A quick glance: Where does the contracting authorities’ duty to protect a merchant’s trade secret end?

Section 5, Paragraph two, Clause 3 of the Latvian Freedom of Information Law (“FoIL”) specifies protected or confidential information amounts to a trade secret. An exception to the rule are those cases whereby a contract has been concluded on dealing with the state or municipal money and property, including contracts, concluded based on the Latvian Public Procurement Law (“PPL”). According to the third paragraph of Article 40 of the PPL, tenders and applications have the status of confidential information, even if they do not contain any trade secret. However, the confidential information status does not mean it cannot be dispensed at all. What should a contracting authority do if the tenderer's interest in the procurement becomes more and more insistent, but on the other hand, the winner carefully protects its trade secrets?

The contracting authority must provide an adequate amount of information to the tenderer in order for the tenderer to be able to defend its rights and legal interests.

There is a difference between information requests brought by the tenderers, who participate in a particular public procurement, and information requests brought by an interested party. Within the meaning of FoIL, tenderers are not recognized as members of the public.1 Under the latter, a tenderer requesting information wishes to exercise their procedural rights,2 and therefore, the regulation of PPL and Administrative Procedure Law are applicable, and not FoIL.

For example, in case no. A42-01737-20/36  the tenderer wanted to know the manufacturer’s tractor model offered by the winner, because the tenderer doubted the price offered by the winner met the requirements of the technical specification.  In this particular case, the contracting authority initially refused to provide this information following the thirteenth paragraph of Article 9 and the second paragraph of Article 14 of the PPL, citing the confidential status of the information.3 However, the court acknowledged the purpose of the information requested by the tenderer was sufficient for the contracting authority to provide the requested information.4

The status of a trade secret itself does not impede the dispense of information.

Following the third paragraph of Article 40 of the PPL, tenders and applications are confidential information, even they do not consist of a trade secret. The right to a trade secret is not absolute and is often subject to proportionate restrictions by the legislator.5 Therefore it must be assessed whether it can be extracted. According to Article 12 of the PPL, which stipulates when notifying the conclusion of a contract and informing candidates or tenderers, the contracting authority is not entitled to disclose information provided to it by other suppliers as business secrets or confidential information. The pattern of conduct regarding trade secret information is very clear indeed. However, there is no clarity in the existing case-law on what exactly needs to be assessed in the release of confidential information according to PPL. Nevertheless, it is the author’s opinion, there is no doubt the protection of this information is not absolute.

If the tenderer requests the issuance of a trade secret, the contracting authority must answer the following questions:

  1 / Does the trade secret comply with the features specified in Section 19, Paragraph one of the Commercial Law? The contracting authority and the court are entitled to examine the justification for determining the status of a trade secret, i.e., whether the status of a trade secret complies with the requirements of the law. If the object of a trade secret does not comply with the criteria specified in the law, the status of a trade secret does not arise. Concurrently, the conclusion regarding the unreasonable determination of the status of a trade secret, contrary to the merchant’s opinion, must be well reasoned. It should be based, if necessary, on the expert’s opinion in the relevant sector;6

2 / Which interest should be preferred? The contracting authority may issue information containing a trade secret and may be disclosed if it is provided for in the PPL or if the requested information affects a significant public interest and the disclosure of the information is proportionate to the possible harm to the interests of the capital company. The Senate has indicated non-disclosure of information is justified if its disclosure to the applicant's competitors may endanger fair competition.7 Consequently, the contracting authority must assess each time which of the interests should be given priority in the specific circumstances.

For example, in case no. A42-00840-20/9  a customer refused to issue an estimate of the cost of renovating the bridge stairs because this information was a trade secret.  However, in this particular instance the court pointed out the requested information is important to the public, while the justification for the threat to the merchant is too vague. The court acknowledged although the positions of works and materials in construction may be similar, they will, in any case, differ in different construction sites, and in each estimate of a new site the positions will have to be compiled according to the specific site. Consequently, the court did not see a threat to the trader's right to fair competition.8 In this example, the information was requested by a member of the public. However, in the author’s view, the court could have also extended it to a request made by the tenderer after the conclusion of the procurement contract.

 

In summary, a contracting authority’s obligation to protect the trade secret of the winner of the procurement ends where the tenderer’s right to obtain sufficient information to ensure his rights and legal interests begin.  To refuse the revealing of a trade secret it must be carefully substantiated. There should be checks as to whether the merchant has reasonably determined the status of a trade secret.  Further, it needs to be justified as to which of the parties’ legitimate interests in the specific circumstances is more protectable.

 

[1] Summary of the case law of the Supreme Court of the Republic of Latvia “Right to access information 2010-2019”, 2020. p. 14-15.
[2] Judgment of the Administrative District Court of 13 October 2020 in case no. A42-01737-20/36, Paragraph 14.
[3] Ibid., Paragraph 15.
[4] Ibid., Paragraph 18.
[5] Judgment of the Supreme Court 26 February 2019 in case no. SKA-40/2019 (A420227714) Paragraph 8.
[6] Summary of the case law of the Supreme Court of the Republic of Latvia “Right to access to information 2010-2019”, 2020, p. 26
[7] Ibid., p. 28.
[8] Judgment of the Administrative District Court of 19 June 2020 in case no. A42-00840-20/9, Paragraphs 11 and 12.

 

by Diāna Adamoviča, Associate, Latvia

Team

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