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Confidentiality Agreements

Protection of confidential ideas, processes and creations are an exceptionally important element of most businesses. The law rewards the revelation of certain business ideas into the wider market by allowing the creator a certain degree of exclusivity – for example the protection granted by a patent, or that offered by copyright – however any such protection has limited lifespan and does not extend to every type of confidential information a business may hold. Safety is therefore often further sought by execution of confidentiality agreements in order to extend and strengthen intellectual property rights available at law.

The essential functions of any confidentiality agreement will be:

  • To protect sensitive information owned by a commercial entity; and
  • To define the scope of permitted disclosure.

There are a number of instances in which confidentiality may be required, for example a term may be included in an employee contract to prevent disclosure of sensitive information during the course of and after employment and to prevent competition with the business during and after employment. Certain commercial relationships will also necessitate the disclosure of confidential information, for instance during a tender process and a business may seek to protect any sensitive information disclosed during such a process.

In some cases, law will create a duty of confidentiality automatically. The banker/customer relationship holds a confidentiality protected by the Cyprus Banking Law and the lawyer/client relationship is protected by s 13(1) of the Code of Conduct Regulations which states that the courts and any state or public authorities are under a duty to protect the professional secrecy which is a hallmark of the association.

In a business relationship where one party needs to disclose confidential information to another person then it is usual to seek to impose a duty of confidentiality expressly in a non-disclosure agreement. Such an agreement will usually incorporate some or all of the following provisions:

  • A definition of exactly what information is covered by the agreement;
  • A restraint on the recipient to prevent him from communicating confidential information to a third party/parties;
  • A restraint against the recipient making an announcement or disclosure about the subject matter of the confidential information without written agreement of the supplier;
  • A clear outline of the boundaries concerning what will be considered to be “confidential information”. In other words that it will not include:
  • information already known to the public;
  • information already known to the other person;
  • information disclosed by third persons who do not owe a duty of care;
  • information which must be disclosed by virtue of law or similar.

Any special measures which are necessary in order to keep the information confidential;
A clause to state that injunctive relief may be sought in the case of an anticipated breach of confidentiality;
A definition of any permitted users;
A statement that ownership of the information vests with the supplier;
An indemnity for loss or damage as a result of disclosure.

Where a party has breached the obligation of confidentiality, an injunction (to prevent further disclosure) and/or damages may be awarded.

The European Convention on Human Rights has an impact on confidentiality. Disclosure may be justified where it is clearly in the public interest for such information to be made public. It should be noted that the ECHR makes it very clear that Article 10 (2) concerning freedom of expression does not directly override the obligation of confidentiality.

Michael Chambers and Co LLC’s team of commercial lawyers can advise on every aspect of protection and disclosure of the confidential information owned by a business. If you wish to speak to one of our commercial lawyers then please contact us.