The Confidentiality might be stated in an independent Agreement called "Confidentiality Agreement" and it could be stated in certain Clauses in different agreements or contracts such as an employment contract. The Confidentiality Agreements or Clauses are essential in any contractual relationship, as it plays an important role in assuring the maintenance of the secrecy and confidentiality regarding all the information disclosed among all the involved Parties of the Agreement. It is a win-win situation for both Parties, as it protects both Parties and builds trust between Parties of the agreement.
Confidentiality Agreements might as well be called "Non-Disclosure Agreements" or "Secrecy Agreements", all of which are legal agreements between the Disclosing Party and the Receiving Party, which mainly states the confidentiality of the information disclosed between the parties of the Agreement and prohibits the Receiving Party from disclosing it to third parties. The Confidentiality Agreement is only enforceable against the two parties of the Agreement, so such Agreement is not protected against third parties.
Confidentiality Agreements are of two types, which are as follows:
It is used when only one party of the Agreement is disclosing the information to the other Party who is just a Receiver. For example: in the Employment Contracts, the information is disclosed by the Employer to the Employee.
It is used when both parties to the agreement are the Disclosing Party and the Receiving Party at the same time. For example: When two investors are establishing a joint venture, both of them are disclosing information about their companies, consequently, both of them are Disclosing Party and Receiving Party.
Confidentiality agreements require consideration in order to be valid, which means receiving something in exchange for non-disclosing the information. For example, in the employment contracts, mainly the non-disclosure obligation is stated as a clause in the employment contract, however, if it was not stated as a clause, it might be signed as a separate agreement which needs a consideration for the employee's promise, such as promotion, bonus, benefits...etc.
What information may be considered as Confidential Information?
Confidential Information generally means, "information which is not disclosed to the public or in the public domain but it is private to the company or the individual who possesses such information". Generally, there is no specific information or list which is considered to be "confidential information", accordingly, Parties to the Agreement should identify the definition of the private Confidential Information and its originality. For example, the terms of the Confidential Agreement – between the employer and the employees –must be reasonably limited to serve the employer's legitimate business interest and shouldn't include information that is obviously not confidential. Confidential Information may include, but not limited to, any private information or documents about the business organizational structure, operating procedures, business affairs, feasibility, financial information, net worth, programs, customers, employees, technical information and know-how, plans, transactions, marketing techniques etc...
What to include in Confidentiality Agreements?
As minimum clauses, the Confidentiality Agreement shall include the following:
- Definition of the "Confidential Information" including an accurate, comprehensive description of the disclosed information that should be protected;
- The Receiving Parties' obligation to maintain the information confidential and to guarantee the adherence of the Receiving Parties' employees and affiliates to hold the information confidential;
- Determining the purpose in which the information should be used;
- Detailed description for the limited
circumstances in which the Receiving Party will not be obliged to
maintain such information, such as:
- If the information is generally available to the public domain;
- If the information is received from a third party;
- If the information was in the possession of the Receiving Party prior to the disclosure or was developed independently;
- By virtue of subpoena or courts order, in case the Confidentiality Information is required to be disclosed by the Receiving Party.
- The duration of the Confidentiality Agreement which is generally preferable to require confidentiality until the information enters the public domain;
- Applicable Law, in order to govern the Agreement and the jurisdictional Courts in case of disputes.
Breaching the Confidentiality Agreements
Sometimes the non-disclosure obligation is included as a clause in the main agreement or drafted as a separate agreement attached to the main agreement, however, in both cases if the Receiving Party breached the Confidentiality Clause/Agreement, such breach is considered as breaching the whole main agreement, and as a result the Disclosing Party should have the right to bring a legal action for breaching the whole main agreement and claim compensation for such breach and the allegedly suffered harm.
Actions to be taken in case of breaching the Confidentiality Agreement
The first and most obvious action of breaching the Confidentiality Agreement, is terminating such contract. For example, in employment contract, breaching the contract by the employee will be considered as a valid reason for terminating such contract.
Parties may claim compensation through legal actions for breaching the confidentiality. For example, if the employee shared a sensitive information with a competitor, the employer might claim compensation if the employer proved the Company's loss of market share and revenue, the employer will be compensated for such loss; the employer might as well obtain punitive compensation from the employee.
The Egyptian Penal Code and the Egyptian Profession Ethics Regulations imposed criminal sanctions on the medical practitioners who discloses their patient's information to third parties without their consent.
The Disclosing Party might as well be harmed in the marketplace, as the disclosed information might ruin the Disclosing Party's reputation.
Confidentiality under the Egyptian Regulations
Although the Confidentiality Clauses/Agreements are very important in any contractual relationship, the Egyptian law doesn't regulate the Confidentiality Agreement in a separate law. However, the Egyptian Law regulates Confidentiality in many different laws as follows:
A) The Egyptian Labor Law
The Egyptian Labor Law states that the employee may be discharged, if he commits a serious error, and one of these errors is, according to Article 69, "if it is established that the Employee has divulged the secrets of the establishment of his work, leading to the occurrence of serious damages and harm to the establishment".
B) The Egyptian Penal Code
The Egyptian Penal Code regulates that any disclosure of the Confidential Information will lead to detention for a period not exceeding six months or a fine not exceeding five hundred pounds. As mentioned in Article 310 which stipulates that "whoever among the physicians, surgeons, pharmacists, midwives, or others with whom a secret is deposited by dint of his profession or position, or to whom it is confided, then he discloses it in other than the cases wherein the law obligates him to report it, shall be punished with detention for a period not exceeding six months or a fine not exceeding five hundred pounds.
The provisions of this Article shall not apply except in the cases where it is not legally authorized to disclose and divulge specific matters as prescribed in Articles 202, 203, 204, and 205 of the Procedure Code, in civil and commercial matters".
C) The Egyptian Lawyers' Act
The Egyptian Lawyers' Act stipulates in Article 79 that "the lawyer shall retain the information that the client gives him unless he is asked to express his opinion on the reconciliation of the cases".
Burden of Proof
Since the Egyptian Law did not regulate anything related to proving the harm caused by breaching the Confidentiality Agreement or Clause, therefore, the burden of proof lies on the claimant, thus, the Disclosing Party should prove by all means the harm that he suffered. If the Disclosing Party realizes that his confidential information has been stolen or disclosed without his consent by the Receiving Party, he shall conduct investigations and collect evidences in order to support his claim. If the Disclosing Party could not support his claim, the lawsuit could be unsuccessful and could result in the end of pay the defendant's attorney's fees.
The submitted evidences shall include the following:
1. The stolen Confidential Information:
As a main part of the investigation, what has been stolen shall be established, whether it is a business technique, sensitive technical information or secret marketing tool... etc.
2. Who is involved in the breach?
Investigations should be done with all the employees who have direct access to the confidential information, and with the employees who are about to leave, have left and moved to a competitor, as such employees are the ones who must be suspected. It is as well important to mention that the aforementioned employees might not be the ones who committed the breach as it might be other employees or it might be a collaboration between several employees and a competitor or an external party who has interest.
If the investigations did lead to an evidence or a clue, circumstantial evidence should be used, such as unusual activity from employee's end. For example, suddenly shifting to night shifts and weekends or copying down large number of confidential information without any reasonable objective/explanation.
3. How the breach was done?
Along with the investigations and the collection of evidence, an evidence on how the breach occurred should be collected:
- Was the confidential information kept in secured electronic files?
- Are the documents missing or were photocopied?
- Does one of the employees know a competitor personally?
Moreover, the email records, telephone records and computer usage must be checked and whether the records that have been deleted are stored on a backup system should be retrieved.
Mainly, Confidentiality Agreements or Clauses are used by Companies or entities, in order to maintain its business, technical, marketing and operating techniques, from being disclosed to their competitors or to be shared in the public domain. Breaching such an Agreement or Clauses might cause serious harm to the Disclosing Party, which will accordingly, infringe their rights' and ruin their reputation. Accordingly, the Disclosing Party should bring legal actions against the Receiving Party, but the Disclosing Party must collect evidence and prove the harm caused to him prior to the legal action, in order to have a successful lawsuit.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.