Confidentiality in Arbitration: Maintaining privacy and confidentiality in arbitration proceedings

INTRODUCTION

¶Arbitration has become a favored way to resolve disputes, providing an alternative to traditional courts that are often slow and costly. It’s quicker, more flexible, and saves money. One of its big advantages is confidentiality, keeping the parties’ privacy and the details of the dispute secure. Arbitration is often chosen over court cases because it offers confidentiality. This privacy is crucial for the smooth running of arbitration and other dispute-resolution processes. It helps keep things fair and efficient, preventing unnecessary drama or attempts to use the media for an unfair advantage. Confidentiality lowers the chances of exposing sensitive business details to rivals, clients, or outsiders[1]. This privacy ensures that sensitive information, trade secrets, and personal data stay private, protecting business reputations and allowing for open communication. However, the level of confidentiality can vary based on the arbitration agreement, the institution’s rules, and national laws.[2]

¶This article discusses why confidentiality in arbitration matters, looking at the legal framework that controls it and suggesting ways to uphold it. By examining important cases and addressing challenges to confidentiality, we hope to give a thorough understanding of how privacy is safeguarded in arbitration proceedings and what it means for parties looking to solve disputes privately.

THE IMPORTANCE OF CONFIDENTIALITY IN ARBITRATION:

¶Confidentiality is a cornerstone of the arbitration process, playing a vital role in maintaining the integrity and trustworthiness of this alternative dispute resolution mechanism. As arbitration often involves sensitive commercial or personal information, ensuring confidentiality is essential to prevent damage to reputation, business relationships, and strategic interests. Confidentiality also fosters a safe environment for open communication, allowing parties to share information freely and work towards a mutually beneficial resolution. Therefore, maintaining confidentiality, in arbitration is highly significant for reasons;

1. Safeguarding Sensitive Information; Many disputes involve business details, trade secrets, or personal data. By keeping these details private it prevents any harm to the parties.
2. Preserving Business Connections; Arbitration enables parties to settle conflicts without harming their business image or relationships. The private nature of the process can pave the way for a resolution.
3. Promoting Openness; With the assurance of confidentiality, during proceedings parties are more likely to be open and share information ultimately leading to a resolution.
4. Avoiding Public Attention; Disputes that garner attention can attract media scrutiny. Confidential arbitration helps in keeping matters from the public eye.

PRACTICAL SAFEGUARDS:

¶Practically, many situations can compromise confidentiality in arbitrations, whether legitimately or not. The winning parties might feel tempted to share details with non-parties & statutory bodies. Legal regulations, police inquiries, or insurance policies could require disclosure. Expert witnesses might seek third-party help to create reports, thus revealing arbitration details. Companies related to or holding the parties could also be internally informed.[3] Therefore, several safeguards can be implemented by parties and arbitral tribunals to ensure confidentiality.

1. Parties may opt to enter into specific confidentiality agreements at the commencement of the arbitration process. These agreements can outline the extent of confidentiality, specifying what information requires protection and the repercussions of any violations.
2. Protective Orders: arbitral tribunals hold the authority to issue protective orders for safeguarding sensitive information. Such orders are capable of limiting the dissemination of certain documents and restricting access to hearings to authorized individuals exclusively.
3. Secure Communication Channels: Utilizing secure and encrypted communication methods for sharing documents and information stands as a preventive measure against unauthorized access. This encompasses secure emails, data rooms, and various digital platforms.
4. Redaction of Sensitive Information: Parties have the option to redact sensitive details from documents before submission to avoid revealing confidential information. This process guarantees that only pertinent, non-sensitive information is shared.
5. Private Hearings: Confining hearings to a private setting and permitting attendance solely to those directly relevant to the arbitration assists in maintaining confidentiality. This practice includes prohibiting unauthorized recording or broadcasting of the proceedings.
6. Limited Disclosure of Awards: Parties can mutually decide to restrict the disclosure of the arbitral award. They may opt to release only a redacted version excluding confidential information or maintain complete confidentiality of the award.
7. Confidentiality Clauses in Arbitration Rules: Opting for an arbitral institution with robust confidentiality provisions within its rules offers an additional level of protection. Numerous institutions like the ICC and LCIA include built-in confidentiality clauses that parties can rely on.
8. Training and Awareness: Ensuring that all involved parties, including arbitrators, counsel, and administrative staff, understand the significance of confidentiality and are familiar with the specific measures in place aids in preventing inadvertent breaches.[4]

LEGAL FRAMEWORK GOVERNING CONFIDENTIALITY IN ARBITRATION:

¶Privacy is essential, in arbitration as it safeguards details and promotes a setting for resolving disputes. The level of privacy in arbitration can differ based on the existing structure. Globally different legal systems and institutional regulations deal with privacy in arbitration offering directives and norms to maintain the confidentiality and security of proceedings. Familiarizing oneself with these frameworks is crucial for individuals navigating the intricacies of privacy, in arbitration.

1. International Chamber of Commerce (ICC) Rules of Arbitration: The ICC Rules of Arbitration highlight the significance of maintaining confidentiality. Article 22(3)[5] of the ICC Rules allows the arbitral tribunal to safeguard trade secrets and confidential information either voluntarily or upon request, from any party. Additionally, the regulations specify that the arbitration proceedings are conducted privately and awards are not disclosed without the party’s consent.
2. UNCITRAL Model Law on International Commercial Arbitration: The UNCITRAL Model Law on International Commercial Arbitration[6] was created by the United Nations Commission on International Trade Law (UNCITRAL as a guide for international arbitration. Even though the Model Law doesn’t directly require confidentiality, it permits parties to decide on procedural aspects, such as confidentiality, giving them the freedom to include specific confidentiality rules suited to their requirements.
3. Indian Arbitration and Conciliation Act of 1996: Section 42A: introduced in the 2019 Amendment Act, explicitly provides for the confidentiality of arbitral proceedings also Section 42A[7] exceptions include disclosure mandated due to legal duty, disclosure to protect or enforce a legal right, and disclosure before a court or judicial authority for the implementation and enforcement of arbitral awards.
4. Arbitration Agreements: Parties can include confidentiality clauses in their arbitration agreements, specifying the scope and extent of confidentiality.
5. Common Law Principles: In jurisdictions where arbitration is governed by common law, courts might deduce that confidentiality agreements are implied due, to the essence of arbitration as a method, for resolving disputes.[8]

CHALLENGES FACED IN CONFIDENTIALITY IN ARBITRATION:

¶Achieving confidentiality is indeed a daunting task due to the absence of a consistent legal structure, insufficient laws, and varying judicial methods lead to uncertainty and barriers. Furthermore, having multiple participants, witnesses, and specialists raises the likelihood of data breaches. Balancing confidentiality with the necessity for openness and public revelation adds another layer of complexity to the problem.[9]

1. Involvement of External Parties; Arbitration often involves the participation of parties, like witnesses, experts, and translators. These individuals may have access to information shared during the process. Ensuring that all external parties maintain confidentiality can pose a challenge as any violation by them could jeopardize the confidentiality structure. Moreover, the necessity for documents or testimonies might lead to disclosures that are challenging to manage.
2. Legal Responsibilities; Parties might have duties that require them to reveal information from arbitration proceedings. Regulatory mandates from entities or government bodies could demand disclosures. Likewise, court directives in litigation cases may compel parties to divulge details, about the arbitration process, including presented evidence and awarded judgments. Adhering to these responsibilities could inadvertently result in breaches of confidentiality.[10]
3. Enforcing Awards; When parties want to enforce a decision, in courts they might have to share details about the arbitration proceedings. This information could involve the issues in the dispute the evidence provided and the rationale behind the tribunal’s decision. Local courts might ask for details to assess the legitimacy of the decision review adherence, to procedures, and confirm that it aligns with public policy. This legal scrutiny can compromise the confidentiality that was initially maintained during arbitration.
4. Media and Public Scrutiny: When high-profile arbitrations occur those associated with companies or individuals may draw the interest of the media. The involvement of reporters and the possibility of information leaks can heighten the chances of confidentiality violations. Media exposure has the potential to invite scrutiny, pressure, and conjecture impacting both the credibility and privacy of the arbitration proceedings.

RECOMMENDATIONS FOR THE BETTERMENT OF CONFIDENTIALITY IN THE ARBITRATION PROCESS IN REQUIRED AREAS:

¶Regarding confidentiality in International Commercial Arbitration (ICA), it’s essential to note that there is a widespread acknowledgment of the duty of confidentiality among arbitrators. However, there is no consensus on extending this duty to the parties or other individuals involved in the arbitration process. Maintaining confidentiality entirely poses challenges. Yet, certain steps can be implemented to reduce the risk of information leaks and uphold top-notch confidentiality. An essential is to include a confidentiality clause in the arbitration agreement. This leads arbitrators in ICA to often advocate for a specific confidentiality agreement between the parties at the outset of the arbitration, commonly referred to as Terms of Reference.

¶The scope of confidentiality can vary significantly, with differing rules recognizing different aspects of information that should be kept confidential. This highlights the absence of a universal presumption of confidentiality in ICA, or at least the lack of a general principle governing this aspect.[11]

¶When involving third parties such as witness experts, it’s crucial to have them sign a separate confidentiality agreement. This agreement must emphasize their obligation to maintain confidentiality and warn them about potential legal consequences for any breaches. Moreover, limiting access to confidential information copies during arbitration can prevent unauthorized disclosures.[12]

IMPORTANT CASE LAWS:

1. Board of Control for Cricket in India v. Kochi Cricket Private Limited[13]: The court held that ‘arbitral proceedings’ are divorced from court proceedings held ‘in relation to’ an arbitration.
2. Department of Economics, Policy, and Development of the City of Moscow v. Bankers Trust Co.[14]: The English Court of Appeal upheld the order directing the parties to maintain confidentiality around the judgment, as publishing it could cause real prejudice.
3. Emirates Trading Agency LLC v. Spliethoff’s Bevrachtingskantoor B.V. [2015] EWHC 1450 (Comm)[15]: The English High Court granted an injunction to restrain the disclosure of confidential information obtained during arbitration proceedings, emphasizing the importance of maintaining confidentiality in arbitration. This case highlights the courts’ willingness to protect confidentiality in arbitration and enforce confidentiality obligations, even after the arbitration proceedings have concluded.

CONCLUSION:

¶Confidentiality is a vital aspect of arbitration, essential for maintaining the privacy and security of parties and their sensitive information. While arbitration offers a confidential alternative to traditional courts, challenges arise from the lack of a uniform legal framework, inadequate laws, and varying judicial approaches. To uphold confidentiality, parties and arbitral tribunals must implement practical safeguards, such as confidentiality agreements, protective orders, secure communication channels, redaction of sensitive information, private hearings, limited disclosure of awards, and training and awareness. Familiarity with the legal framework governing confidentiality in arbitration, including international rules and national laws, is crucial. Despite challenges, efforts can be made to improve confidentiality in arbitration, including incorporating confidentiality clauses in arbitration agreements, ensuring all participants understand their confidentiality obligations, and limiting access to confidential information. By prioritizing confidentiality, arbitration can maintain its integrity and continue to provide an effective and private dispute resolution process.

Reference(s):

[1] Sahil Narang, Confidentiality In Arbitral Proceedings: An Indian Perspective, mondaq (last visited 27 June 2024)

<https://www.mondaq.com/india/arbitration–dispute-resolution/1353704/confidentiality-in-arbitral-proceedings-an-indian-perspective>

[2] Id. at 1.

[3] CONFIDENTIALITY IN ARBITRATION: Fundamental Virtue or Mere Illusion? (last visited 26^th June 2024) < https://www.aiac.world/news/189/CONFIDENTIALITY-IN-ARBITRATION:-Fundamental-Virtue-or-Mere-Illusion>

[4] Saumya Sinha,  Confidentiality Concerns in Arbitration Disputes: Implementation of Confidentiality in Courts of Law, (last visited 27^th June 2024), < Confidentiality Concerns in Arbitration Disputes: Implementation of Confidentiality in Courts of Law >

[5] International Chamber of Commerce (ICC) Rules of Arbitration (2017), (last visited 27^th June 2024) <https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/.>

[6] UNCITRAL Model Law on International Commercial Arbitration, U.N. Doc. A/40/17, annex I (1985), with amendments as adopted in 2006. (last visited 27^th June 2024) < https://uncitral.un.org/en/texts/arbitration/modellaw/commercial_arbitration >

[7] The Arbitration and Conciliation Act, 1996, No 26, Acts of Parliament, 1996(India).

[8]Gopal Subramanium, Confidentiality under the Indian Arbitration & Conciliation Act of 1996, (last visited 26^th June 2024) < https://www.ibanet.org/article/015535e1-e477-42e7-a7cc-d6dc978975d5 >

[9] Katie Chung, Michael Hwang, Defining the Indefinable: Practical Problems of Confidentiality in Arbitration, (Last visited 26th June 2024), <https://kluwerlawonline.com/journalarticle/Journal+of+International+Arbitration/26.5/JOIA2009034 >

[10]  Saumya Sinha Supra note 4, at 3

[11] Marlon Meza-Salas, Confidentiality in International Commercial Arbitration: Truth or Fiction? (last visited 25^th June 2024), < https://arbitrationblog.kluwerarbitration.com/2018/09/23/confidentiality-in-international-commercial-arbitration-truth-or-fiction/>

[12] Bhavy Sharma,  Importance of Confidentiality in Arbitration, (Last visited 28^th June 2024), < https://ibclaw.in/importance-of-confidentiality-in-arbitration-by-bhavy-sharma/>

[13]Board of Control for Cricket in India v. Kochi Cricket Private Limited (2018) 6 SCC.

[14] Department of Economics, Policy, and Development of the City of Moscow v. Bankers Trust Co [2003] EWHC 1377

[15]Emirates Trading Agency LLC v. Spliethoff’s Bevrachtingskantoor B.V. [2015] EWHC 1450 (Comm) [2015] EWHC 1452