Confidentiality in Arbitration: Maintaining Privacy and Confidentiality in Arbitration Proceedings

Abstract:

In order to strengthen data security and confidentiality in arbitration processes, Sections 42A and 43K were recently added to India’s Arbitration and Conciliation Act 1996[1]. In order to protect the confidentiality of arbitration proceedings while permitting disclosures that are required or the execution of awards, section 42A places strict confidentiality requirements on arbitrators, parties, and arbitral institutions. By bringing Indian Arbitration methods into compliance with international standards, this clause allays long-standing worries about arbitration’s fairness and openness. Nonetheless, there are still issues with how section 42A should be interpreted and used especially when it comes to sharing private information during relevant legal procedures. Judicial guidance is therefore required to strike a balance between secrecy and the ideals of justice and procedural fairness. The significance of a “public interest” approach in finding exceptions to confidentiality is shown by comparisons with the law of countries such as Singapore and the United Kingdom.

In keeping with a larger commitment to accountability and openness in arbitration, Section 43K creates the Arbitration Council of India (ACI) as a repository for arbitral records. Within the scope of the Personal Data Protection Bill, 2019 (PDP Bill),[2] data security standards will be defined by the upcoming regulations under section 43K. In order to address concerns about data breaches and cyber dangers, this legislative alignment is crucial to ensuring the strong security of personal data processed during arbitration processes.

Keywords:  Arbitration, Confidentiality, Privacy

Introduction:

After the Arbitration and Conciliation Act, of 1996 was significantly amended; the arbitration scene in India underwent a revolutionary period. These 2019 modifications seek to strengthen data security and confidentiality in arbitration processes. The legislature has made a deliberate attempt to modernize India’s arbitration framework in accordance with international norms while resolving long-standing complaints about procedural fairness and openness, as seen by the key clauses, sections 42A, and 43K.

Due to its adaptability, effectiveness, and confidentiality-preserving qualities, arbitration has grown in favor of an alternative conflict settlement method. Except for conciliation, the Arbitration Act did not specifically address secrecy in arbitral procedures previous to the modifications. This loophole created questions and presented difficulties, especially when it came time to disclose material pertaining to arbitration in court or for enforcement purposes. The PDP Bill’s applicability to arbitration procedures is still unclear; hence it is necessary to define data fiduciaries’ and data principles’ duties in arbitration settings[3]. In order to preserve arbitration’s integrity and credibility as India’s preferred means of resolving disputes, it is imperative the strict data privacy safeguards be incorporated into arbitration procedures[4].

Section 42A,[5] which imposes stringent secrecy duties on arbitrators, arbitration parties, and arbitral institutions, is a significant turning point in the history of arbitration. It states that all aspects of the arbitration process must be kept private, with the exception of disclosing the arbitral ruling when it is required to be implemented and enforced. This clause seeks to preserve party autonomy, safeguard commercially sensitive information, and create an atmosphere that promotes fair and effective dispute resolution.

The Arbitration Council of India (ACI) is designated as the central repository for arbitral records by section 43K[6]. This provision which also reflects a broader commitment to transparency and accountability in arbitration proceedings, reflects the ACI’s role in maintaining electronic records arbitral awards, and other relevant documents, facilitating accessibility while guaranteeing the implementation of robust data security protocols.

Amendments to the 2019 and Their Consequences:

The 2019 Amendments made to the Arbitration and Conciliation Act, 1996 are major overhauls intended to strengthen the privacy and security of arbitration procedures in India. Sections 42A  and 43K which each address important facts of data confidentiality and the Arbitration Council of India’s responsibility in maintaining arbitral records, are at the heart of these modifications.

Section 42A: Confidentiality Obligations

This provision states, “Notwithstanding anything contained in any other law for the time being in force, the arbitrator, the arbitral institution and the parties to the arbitration agreement shall maintain the confidentiality of all arbitral proceedings except award where its disclosure is necessary for the purposes of implementation and enforcement of award. [7]”

This statutory obligation aims to protect confidential information trade secrets, proprietary data, and financial information that is shared during arbitral proceedings. Section 42A attempts to strike a compromise between the necessity for secrecy and the realistic requirements for judicial enforcement by restricting expectations to disclosure to circumstances required for upholding arbitral awards.

On the other hand, difficulties occur when parties ask the court to get involved in the arbitration process. For example, circumstances pertaining to injunctive relief, temporary relief, or challenges to arbitrator mandates could require the sharing of private arbitration-related data in court.[8] The lack of clear guidelines under section 42A on the handling of disclosures of this kind by courts leaves leeway for judicial interpretation and the possible establishment of precedents to provide light on the subject.

Section 43 K: The Indian Arbitration Council’s (ACI) Function:

Establishing the Arbitration Council of India (ACI) as the primary repository for arbitral records is Section 43K of the Arbitration and Conciliation Act, 1996, as modified in 2019. This function is important for a number of reasons, chief among them being the improvement of arbitration procedures’ accountability, transparency, and accessibility in India.

The ACI is responsible for keeping a computerized archive of all arbitral verdicts rendered within India under Section 43K. This obligation includes any additional records that may be required under yet-to-be-notified regulations. The creation of a central archive seeks to address the following important difficulties in the state of arbitration today:

1. Transparency: The ACI’s ability to centralize information and offer an easily readable record of arbitration decisions is essential to preserving the arbitration process’s openness. The ability of interested parties and parties engaged in arbitration to get pertinent information promotes an accessible and transparent arbitration process.
2. Accessibility: The easy accessibility to arbitral awards and other pertinent documents is guaranteed by an electronic depository. Because the parties may easily obtain the appropriate documents, this accessibility can help resolve conflicts more quickly.[9] Because records are kept in a methodical manner and are retrievable upon request, it also facilitates the enforcement of awards.
3. Accountability: In arbitration processes, accountability is improved by the centralization of documents under the ACI. The possibility of errors or data loss is reduced with a standardized repository. This methodical approach makes it possible to guarantee that all processes are recorded and accessible for inspection when needed.

Unsuitability of Section 42A

Notwithstanding its noble objective, section 42A presents difficulties in practices, especially with regard to secrecy exceptions. For example, Indian courts may come into circumstances wherein the public interest warrants the revelation of material that would otherwise be confidential regarding arbitration.[10] A “public interest” test has been recognized by international precedents, including those established in Singapore and the UK, for deciding confidentiality issues resulting from arbitration processes. These tests strike a compromise between the arbitration laws’ mandated secrecy obligations and the justifiable interest in transparency.

The Supreme Court of India permitted nonsignatories to request a reference to arbitration proceedings in Mahanagar Telephone Nigam Ltd. Vs Canara Bank[11] by providing their participation in the underlying contract, possibly necessitating the release of private information. The lack of clear requirements in section 42A pertaining to such situations emphasizes the necessity of judicial action to provide logical rules for the disclosure of private information during legal procedures while respecting the primary objective of preserving arbitration confidentiality.

Section 43K Data Security

In addition to designating the ACI as the custodian of arbitral records, section 43K mandates strict data security procedures in order to protect confidential data. The complex relationship between data protection and arbitration processes needs to be covered in the ACI; ‘s upcoming regulations, especially in view of the PDP Bill’s impact on the changing legal landscape.

The PDP Bill lays forth extensive guidelines for the handling and safeguarding of personal data and places strict responsibilities on organizations referred to as “data fiduciaries”.[12] Although arbitration is not specifically addressed in the PDP Bill, it is important to consider how arbitration may affect data security. Regulations by the ACI are required to specify the functions of data fiduciaries and data principles in arbitration, guaranteeing that personal information handled in arbitration processes complies with legal requirements and security measures.

The COVID-19 epidemic has resulted in an increase in online arbitration processes, which has brought attention to the vulnerabilities present in digital infrastructure and the pressing need for strong data security regulations[13]. Arbitration procedures are significantly in danger from cyber threats and data breaches, hence preventive steps are needed to lessen the risk. To instill confidence in arbitration as a dependable dispute resolution mechanism, India’s regulatory framework for the ACI ought to put first strict data security measures, taking cues from international frameworks like the General Data Protection Regulation (GDPR), which sets stringent requirements for safeguarding personal information in the European Union.

Requirement for Particular Data Security Laws:

Although the ACI’s record-keeping responsibilities are outlined in Section 43K the specific rules governing the ACI’s data security procedures have not yet been announced. These new rules are important for a number of reasons:

1. Compliance with Data Protection Guidelines: The Personal Data Protection Bill, 2019, and new data protection standards must be reflected in the legislation. The PDP Bill seeks to control how personal data is processed in a number of contexts, including court cases. Therefore, in order to guarantee the security of personal information handled during arbitration proceedings, it is imperative that the ACI’s data security mechanisms adhere to these standards.
2. Ensuring Compliance and Protection of Rights: Careful attention is required to ensure compliance and the protection of parties’ rights when the PDP Bill and arbitration proceedings under section 43K overlap. The PDP Bill imposes strict requirements on organizations that handle personal data, such as the requirement for consent, the right to data portability, and modify data. As a data custodian, the ACI will probably be held to these duties as well, necessitating the implementation of strong data protection protocols.
3. Handling Data Security Issues: Data security and data confidentiality are closely related. To safeguard sensitive data from breaches and cyber-attacks, the ACI regulations must include robust data security protocols. This is particularly crucial given the increasing dependence on online venues for arbitration proceedings, a trend hastened by the COVID-19 pandemic[14]. Making sure data security is critical to preserving the integrity and reliability of the arbitration process.
4. Clarifying Responsibilities under the PDP Bill Structure: The regulations must define each party’s responsibilities in the arbitration procedure within the PDP Bill’s framework. In this regard, it needs to be ascertained if mediators, arbitral institutions, and other associated entities meet the PDP Bill, any individual or organization that chooses how and why to treat personal data is considered a data fiduciary. By making these positions clear, we can make sure that everyone taking part in the arbitration process understands their respective responsibilities and obligations regarding data protection.
5. Harmonizing Domestic and International Standards: The rules ought to take into account coordinating national data security requirements with global best practices. With regard to that the European Union’s General Data Protection Regulation (GDPR)[15] establishes strict guidelines for data protection and levies heavy fines for violations. The ACI may guarantee that India’s arbitration framework complies with international standards by implementing comparable requirements, which will increase India’s legitimacy and appeal as a location for international arbitration.

Thus the regulations that govern data security standards will play a crucial role in guaranteeing that the ACI’s position as the central repository for arbitral records is carried out securely and effectively, even though section 43K establishes the groundwork for it. To safeguard the rights of parties to arbitration and uphold the integrity of the arbitration process in India, these regulations must be compliant with the PDP Bill and international data protection standards.

Conclusion:

An admirable attempt to improve data security and confidentiality in Indian Arbitration processes may be seen in the 2019 revisions to the Arbitration and Conciliation Act 1996. A paradigm change towards transparency and accountability is marked by the establishment of the ACI as a custodian of arbitral records under Section 43K and the mandate for strong confidentiality obligations under Section 42A[16].

But difficulties still exist, especially when it comes to putting a sect. 42A’s confidentiality exceptions into practices and creating strong sect 43K data security procedures[17]. In order to strike a balance between the necessity of protecting sensitive information and the requirement for transparency, judicial advice will be crucial in defining the parameters of secrecy in arbitration procedures. In order to reduce the risks connected with data breaches and cyber-attacks, the ACI’s regulations must be updated to reflect new data protection standards, such as those included in the PDP Bill. India may enhance its arbitration framework’s legitimacy and appeal as a preferred forum for conflict settlement, both domestically and globally, by cultivating a regulatory environment that places a high priority on data protection and confidentiality.

 References:

• Jeanette Herrle, The Peril and Potential of the GDPR, Centre for International Governance Innovation (July 9, 2019), https://www.cigionline.org/articles/peril-and-potential-gdpr/?utm_source=google_ads&utm_medium=grant&gad_source=1&gclid=CjwKCAjw-O6zBhASEiwAOHeGxRmSQFZLECVmOLx9qiNghnfBPfonKGpJkArd-edM44KYtqLnUyWGPBoCEGAQAvD_BwE.
• Latta, Headline Verdana Bold, (Jan. 23, 2020), https://www2.deloitte.com/content/dam/Deloitte/in/Documents/risk/in-ra-draft-personal-data-protection-bill-noexp.pdf.
• Kim M Rooney, The Global Impact of the Covid-19 Pandemic on Commercial Dispute Resolution in the First Year, International Bar Association https://www.ibanet.org/global-impact-covid-19-pandemic-dispute-resolution.
• Virtual Arbitration in Viral Times: The Impact of Covid-19 on the Practice of International Commercial Arbitration, American University Washington College of Law https://www.wcl.american.edu/impact/initiatives-programs/international/news/virtual-arbitration-in-viral-times-the-impact-of-covid-19-on-the-practice-of-international-commercial-arbitration/.
• Just a moment…, https://www.charlesrussellspeechlys.com/en/insights/expert-insights/dispute-resolution/2023/confidentiality-in-arbitration—a-cloak-with-holes/.
• Somdutta Bhattacharyya, Tracing The Evolution Of The Law Since MTNL V. Canara Bank, (Apr. 13, 2022), https://www.livelaw.in/law-firms/law-firm-articles-/mtnl-canara-bank-arbitration-and-conciliation-act-196565.
• Confidentiality in Commercial Arbitration, Slaughter and May Insights https://my.slaughterandmay.com/insights/client-publications/confidentiality-in-commercial-arbitrations.
• Rishab Khare, Section 42-A of the Arbitration Act, 1996: A tiger without its’ hunting teeth ?, Lexology (Apr. 27, 2023), https://www.lexology.com/library/detail.aspx?g=b18cd2dc-dcf2-4352-bd6c-5bd5fc210865.
• Section 43K of Arbitration and Conciliation Act, 1996 – Depository of awards – IBC Laws, (May 1, 2019), https://ibclaw.in/section-43k-of-arbitration-and-conciliation-act-1996-depository-of-awards/
• Vanshika Kapoor, Section 42 of Arbitration and Conciliation Act, 1996 – iPleaders, IPleaders (Apr. 2, 2024), https://blog.ipleaders.in/section-42-of-arbitration-and-conciliation-act-1996/.
• Sahil Narang, Confidentiality In Arbitral Proceedings: An Indian Perspective, Confidentiality In Arbitral Proceedings: An Indian (Aug. 10, 2023), https://www.mondaq.com/india/arbitration–dispute-resolution/1353704/confidentiality-in-arbitral-proceedings-an-indian-perspective.
• Sahil Narang, Confidentiality In Arbitral Proceedings: An Indian Perspective, Confidentiality In Arbitral Proceedings: An Indian (Aug. 10, 2023), https://www.mondaq.com/india/arbitration–dispute-resolution/1353704/confidentiality-in-arbitral-proceedings-an-indian-perspective.

 

[1] Arbitration and Conciliation (Amendment) Act, 2015, (last visited Jun 27, 2024).https://lawmin.gov.in/sites/default/files/ArbitrationandConciliation.pdf  

[2] The Personal Data Protection Bill, 2019, PRS Legislative Research (2024) (last visited Jun 27, 2024)., https://prsindia.org/billtrack/the-personal-data-protection-bill-2019  

[3] Sahil Narang, Confidentiality In Arbitral Proceedings: An Indian Perspective, Confidentiality In Arbitral Proceedings: An Indian (Aug. 10, 2023), https://www.mondaq.com/india/arbitration–dispute-resolution/1353704/confidentiality-in-arbitral-proceedings-an-indian-perspective.

[4] Sahil Narang, Confidentiality In Arbitral Proceedings: An Indian Perspective, Confidentiality In Arbitral Proceedings: An Indian (Aug. 10, 2023), https://www.mondaq.com/india/arbitration–dispute-resolution/1353704/confidentiality-in-arbitral-proceedings-an-indian-perspective.

[5] Vanshika Kapoor, Section 42 of Arbitration and Conciliation Act, 1996 – iPleaders, IPleaders (Apr. 2, 2024), https://blog.ipleaders.in/section-42-of-arbitration-and-conciliation-act-1996/.

[6] Section 43K of Arbitration and Conciliation Act, 1996 – Depository of awards – IBC Laws, (May 1, 2019), https://ibclaw.in/section-43k-of-arbitration-and-conciliation-act-1996-depository-of-awards/.

[7] Vanshika Kapoor, Section 42 of Arbitration and Conciliation Act, 1996 – iPleaders, IPleaders (Apr. 2, 2024), https://blog.ipleaders.in/section-42-of-arbitration-and-conciliation-act-1996/.

[8] Rishab Khare, Section 42-A of the Arbitration Act, 1996: A tiger without its’ hunting teeth ?, Lexology (Apr. 27, 2023), https://www.lexology.com/library/detail.aspx?g=b18cd2dc-dcf2-4352-bd6c-5bd5fc210865.

[9] Confidentiality in Commercial Arbitration, Slaughter and May Insights https://my.slaughterandmay.com/insights/client-publications/confidentiality-in-commercial-arbitrations.

[10] Just a moment…, https://www.charlesrussellspeechlys.com/en/insights/expert-insights/dispute-resolution/2023/confidentiality-in-arbitration—a-cloak-with-holes/.

[11] Somdutta Bhattacharyya, Tracing The Evolution Of The Law Since MTNL V. Canara Bank, (Apr. 13, 2022), https://www.livelaw.in/law-firms/law-firm-articles-/mtnl-canara-bank-arbitration-and-conciliation-act-196565.

[12] Latta, Headline Verdana Bold, (Jan. 23, 2020), https://www2.deloitte.com/content/dam/Deloitte/in/Documents/risk/in-ra-draft-personal-data-protection-bill-noexp.pdf.

[13] Virtual Arbitration in Viral Times: The Impact of Covid-19 on the Practice of International Commercial Arbitration, American University Washington College of Law https://www.wcl.american.edu/impact/initiatives-programs/international/news/virtual-arbitration-in-viral-times-the-impact-of-covid-19-on-the-practice-of-international-commercial-arbitration/.

[14] Kim M Rooney, The Global Impact of the Covid-19 Pandemic on Commercial Dispute Resolution in the First Year, International Bar Association https://www.ibanet.org/global-impact-covid-19-pandemic-dispute-resolution.

[15] Latta, Headline Verdana Bold, (Jan. 23, 2020), https://www2.deloitte.com/content/dam/Deloitte/in/Documents/risk/in-ra-draft-personal-data-protection-bill-noexp.pdf.

[16] Rishab Khare, Section 42-A of the Arbitration Act, 1996: A tiger without its’ hunting teeth ?, Lexology (Apr. 27, 2023), https://www.lexology.com/library/detail.aspx?g=b18cd2dc-dcf2-4352-bd6c-5bd5fc210865.

[17] Section 43K of Arbitration and Conciliation Act, 1996 – Depository of awards – IBC Laws, (May 1, 2019), https://ibclaw.in/section-43k-of-arbitration-and-conciliation-act-1996-depository-of-awards/.