Protected information and trade secrets - business implications in new espionage laws.

The UK’s draft National Security Bill has raised concerns over the impact on journalists and the media, but the requirements and impacts on businesses and their employees (direct and indirect) has been overlooked.

New offences classified as ‘espionage’ activity

Espionage is now addressed by three offences in the Bill:

1. obtaining or disclosing protected information;
2. obtaining or disclosing trade secrets;
3. assisting a foreign intelligence service.

The provisions on assisting a foreign intelligence service will, for the first time, criminalise being an undeclared intelligence officer in the UK. This means that someone who is working covertly for a foreign intelligence service, including those who support that work, could face prosecution. It also covers a range of harmful activities that constitute espionage beyond the obtaining or disclosing of protected information or trade secrets.

Each offence has been constructed with legal tests appropriate to the relevant activity. In particular the offences will only apply if the person is acting for, on behalf of, or with the intention to benefit a foreign power* or intends that conduct will, or knows their conduct may, materially assist a foreign intelligence service.

What are the differences between obtaining and disclosing “protected information” and “trade secrets”?

• The offence of obtaining or disclosing protected information criminalises espionage activity in relation to the government’s sensitive information (including information such as defence information or the work of UK intelligence agencies). An offence can only be committed where the person is acting for, on behalf of, or with the intent to benefit a foreign power and knows, or ought reasonably to know, that their acts would prejudice the safety or interests of the UK.
• The offence of obtaining or disclosing trade secrets criminalises espionage in relation to information that has existing or potential commercial, economic, or industrial value, such as a new technology developed in the UK. In contrast to the first offence this does not require a person to know they are prejudicing the safety or interests of the UK, although in many cases that condition may be met. Instead the person’s conduct must be unauthorised. This offence reflects the inherent wrongness of states seeking to acquire our trade secrets and recognises the wider harm to the UK and UK industries that flows from such activity.

What does this mean for businesses?

The draft factsheet provides a hypothetical scenario which highlights the potential implications for organisations in a scenario relating to disclosing trade secrets:

‘Person A is approached by Person B, who works for a foreign power. At B’s request, A intentionally discloses a trade secret relating to sensitive artificial intelligence technology, known only by a few people in their company, to B. The information is highly sought after by foreign powers and A is not permitted to disclose the information under the terms of their employment. A knows that B is being directed by a foreign power to obtain this company’s trade secrets and, in disclosing the trade secret, intends for this information to benefit the foreign power in question.’

To what extent there is a burden on Person A to ‘know’ Person B works for a foreign power is unclear – and herein lies the risk. The draft bill states:

‘Where a person’s conduct is unauthorised and the person knows, or ought reasonably to know that their conduct is unauthorised.’

While the penalties target the person committing the offence, (with the potential for a maximum penalty of life imprisonment or a fine, or both) the are significant implications for businesses.

*How the bill – and specifically trade secrets – relates to state owned / linked enterprises raises a number of questions, particularly in today’s global business landscape of multinational corporates, joint ventures with foreign entities, global supply chains, managed service providers, and contract resource(s).

While the bill evidences the threat posed by foreign intelligence services, it highlights the increasing utility and utilization of grey zone warfare tactics, and how private organisations are being targeted and exploited in geopolitical AND market competition.

Legal, compliance and ethics will be at the forefront of managing the risks associated with unauthorized disclosure, but security (physical, corporate, and cyber) and fraud functions will be 'tip of the spear' in mitigating the threat.

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