonable settlement. The same happened to Transocean. The Bermuda Form provided for arbitration.

Mr Rokison was appointed as sole arbitrator in Halliburton’s arbitration against Chubb, after the parties were unable to agree a third arbitrator. Subsequently Mr Rokson was appointed as an arbitrator in two further Deepwater Horizon references. The first appointment was made by Chubb and related to Transocean’s claim against Chubb. The second was a joint nomination by the parties involved in a claim by Transocean against another insurer.

When Halliburton discovered this they applied to the court under section 24 of the Arbitration Act 1996 to remove Mr Rokison as an arbitrator. That application was refused. The Court of Appeal then found that, while Mr Rokison’s proposed appointment in the subsequent references should have been disclosed to Halliburton, an objective observer would not in the circumstances conclude there was a real possibility of bias.

On Friday the Supreme Court unanimously agreed, Lord Hodge giving the principal judgment, and dismissed the appeal. In considering an allegation of apparent bias against an arbitrator, the test is whether the fair-minded and informed observer would conclude there is a real possibility of bias. The duty of disclosure is a legal duty and not simply good arbitral practice, and is a component of the arbitrator’s statutory obligations of fairness and impartiality. It does not, however, override the arbitrator’s duty of privacy and confidentiality. The duty of disclosure requires the arbitrator to disclose matters which might reasonably give rise to justifiable doubts as to his or her impartiality, and a failure to do so is a factor for the fair-minded and informed observer to take into account in assessing whether there is a real possibility of bias, having regard to the facts and circumstances known at the time of the hearing to remove the arbitrator.

Five factors pointed against any finding of bias. First, at the time, it had not been clear that there was a legal duty of disclosure. Secondly, the Transocean arbitrations had commenced several months after the Halliburton arbitration. Thirdly,  in his measured response to Halliburton’s challenge Mr Rokison hadexplained that it was likely the subsequent references would be resolved by a preliminary issue (as they in fact were) and that, if they were not, he would consider resigning from the Transocean arbitrations. Fourthly, there was no question of his having received any secret financial benefit. Fifth, there was no basis for inferring any unconscious ill will on his part.

Ship Operations- New IISTL Book Out

Delighted that our new book “Ship Operations- New Risks, Liabilities and Technologies in the Maritime Sector” has just been released by Informa Law.

This book covers all the major topics associated with ship operations. Part I offers a detailed and critical analysis of issues of contemporary importance concerning new liability regimes and developments. Part 2 discusses how parties, in particular ship operators, attempt in contemporary practice to allocate their risks concerning ship operations by utilizing contractual mechanisms.

Apart from members of the IISTL namely Dr Leloudas, Professors Baughen, Rainey QC, Sozer, Soyer, Tettenborn and Williams, the following excellent authors contributed to this book: Professor Ringbom, Professor Cachard, Mr Macfarlane, Mr Hunter, Associate Professor Stevens, Sir Bernard Eder, Mr Martin and Mr Weale.

The book provides an invaluable guide to recent legal and practical developments and offers a comprehensive, well-informed and thoroughly practical guide on what is a very complex and developing area of law. It will therefore be of great use to legal practitioners and administrators of ship operations worldwide, as well as students in this area and academics associated with maritime law generally.

Understanding TSR and its “curious provision”

Lord Justice Arnold

Giving judgement in the Court of Appeal case Shenzhen Senior Technology Material Co Ltd v Celgard, LLC [2020] EWCA Civ 1293 Lord Justice Arnold has shone a further light on the UK Trade Secrets (Enforcement, etc.) Regulations 2018 (SI 2018/597) [TSR].

Dividing his analysis into pre/post the EU Trade Secrets Directive (EU Dir. 2016/943) Arnold LJ noted, “under English law prior to the implementation of the Trade Secrets Directive, trade secrets constituted a particular category of confidential information. The principal distinguishing characteristic of trade secrets, as opposed to other forms of confidential information, was that a former employee could be restrained from using or disclosing their former employer’s trade secrets after the termination of the employment”. [24]

“The Trade Secrets Directive harmonises the protection against the unlawful acquisition, use and disclosure of trade secrets in the European Union. It is not an exhaustive harmonisation: Article 1(1) provides that Member States may provide for more far-reaching protection than that required by the Directive provided that compliance with a number of provisions of the Directive is ensured. Thus the Directive provides both a floor and a ceiling.”[25]

Moreover, it was noted that whilst TSR might implement the Trade Secrets Directive, it does not transpose Articles 3, 4 or 5 of the Directive.

Turning to the “curious provision” of Regulation 3 Wider Protection, Arnold LJ surmised “… it appears to be primarily intended to ensure that, if and in so far as English law prior to the implementation of the Trade Secrets Directive was more favourable to the trade secret holder…then that greater level of protection shall continue to be available…”.[29]

Conversely it was noted that Regulation 3 does not appear to address the position if the Directive confers greater protection than English law did previously. In such a situation the solution advocated by Arnold LJ would be to interpret and apply TSR consistently with the Directive and again offer the trade secret holder the higher protection.

Despite its somewhat inauspicious start at IPEC it seems clear that our Judges are starting to get to grips with TSR.

Preliminary Issue on A Question of Construction- What Happens Next?

Daewoo Shipbuilding & Marine Engineering v Songa Offshore Equinox Ltd [2020] EWHC 2353 (TCC)

A claimant seeks a preliminary issue on a question of construction. It states that it accepts that if the point is decided against it, then that will be the end of all claims by it in respect of the project in question. The other party on this basis agrees and the tribunal makes a consent order. The claimant loses the preliminary issue and leaves it too late for a s.69 appeal. Can it then amend to run a different legal case on more or less exactly the same facts complained of, which it could have run in the alternative to its primary case, if wrong on its primary case on construction?

Can it resist reliance on res judicata on the basis that that principle cannot apply to amendments in the same set of proceedings as those in which the preliminary issue decision was made?

Or can the other party preclude the claimant from re-opening any claim on those matters, and, in addition, to defending its counterclaim by seeking to rely on the matters as defences?

Indeed can the other party contend that a binding agreement came into effect concerning the preliminary issue which meant that the claimant had contracted out of its rights (if any) to make any other claims if it lost on the issue? These stark facts arose in Daewoo Shipbuilding & Marine Engineering (DSME) v Songa Offshore Equinox Ltd [2020] EWHC 2353 (TCC). The Court (Jefford J.), dismissing DSME’s double-barrelled s.69 and s.68 Arbitration Act 1996 applications, held that DSME was estopped per rem judicatam from trying to relitigate matters which it could and should have raised before, that it made no difference that this all took place in the same set of proceedings rather than in two separate sets of proceedings and that this preclusion extended to relying on the same matters not only as claims in their own right but also as defences to the respondent Songa’s counterclaims.

The judgment contains a detailed and valuable analysis of the circumstances in which it will be an abuse of process to seek to raise new arguments in the same proceedings.

The competing arguments

Songa’s case was that the situation fell exactly into the situation described in Henderson v Henderson (1843) 3 Hare 100: “the court requires the parties to that litigation to bring forward their whole case … and will not permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward”. The result was that the determination of the preliminary issue and of DSME’s responsibility for design (FEED) in respect of the project and delays and costs relating to issues with that design meant that the award decided against DSME all issues of liability arising out of the design and as to which party bore the delay and costs associated with design problems. DSME had put its case on one ground only, had sought a preliminary issue on the basis that if it lost that was the end of the case and could not now re-open the question under a different legal guise. If it had run the case which it now wished to run, there could and would have no possibility of a preliminary issue. It sought such an issue representing that there were no other issues which could make a preliminary issue inappropriate.

Songa submitted that for DSME to try to re-introduce the new alternative factual case was an example of abuse of process res judicata estoppel, analysed by the House of Lords in Johnson v Gore Wood [2002] 2 AC 1. Given the very wide restatement of Henderson v Henderson by the House of Lords (as Lord Bingham put it “one cannot comprehensively list

all possible forms of abuse, so one cannot formulate any hard or fast rule to determine whether, on given facts, abuse is to be found or not”: 31E), Songa submitted that it made no difference that the estoppel was invoked in one set of proceedings to stop an amendment in those proceedings rather than to stop a later separate claim in separate proceedings. The critical question was simply: “Whether in all the circumstances, a party is misusing or abusing the process of the court [or the arbitral tribunal] by seeking to raise before it the issue which could have been raised before”.

DSME advanced various arguments before the Tribunal (Stewart Boyd QC, Sir David Steel, John Marrin QC). But its principal case was that Henderson v Henderson abuse of process estoppel had no place and could not apply to amendments in the same set of proceedings. That was dealt with on ordinary amendment principles which looked at costs and prejudice.

Subject to such matters, it was always open to a party to amend, paying costs. In the present case given that this was an early preliminary issue, amending to run a new alternative case based on the legal findings in the preliminary issue award could hardly be said to be late, or to occasion prejudice.

The battle of the authorities

DSME relied on the decision of Jackson J. in Ruttle Plant Hire Ltd v Secretary of State for the Environment [2007] EWHC 1733 (TCC). He had stated “the rule in Henderson v Henderson cannot be invoked in order to prevent a party from pleading at a later stage in the litigation issues which might have been pleaded earlier” (at [36]). But no reasoning and analysis was given for that view.

In particular the Court in Ruttle did not appear to have been referred to an earlier decision of the Court of Appeal in Tannu v Moosajee [2003] EWCA Civ 815 in which the Court of Appeal had said “Whilst it might be unusual to apply the principle in Henderson v Henderson in relation to separate stages of the same litigation, it is not conceptually impossible” (perArden LJ at [40]). Tannu was relied upon and followed in refusing amendments relating to liability after a “liability hearing” in Seele Austria GmbH v Tokio Marine Europe Insurance [2009] EWHC 255 (TCC)

Other cases, post Ruttle, all at first instance had shown the clear application of Henderson v Henderson in the same litigation: BT Pension Scheme Trustees v BT plc [2011] EWHC 2071 (Ch), a case involving preliminary issues; Gruber v AIG Management France SA [2019] EWHC 1676 (Comm), in which Andrew Baker J. had made clear that it was a “strong

thing” to shut someone out from running a point which had not actually been determined and “even stronger in relation to different stages of a single action” but that determinations within the action, e.g. by way of preliminary issues or a summary judgment on a particular claim could have just such an effect. See also Kensell v Khoury [2020] EWHC 567 (Ch).

The Judgment

Jefford J. concluded that there was no principled basis for the contention that Henderson v Henderson estoppel could not apply within the same proceedings or to different stages and determinations within a single set of proceedings [128]. Accordingly, the Tribunal was right to embark upon a “broad, merits based judgment” of the situation (in Lord Bingham’s words in Johnson v Gore Wood) and there was no error of law.

Interestingly, by a majority, the Tribunal had also held that DSME’s conduct in representing repeatedly that the claim was over if it lost on the preliminary issue which it proposed, in order to induce Songa to agree to it amounted to a contractually binding arrangement under which DSME had given up any other claims, while recognising that a binding

contract springing from a consent order was “less usual but not unknown”. An attempt to argue that the majority had erred in law also failed [95].

Lessons for the future?

When proposing a preliminary issue, parties should have in mind that if it is portrayed as determinative if decided in one way, then that is likely to set the foundation for an argument that later attempts to amend to run a new case amounts to a Henderson v Henderson abuse, and that the party should have brought forward all of its arguments.

When on the receiving end of an application for a liability only hearing or the determination of preliminary issues, a party should consider carefully defining what the result of that will be for the claims and the proceedings generally and tying the applicant down to the dismissal of the claim etc in the event of a particular determination.