How Good Is Your Mutual Non Disclosure Agreement?

The following list enables you to run a first check of your Mutual Non Disclosure Agreement. However, bear in mind that

• any contractual clause regarding the issues addressed in this list must be drafted in compliance with the law governing your agreement, and
  
  
• an assessment of enforceability of any such agreement in Russia should be reviewed on a case by case basis by an attorney familiar with Russian Law.

The party making information available to the other party hereinafter will be called the Disclosing Party, the other party will be referred to as the Recipient. The Mutual Non Disclosure Agreement hereinafter will be referred to as NDA.

1. Definitions

The term information needs to be defined, since not all information passed between the parties is confidential. Therefore, in order to ensure swift enforceability of the contract, the data which shall be treated confidentially needs to be defined as precisely as possible. This could include, for example: financial data, business plans, trade secrets, know-how, engineering plans, customers and other specific information important to your business. In addition to the information explicitly listed in the NDA, you could also agree that all information, which at the time of its disclosure is clearly identified as confidential (agree on a specific way of marking such information), shall be considered confidential and shall be protected in accordance with the NDA. It might also be advisable to define a time frame during which the information shall be considered confidential.

2. Monitoring

In order to prevent accidental disclosure of valuable information, it is advisable to agree that the Recipient shall monitor access to the information of the Disclosing Party with at the least the same diligence and care with which it protects the confidentiality of it's own information.

3. People with access

Clearly state which employees or agents of the Recipient shall have access to the confidential information. Require any employees or agents of the Recipient who will have access to confidential information to sign a confidentiality agreement, which is at least as restrictive as your NDA.

4. Liability

Clearly state in which cases the Recipient is not liable for the distribution of confidential information. They could include the following:

• the confidential information enters the public domain in other ways than through a violation of the NDA
  
  
• the Recipient only discloses information after legally obtaining it from a third party
  
  
• the information was available to the Recipient before receiving it from the disclosing party
  
  
• the Disclosing Party approved disclosure by the Recipient.
  
  
• the information was disclosed in response to a valid court order or order by any other government body, or was necessary to establish the rights of either party under the NDA.

Establish the burden of proof for each of these cases.

5. Termination

Determine what happens to the confidential information upon termination of your contract. Is the Recipient obligated to destroy the information or return it including all copies thereof?

6. Penalties

It may be difficult to calculate the damage resulting from a breach of the NDA. Therefore an NDA should contain a clause on penalties for each case of violation of the NDA and the amount of the penalty. Please note that penalties are not permitted in every jurisdiction. Under Russian law, it is allowed to agree on contractual penalties. However, a penalty may be reduced by a court if the court deems that the penalty is disproportional to the consequences of the failure of the Recipient.

7. Securing a claim

Since the breach of the NDA can cause irreparable damage make sure the agreement is enforceable and check the possibility of injunctive relief in the Recipient's country. If the competent court under your agreement is a Russian commercial court (arbitrazhny sud), then once you have filed a claim, there are several measures the court can take to secure the claim upon your application. Those include:

• a restraint on disposition of the defendants assets,
  
• a prohibition against the defendant to carry out certain activities,
  
• a prohibition against a third party to carry out certain activities.

The court is required to hear the application in court within a day of receiving it. One or several of these measures will be ordered if the court concludes that the enforceability of its decision will otherwise be undermined. Upon the defendant's application the court can also order the plaintiff to furnish security for potential losses of the defendant.

For further issues you should consider when drafting any IT outsourcing agreement with a Russian partner, have a look at the Ten Steps.

2001, Dr. Christian von Wistinghausen, LL.M. for BEITEN BURKHARDT. All rights reserved. Please note that the above information is intended for your information only. Where it refers to Russian law, it is based on Russian legal acts as of July 1, 2001. The above information may not be reproduced without the written consent of BEITEN BURKHARDT except for your personal, non-commercial use. It may not be regarded as legal advice provided by BEITEN BURKHARDT or the author.