I don’t normally write about law stuff on here (indeed, lately, I don’t write about much at all!), but a question raised on Twitter today by @CharonQC moved me to give some thought to the question of whether governmental pressure (via officials) on payment service providers, such as Paypal, not to provide services to Wikileaks could amount to the tort of inducement to breach of contract.
I should note at the outset, of course, that none of what follows is intended to be legal advice to be relied upon. Also, please note that it (like everything on this blog and on my twitter feed) is written in my personal capacity and not on behalf of (or in any way endorsed by) my employer. This is just for fun.
In English law, this tort – one of the “economic torts” as they are known – is the legal wrong where a party knowingly induces another party to breach its contractual obligations to a third party. I have some familiarity with it, having been present in court (although not acting for any party) when the most important recent decision in relation to it, Mainstream Properties v Young  2 WLR 920 in the House of Lords (more famous with the general public for the case that was heard together with it, Douglas v Hello) was being argued by Gordon Pollock QC for the respondent (it transpired successfully). In my own professional practice, I have also worked on a case in the last couple of years acting for a defendant in successfully resisting an interlocutory injunction brought upon the basis of the tort.
In the Wikileaks case, there is no real information as to what, if any, inducements by government officials might actually have taken place to enable any very firm conclusions to be drawn. Also, it may well be that any action, if brought, would be brought in the US, or elsewhere, under a law other than English law (although I suspect that other Common Law jurisdictions may impose similar hurdles to those discussed below). However, one can say that under English law, the tort is not an easy one to make out. It strikes me that there would be potential problems in this case (given the facts as I currently understand them to be) with several of the elements that would be necessary before liability would arise. The elements are as follows:
- An actual or threatened breach of contract.
This is a tort of secondary liability, in that there can be no inducement of a breach unless what is induced does (if it has already happened) or would (if it is yet to happen) amount to a breach.
Accordingly, in this case, if the payment service providers’ actions do not amount to a breach of contract, there could be no tort either. Whether or not there has been (or will be) an underlying breach will depend upon the terms of the contracts between Wikileaks and the payment service providers, but no doubt the latter would strongly resist liability.
- An inducement or procurement.
The party must have done something to induce or procure the breach. In this case, we don’t know what, if anything, has been done by any government to encourage payment service providers not to provide services to Wikileaks. Mere expressions of governmental disapproval of Wikileaks are unlikely to be sufficient here.
There is a distinction to be made here between procurement and prevention. Where a party joins with the contracting party to induce the breach – for example by persuasion, pressure or entry into of conflicting contractual obligations – the inducing party may be liable as an accessory if the other elements for liability are made out. The inducing party does not need to have done anything that would be unlawful in its own right in order for liability to arise.
Where a party does not join with the contracting party, but simply acts to prevent it complying with its contractual obligations, there can be no question of accessory liability. The liability must therefore be stand-alone, in that no tort is committed unless the preventative means used were independently unlawful.
Interestingly, therefore, if a government were to go so far as to make it illegal to provide services to Wikileaks, for example by placing Wikileaks on a “banned list” of organisations (as the news reports suggest has at least has been raised in the US as a possibility) this could not then amount to an inducement to breach of contract (provided that the government was validly exercising a lawfully conferred power). In such circumstances there may also be an issue of Crown immunity to consider (i.e. that the government cannot be sued in tort for exercising a prerogative power or a power conferred upon it by statute).
The party must know that what is being induced is a breach of contract. It is not enough merely that the act induced is, as a matter of law or construction of the contract, a breach. The inducing party must actually realise that it will have this effect. Nor does it matter that the inducing party ought reasonably to have realised this – the test is subjective.
Given that it is not clear that what the payment service providers have done actually amounts to a breach of their own obligations, this seems to be another area where a claim in this case could fall down. For example, if a government had simply said “we would like you to stop working with Wikileaks”, without considering whether this would involve payment service providers in a breach of their obligations, no tort would have been committed.
The party must intend to procure the breach. If the breach is neither an end in itself or a means to an end, but merely a foreseeable consequence of the inducing party’s actions, then the court has held that it cannot for this purpose be said to have been intended.
There is overlap here with inducement and knowledge. In this case, if it were to be made out that an inducement had taken place, in the knowledge that it would involve a breach, it would seem difficult to conclude that such breach was not at least a means to an end.
The claimant must have suffered, or show that it is reasonably in fear of suffering, financial loss. This will essentially be an evidential issue, which I would have thought could successfully be overcome in this case
In conclusion, this is of course hypothetical and no very firm views can be reached absent the details of any inducements that may or may not actually have taken place. However, this tort can be quite a difficult one to establish and, on present information, I personally would not expect to see a claim being brought (under English law or other laws like it, at least). I gather that @CharonQC is researching the US law position, however, and I await his conclusions with interest.