Judgment

Lord Justice Maurice Kay:

The decision of the FTT

“33. There was nothing exceptional about the closed session evidence in this case. It was quite straightforward and came from two businessmen who exported to Iran. …the evidence, when heard in closed session, reinforced that conviction. As we indicated before the session began, we were ready to review the position if our preliminary impression, for any reason, changed. It did not.

34. We concluded that this was far from an exceptional case and refused the application”.

“35. The asserted need for confidentiality relates only to the names of the witnesses and their businesses and the nature of those businesses, from which the names might be deduced. The effect of their evidence was straightforward and can be shortly summarised in the publicly available decision.

36. Both had direct experience of lawfully exporting to Iran over a substantial period…Both had experienced critical problems in the withdrawal of banking facilities by major UK banks because of their trade with Iran. The bank’s letter withdrawing facilities was exhibited to the statement of one of the witnesses. Both suffered repeated rebuffs from other banks, which they approached to provide facilities. One ultimately overcame the problem by “disguising” the source of payment through routing via a foreign bank. The “disguise”, apparently, was required by the bank that eventually provided facilities so that there was no evidence that it knew that funds came from Iran – surely a deplorable state of affairs. Similar problems were confronted when attempts were made to transfer funds, lawfully held in Iraq, to a UK account. European banks refused to act. Eventually a bank within the EU agreed to make transfers but at a very high rate of commission.

37. Both witness stated that these problems had done immense damage to their businesses, indeed that they had faced closure. Both spoke of competitors facing these difficulties.

38. Their evidence confirmed that the risk of withdrawal or refusal of banking services extended to European and, plainly, to US institutions.

39. It was made clear to them that this aversion to Iranian transactions was the result of the perceived risk of withdrawal of the US correspondent banking licences without which a bank cannot trade in US dollars. Major European banks have, of course, a considerable presence in the USA for more general business purposes.

40. Evidence was also given of the potential loss of business from US companies, if this trade were publicised. On the other hand, major suppliers refused to do any business with a company trading with Iran, even for the purposes of exporting to a quite distinct end user.

41. More generally, both companies feared scrutiny by the US authorities and their inclusion on a black list which cut off all trade contacts with the USA and perhaps more widely. We were referred to the websites of the Office of Foreign Assets Control…, an organ of the US Treasury, which enforces economic sanctions worldwide and blacklists companies and individuals with which US entities are prohibited from trading.

42. All these measures are liable to be taken against companies engaging in trade which is perfectly lawful according to EU law and the domestic law of the country in which they are registered and controlled.

43. One of the witnesses emphasised his expectation of confidentiality in making a licence application, having regard to the consequences of disclosure which he described.”

I have set out those paragraphs at length so as to demonstrate the extent to which the product of the closed session was disclosed openly. It was disclosed to Mr Browning and Mr Coppel at the time so as to enable Mr Coppel to make submissions about it.

“60…we were strongly impressed by the strength of the evidence on detriment which we heard in the closed session and which we tested with some care. We readily accept that these witnesses – and doubtless others – were treated by large banks in the manner which they describe and suffered the other trading difficulties summarised above. On the evidence adduced before us we are satisfied that a climate of fear as to US Treasury reaction frequently inhibits not just US institutions but many European ones from dealing with those who trade quite lawfully with Iran.

61. Taken as a whole, we found the evidence as to detriment resulting from disclosure entirely compelling. ”

“69. We bear well in mind that information must be disclosed if the balance of public interests is inconclusive. Given the doubt as to whether the information now sought would achieve what is claimed, the very high likelihood of real harm to a large number of companies resulting from disclosure of their identities and the ancillary point as to deterrence from candour in the licensing process, we conclude that the public interest firmly favours the withholding of this information.”

The decision of the FTT was unanimous.

The decision of the UT

“60…in our view, to characterise the First-tier Tribunal’s function, within the statutory scheme established by FOIA, as or equating to ordinary civil and therefore adversarial litigation because it is deciding a dispute between the parties before it, or deciding whether to vindicate a right claimed by the applicant, is an inadequate and inaccurate description; rather, its function is investigatory and is to see if FOIA is properly applied to the circumstances. This involves consideration, in the manner provided by FOIA, of the right which is given by section 1 (1) in pursuance of the interests that were served by the release of information, together with the assessment of countervailing public and private interest in accordance with the terms of the exemptions.”

It later referred to the procedure as “an investigatory appeal process to a tribunal comprising persons with relevant expertise” (paragraph 65).

“78. The points made…all point to the conclusion that it will only be in exceptional and so rare cases that it would be appropriate to exercise a discretion in favour of directing disclosure of closed material to a representative of a person who is not to be provided with it.”

Basing itself on the approach which had been taken in the BUAV case, the UT stated:

“…we have concluded that a First-tier Tribunal should not direct that a representative of an excluded party should see closed material or attend a closed hearing unless it has concluded that, if it does not do so:

it cannot carry out its investigatory function of considering and testing the closed material and give appropriate reasons for its decision on a sufficiently informed basis and so fairly and effectively in the given case having regard to the competing rights and interest involved.”

The italicised quotation was taken from the BUAV case. Applying this test, the UT dismissed Mr Browning’s appeal on this and other grounds.

The statutory framework

The right to information under the FOIA

“In respect of any information which is exempt information by virtue of any provision of Part II, section 1 (1) (b) does not apply if or to the extent that –

The two categories of exemption considered in the present case are those provided for in section 41(1) and section 43 (2). The former is an absolute exemption within the meaning of section 2 (2) (a). The latter is a qualified exemption giving rise to the balancing exercise required by section 2 (2) (b).

“Information is exempt information if –

“Information is exempt information if its disclosure under this Act would, or would be likely to, prejudice the commercial interests of any person (including the public authority holding it).”

The role of the IC and the FTT

“(1) If on an appeal under section 57 the Tribunal consider –

(2) On such an appeal, the Tribunal may review any finding of fact on which the notice in question was based.”

The FTT Rules

The development of CMP in the FTT

“…at times the judge may have to make directions during the hearing to hold part of it in private. This means that those who cannot see what is claimed to be confidential information, or hear evidence presented that needs to refer directly to its contents will be asked to leave the room for the minimum length of time necessary to examine such evidence. For the avoidance of doubt those excluded will be those from whom the information needs to be kept confidential, which normally will mean everyone other than those parties from whom the documents are requested and any related parties and those representing the Information Commissioner.”

(Underlining added).

Thus, “normally” the legal representative of an excluded party would be excluded.

“(g) The Commissioner, though a party to the appeal, does not have the specific objective of trying either to procure or to prevent the release of the particular information. His concern, like the Tribunal’s, is to see that the Act is properly applied and to take proper account of the relevant private and public rights and interests. He argues for disclosure or non-disclosure according to his view of the application of the Act to the particular circumstances. Because his commitment is to the Act rather than to a pre-selected result, it is not unusual for his arguments to alter during the course of the hearing as evidence unfolds…

(h) In appeals which involve consideration of the requested information in closed session, the role of the Commissioner’s counsel is of particular importance. Counsel is able to assist the Tribunal in testing the evidence and arguments put forward by the public authority.

(i) However, irrespective of the assistance of the Commissioner, the Tribunal, as a specialist tribunal, can be expected to be able, at least in some cases, to assess for itself the application of the provisions of FOIA to the closed material…the extent to which the tribunal will be in a position to do this will depend upon the particular circumstances.

(j) Until the Tribunal has decided whether the information is to be disclosed under FOIA section 1, it must proceed on the basis that it may decide against such disclosure. The Tribunal must therefore be careful not to do anything which might prejudice that outcome.

(k) Disclosure to the appellant’s counsel on restricted terms would not itself amount to disclosure to the public under FOIA section 1. But it would be attended by risks of prejudicing the outcome. There could be a slip of the tongue. Information could be given away by facial expression or body language, or by the way questions were asked or answered or submissions made, or by inference from advice given. A change in the approach of counsel after seeing the material could make apparent the content of the information, or some of it. Such risks are relevant to the exercise of discretion under the Tribunal’s procedural powers.

(l) Further risks may arise, beyond the individual appeal, because there are many individuals and organisations who are regular users of the right to freedom of information in pursuance of a particular interest. BUAV is one example out of many. If it became a regular practice to disclose requested information to counsel for the appellant, such counsel would over time build up a bank of knowledge concerning the topic of interest, derived from information which the public has no right to see. This could affect the person’s or organisation’s strategy in the use of the Act. I have observed above that, unlike a special advocate, an ordinary legal representative, authorised to see the closed material on confidential terms, would continue to communicate with the appellant after seeing it, and would take into account the confidential information when advising the appellant and taking decisions on the conduct of the case. By making the information available to counsel, in cases where there is no right to it, the appellant would over time derive illegitimate benefits.

(m) Difficulties would also arise in relation to how appellants should be treated, who are not legally represented. An appellant may be wholly trustworthy and may offer an undertaking not to disclose the information unless the Tribunal so orders. If the information can be made available to counsel, why not to a trustworthy appellant? Yet to give it to the appellant before the Tribunal has decided whether it is disclosable, would be to override the Act and undermine the Tribunal’s function. Giving it to a lawyer acting as the appellant’s representative is not far different from giving it to the appellant in person.”

These observations led to the Tribunal expressing its approach as follows (at paragraph 15):

“These considerations lead me to the conclusion that the type of order now sought should not be made, save in exceptional cases where, as a minimum, the Tribunal take the view that it cannot carry out its functions effectively without the assistance of the appellant’s legal representative in relation to the closed material. Whether there will be any such cases remains to be seen. The approach must depend upon the particular circumstances. In some cases the Tribunal will be able to deal with the matter without external assistance. In many cases all necessary assistance will be provided by counsel for the Commissioner. In a few cases it may be necessary to appoint a special advocate, despite the extra expense likely to be occasioned.”

This is the passage that was adopted by the UT in the present case (see paragraph 15 above). Since the present case was decided by the FTT, a further Practice Note has been issued in May 2012. It provides for additional procedural protection by a requirement of an application in writing for the withholding of material. Where a party and, by inference, his legal representative are excluded from part of a hearing it states (paragraph 12) that “the judge will explain to the excluded party, usually the citizen, what is likely to happen during the closed part of the hearing. The judge may ask if there are any particular questions or points which he would like put to the other parties while he is absent”. It further provides for the Tribunal to discuss with the remaining parties, prior to the end of the closed hearing, what summary of the closed hearing can be given to the excluded party and whether, in the course of the closed session, any new material has emerged which it is not necessary to withhold and which therefore should be disclosed.

Identifying the issue on this appeal

The point of principle

“(4) (a).…justice is done,

(b).… the tribunal system is accessible and fair.”

By Schedule 5, paragraph 7 (b), the Rules may

“make provision as respects allowing or requiring a hearing to be in private or as respects allowing or requiring a hearing to be in public.”

Paragraph 11 (1) permits rules to make provision for the disclosure or non-disclosure of information received during the course of proceedings before the FTT. Paragraph 16 provides that rules may confer on the FTT such ancillary powers as are necessary for the proper discharge of its functions.

“(1) Subject to the following paragraphs, all hearings must be held in public.

(2) The Tribunal may give a direction that a hearing, or part of it, is to be held in private.

(3) Where a hearing, or part of it, is to be held in private, the Tribunal may determine who is permitted to attend the hearing or part of it.

(4) The tribunal may give a direction excluding from any hearing, or part of it –

(c) any person who the Tribunal considers should be excluded in order to give effect to the requirement at rule 14 (10) (prevention of disclosure or publication of documents, and information); or

(d) any person where the purpose of the hearing would be defeated by the attendance of that person.”

Rule 5 confers general powers of case management including the power for the FTT to regulate its own procedure. Rule 14 is headed “Prevention of disclosure or publication of documents and information”. Its provisions include:

“(1) The Tribunal may make an order prohibiting the disclosure or publication of –

…

(4) If the Tribunal gives a direction under paragraph (2) which prevents disclosure to a party who has appointed a representative, the Tribunal may give a direction that the documents or information be disclosed to that representative if the Tribunal is satisfied that –

…

(10)The Tribunal must conduct proceedings and record its decision and reasons approximately so as not to undermine the effect of an order made under paragraph (1), a direction given under paragraph (2) or (6)…”

These provisions were not tailored to the specific context of appeals under FOIA. They apply across the broad range of the jurisdictions inherited by or conferred on the FTT pursuant to TCEA including, for example, appeals and applications arising under the Mental Health Act 1983.

“2. The idea of a court hearing evidence or argument in private is contrary to the principle of open justice, which is fundamental to the dispensation of justice in a modern, democratic society. However, it has long been accepted that, in rare cases, a court has inherent power to receive evidence and argument in a hearing from which the public and the press are excluded, and that it can even give a judgment which is only available to the parties. Such a course may only be taken (i) if it is strictly necessary to have a private hearing in order to achieve justice between the parties, and, (ii) if the degree of privacy is kept to an absolute minimum…

3. Even more fundamental to any justice system in a modern, democratic society is the principle of natural justice, whose most important aspect is that every party has a right to know the full case against him, and the right to test and challenge that case fully. A closed hearing is therefore more offensive to fundamental principle than a private hearing. At least a private hearing cannot be said, of itself, to give rise to inequality or even unfairness as between the parties. But that cannot be said of an arrangement where the Court can look at evidence or hear argument on behalf of one party without the other party ...knowing, or being able to test, the contents of that evidence and those arguments,… or even being able to see all the reasons why the Court reached its conclusions.”

The present case is concerned with a hearing that, in part, was not only private but closed. It is not disputed that the FTT Procedure Rules permissibly provide for private hearings, nor is it disputed that the FTT was entitled to exclude Mr Browning from the closed session. If it had not done so, he would have obtained the very thing which the hearing was designed to decide whether he should obtain, namely information pointing to the identity of the applicant companies. As I have said, the issue is confined to the exclusion of Mr Coppel. For its part, the FTT acknowledged that there may be circumstances in which it is appropriate to exclude a party but to permit the presence of his legal representative in a closed session: see the BUAV case, Appendix 2, paragraph 15, quoted above at paragraph 24. All this serves to emphasise the fact-sensitive nature of the dispute. However, Mr Coppel’s submission is that the Rules do not and cannot have been intended to permit the exclusion of a party and his legal representative because such a substantial derogation from the fundamental principles is intolerable absent a much clearer articulation of legislative intent. His submission is akin to one based on the principle of legality as explained in R v Secretary of State for the Home Department, ex parte Simms [2000] 2 AC 115, 131, per Lord Hoffmann.

“Although devised with the best of intentions, this procedure was, in my view, wrong in principle. As a result, it not only gave rise to very real practical difficulties but led the Court to adopt a mistaken approach to the inspection of the documents by the Lord Ordinary.

…counsel for the petitioners was left in a very difficult situation where, as a result of reading the documents, he had information that he was not able to reveal to, or discuss with, his clients or instructing solicitors. He even felt inhibited from revealing it to the Lord Ordinary. The result was a certain paralysis in the procedure. In agreement with all of Your Lordships, I am satisfied that no such procedure should be followed in the future.”

Drawing on the criminal cases to which I have just referred, Lord Mance said (at paragraph 203):

“It puts counsel in an invidious and unsustainable position in relation to his or her client…as in this case, such a procedure may also put counsel into a position where he or she is uncertain what it is permissible to disclose or say when making submissions to the Court about public interest immunity.”

“cannot carry out its investigatory function of considering and testing the closed material and give appropriate reasons for its decision on a sufficiently informed basis and so fairly and effectively in the given case having regard to the competing rights and interests involved. ”

In associating myself with this formulation I am accepting that there are features surrounding a case such as this which merit the description of the procedure as being at least in part investigatory as opposed to adversarial.

Permission to Appeal

(1) Ground 3: the construction of section 41 (1)

“[Section 41 (1) (a)] will cover recorded information that a public authority has obtained from another person. This will cover recorded information that a public authority has obtained from another person and which finds its way – without any material modification to its content – into a document created by the public authority (i.e. where the public authority merely copies recorded information into another document). It will also cover the situation where the requested public authority puts into a different format confidential information which it has obtained from another person. But section 41 does not exempt a document or record which the public authority has itself created by processing information which it has obtained from another person. In this situation, the document or other record prepared by the public authority (i.e. the recorded information) will not have been obtained from another person.”

The FTT and the UT rejected this construction. The FTT described it as “an impossible proposition” (paragraph 54). I agree.

(2) Ground 4: prejudice

(3) Ground 5: severance

“Disclosure endangers the frankness and caution with which intending exporters currently appear to approach the question of export control” (paragraph 68).

In other words, potential exporters currently adopt a prudent and precautionary approach which embraces the making of applications for licences in borderline cases. If they thought that their applications might become matters of public knowledge, they might be less candid. The UT considered this to be an impermissible conclusion because the FTT had failed to take into account “the crucial and obvious factor that exporting without a licence (when one is needed) is a criminal offence” (paragraph 108).