Published On: 4th August, 2024
ABSTRACT
Confidentiality and privacy are integral to arbitration, distinguishing it from public court proceedings. These principles hinge on party autonomy, underscoring arbitration’s contractual nature where confidentiality is paramount. Presently, arbitration is understood through a hybrid legal framework encompassing contractual agreements and jurisdictional elements, ensuring confidentiality throughout proceedings. However, challenges arise in defining the scope and limits of confidentiality, influenced by jurisdictional norms, institutional rules, and specific agreements between parties. Balancing transparency and confidentiality is crucial, particularly in disputes involving public interest or where disclosure is essential for accountability and regulatory compliance. Arbitration’s private and confidential nature makes it a favored alternative to litigation, safeguarding proceedings from public scrutiny and ensuring discretion with the consent of involved parties.
INTRODUCTION
Confidentiality is integral to arbitration proceedings. Confidentiality is a fundamental characteristic of arbitration proceedings, driving a growing preference among parties, especially multinational and transnational organizations, to choose arbitration over court litigation. Confidentiality in arbitration pertains to the prohibition against disclosure by the tribunal, parties, their representatives, witnesses, or any attendees of the proceedings, materials exchanged or generated during the process, and the arbitral award itself, without the parties’ consent. Privacy in arbitration entails that third parties and outsiders are barred from accessing arbitration proceedings without the parties’ consent. It stands out as a significant feature that sets arbitration apart from litigation in courts. Nevertheless, the emphasis on and the enforceability of confidentiality can vary significantly across jurisdictions.
Indeed, confidentiality is typically portrayed as the foundation of arbitral proceedings and, together with privacy, is frequently cited as a primary benefit of arbitration compared to litigation.[1] Confidentiality is widely considered a primary motive for parties opting for arbitration to resolve their disputes, as they prefer to avoid public scrutiny of their conflicts. Given the extensive exchange of sensitive documents and information during arbitration, the goal is to safeguard proprietary information, trade secrets, and intellectual property, the exposure of which could lead to significant harm. As a result, arbitration proceedings are conducted with a focus on confidentiality.
Confidentiality in arbitration seeks to safeguard: (i) the personal data of the parties involved; (ii) the documents and information exchanged during the proceedings, including the final decision; and (iii) any proprietary commercial or industrial information disclosed during the process. Confidentiality in arbitration covers a wide scope, including the proceedings, related documents, evidence, awards, and all communications within the arbitration forum. This extensive protection allows parties to present their cases openly, confident that sensitive information will remain private.
COMPREHENSIVE COVERAGE OF CONFIDENTIALITY IN ARBITRATION
Confidentiality is not explicitly defined in the Arbitration Act. According to the Oxford Dictionary, it refers to the expectation that information will be kept secret. Black’s Law Dictionary defines it as being entrusted with another’s confidential affairs or intended to remain secret. This principle is well-established in the legal community worldwide, akin to attorney-client privilege.
Those potentially bound by confidentiality include arbitrators, arbitration institution staff, secretaries, witnesses, experts, court reporters, translators, interpreters, and others involved in arbitration, as well as the parties and their representatives. Arbitration is widely favored for its confidentiality, which imposes strict obligations on parties, arbitrators, and all involved not to disclose any details about the proceedings. Before the Arbitration and Conciliation (Amendment) Act, of 2019, confidentiality was expressly mandated only for conciliation under Section 75 of the Arbitration and Conciliation Act, 1996[2]. Advocates and attorneys were also bound by Section 126 of the Indian Evidence Act of 1872[3], to maintain confidentiality regarding case-related communications, advice, and documents.
The scope of confidentiality extends from the existence of arbitration proceedings to the pleadings and submissions of the parties, documents, and evidence like witness statements or expert reports, the award, other arbitration decisions, and the information within these filings. Information contained in arbitration filings can be crucial, such as sensitive commercial data (e.g., profit margins, production costs, pricing strategies, proprietary knowledge, or trade secrets). Inherently confidential documents or information, such as those containing trade secrets or business proprietary information, must benefit from the strictest norms on confidentiality and the same level of protection within the arbitration proceedings as outside. Disclosure of such information could harm one or both parties involved, potentially revealing a company’s financial status or the presence of a defective product, which may damage a company’s public image and benefit competitors.
CONFIDENTIALITY IN ARBITRATION: UNDER THE INDIAN LEGAL FRAMEWORK
Confidentiality in arbitration within India is governed by the Arbitration and Conciliation Act of 1996, which underwent significant amendment in 2019 to enhance its effectiveness. Originally, confidentiality provisions were limited to conciliation proceedings under Section 75[4] of the Act.
However, recognizing the pivotal role of confidentiality in arbitration, the Justice B.N. Srikrishna Committee recommended that
“A new provision may be inserted in Part I of the ACA providing for confidentiality of arbitral proceedings unless disclosure is required by legal duty, to protect or enforce a legal right, or to enforce or challenge an award before a court or judicial authority”[5]
The Srikrishna Committee recognized the need for confidentiality in arbitral proceedings to accommodate legal obligations to disclose information for the protection or enforcement of rights, or to challenge or enforce an award. In addressing this, the Committee posed two fundamental questions for legislative consideration: firstly, the scope of confidentiality and who should be bound by it, and secondly, the specifics of what information should remain confidential. While the Srikrishna Committee guided when disclosure of arbitral proceedings details may be appropriate, it deferred to the legislature to clarify these critical aspects.
The Indian Parliament by way of the 2019 Amendment to the ACA, introduced a new provision, section 42-A, on confidentiality. It reads:
‘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 implementation and enforcement of award.’[6]
This culminated in the introduction of Section 42A, a pivotal addition under the 2019 amendments. Section 42A mandates confidentiality throughout arbitration proceedings. It imposes strict obligations on arbitrators, arbitral tribunals, and parties involved to maintain the confidentiality of all information disclosed during arbitration, except where disclosure is necessary for enforcing the award. This provision, designed as a non-obstante clause, overrides any conflicting provisions in the Act, underscoring its paramount importance in arbitration practice.
In India, parties have the flexibility to choose between institutional and ad hoc arbitration. In institutional arbitration, rules set by the chosen institution govern proceedings, including provisions related to confidentiality. On the other hand, ad hoc arbitration grants parties the liberty to include confidentiality clauses in their arbitration agreements, thus tailoring confidentiality protections to their specific needs. The addition of Section 42A marks a significant stride towards aligning Indian arbitration practices with international standards. While initially lauded for addressing longstanding concerns regarding transparency and privacy in arbitration, its implementation has brought about challenges. The Section neither fully adopted the HLC’s [High-Level Committee] recommendations nor integrated global best practices on confidentiality, leaving room for further refinement.
Overall, confidentiality remains a cornerstone of arbitration in India, safeguarding sensitive information while promoting the efficacy and integrity of the arbitration process. As arbitration continues to evolve as a preferred method for dispute resolution, ongoing efforts to streamline and enhance confidentiality protections will be crucial in maintaining trust and credibility in the Indian arbitration landscape
IS CONFIDENTIALITY IN ARBITRATION A CORE PRINCIPLE OR A DECEPTIVE MIRAGE?
Confidentiality and privacy are often cited as significant advantages of arbitration over litigation, which lacks both privacy and confidentiality. In civil courts, proceedings and documents are typically accessible to the public, which could be concerning for parties seeking to shield certain information from public view, whether it pertains to dispute allegations or commercially sensitive data. Privacy in arbitration ensures that third parties and outsiders are excluded and cannot access arbitration proceedings without the parties’ consent. Confidentiality in arbitration means that the proceedings disclose materials, and the arbitral award cannot be revealed by the tribunal, parties, their representatives, witnesses, or any other attendees without the parties’ explicit consent. Privacy and confidentiality are closely interconnected concepts in arbitration. If an arbitration hearing were open to outsiders, maintaining confidentiality would be nearly impossible. Similarly, if the proceedings were conducted privately but attendees were free to disclose information to others, the privacy of the process would lose its significance.
Confidentiality is widely acknowledged internationally as an inherent principle of arbitration. They suggest that it constitutes an established international commercial practice, akin to customary law. The utmost duty of confidentiality is implicitly embedded within arbitration agreements. When parties opt for arbitration, they do so with an understanding of its confidential and expeditious nature, intending to avoid litigation in courts. Professor. Fraser further supports this view by asserting that arbitration is fundamentally private, conducted without public access, and involves an obligation between parties not to disclose or utilize arbitration-related documents for purposes outside the arbitration process[7].
Confidentiality is important to the arbitration process, impacting all participants involved. It encompasses safeguarding the personal data of the parties and potentially sensitive commercial or industrial secrets that may be addressed during proceedings. Ultimately, the significance of confidentiality is underscored by the potential liability that can arise from its breach. This aspect enhances arbitration as a highly secure dispute resolution system for those who choose to utilize it.
BALANCING PRIVACY AND DISCLOSURE: UNDERSTANDING INTERNATIONAL ARBITRATION CONFIDENTIALITY LAWS
In various foreign legal cases, the issue of confidentiality in arbitration has been extensively discussed. Lord Justice Lawrence Collins addressed three key legal concepts in John Forster Emmott vs Michael Wilson & Partners Ltd[8]. Firstly, he underscored the importance of privacy in arbitration, highlighting that publishing or sharing documents used in arbitration could breach its inherent privacy. Secondly, he defined confidentiality as safeguarding sensitive information, like trade secrets, generated or used during arbitration. Thirdly, he recognized confidentiality as an implied agreement restricting the use of disclosed arbitration documents solely for arbitration purposes. Lord Justice Lawrence Collins emphasized that while arbitrations are private as agreed upon, this privacy does not extend universally. He noted in Ali Shipping Corporation vs. Shipyard Trogir that confidentiality is an essential aspect arising from the arbitration’s private nature. Regarding the limits of confidentiality obligations, Lord Justice Lawrence Collins noted their ongoing evolution and contextual dependence. He outlined scenarios where disclosure might be permissible, such as with parties’ consent, court orders, or to protect legitimate interests, uphold justice, or potentially serve the public interest. He acknowledged situations where disclosing arbitration claims to insurers, shareholders, or regulators may be necessary. Lord Justice Lawrence Collins distinguished between privacy and confidentiality in arbitration, emphasizing that disclosures should not undermine arbitration’s fundamental purpose. He concluded that decisions on confidentiality during ongoing arbitration proceedings should be made case by case. Additionally, Article 30(1) of the London Court of International Arbitration allows disclosure of arbitration-related information when legally mandated[9]
ENGLAND
In England, the Arbitration Act 1996 does not explicitly cover arbitral confidentiality. However, English courts consistently uphold an implied duty of confidentiality in arbitration. Dolling-Baker v. Merret[10] established this duty, barring parties from using or disclosing arbitration documents for purposes other than arbitration itself. Similarly, Hassneh Insurance Co of Israel v. Stuart J Mew[11] recognized confidentiality as inherent in arbitration agreements, protecting the privacy of proceedings from third-party exposure. Ali Shipping Corp v. Shipyard Trogir[12] affirmed confidentiality as a legal obligation linked to the arbitration’s private nature. Exceptions include situations where consent is given, court orders mandate disclosure, or when protecting legitimate or public interests necessitates it. While arbitration hearings are typically private, English law may require the publication of arbitration-related judgments under open justice principles, unless such disclosure risks sensitive information, as detailed in City of Moscow v. Bankers Trust[13] and Manchester City Football Club Ltd v. The Football Association Premier League Ltd and others[14].
GERMANY
In Germany, the arbitration law as laid out in the German Code of Civil Procedure does not explicitly address confidentiality. Instead, Germany leaves the issue of confidentiality to be governed by the parties’ agreement, whether established separately or incorporated through the institutional rules they adopt. Specifically, the Arbitration Rules of the German Arbitration Institute (DIS) explicitly mandate strict confidentiality.[15] According to Article 44 of the Rules, unless otherwise agreed by the parties, those involved in the arbitration—including the parties, their external counsel, arbitrators, DIS employees, and any other associated individuals—are prohibited from disclosing any information related to the arbitration. This encompasses details such as the arbitration’s existence, party names, claims nature, witness or expert names, procedural orders, awards, and non-publicly available evidence[16]. In Germany, there is ongoing scholarly debate regarding whether parties involved in arbitral proceedings are bound by an implied duty of confidentiality. While there is limited case law on the matter, it is generally accepted that arbitrators (rather than the parties themselves) are understood to have an implicit obligation to maintain confidentiality.[17]
HONGKONG
In Hong Kong, the Arbitration Ordinance (AO)[18] establishes a strict duty of confidentiality for arbitration proceedings. According to Section 18(1)[19] of the AO, parties are obligated to maintain confidentiality regarding all aspects of the arbitral process and any awards, unless otherwise agreed. Section 18(2) provides exceptions, allowing disclosure in legal proceedings, to government bodies as required by law, or to professional advisers. The HKIAC Administered Arbitration Rules in Hong Kong reinforce these confidentiality requirements, extending them to include representatives and emergency decisions during arbitration. Specific circumstances, such as multi-party proceedings or seeking third-party funding, permit limited disclosure.
Listed companies face additional obligations under the Securities and Futures Ordinance, where disclosure of arbitration-related information may be necessary if it significantly impacts stock prices. Parties can rely on statutory exceptions or include provisions in arbitration agreements allowing for regulatory disclosures. Hong Kong law permits injunctions to prevent breaches of confidentiality, subject to procedural requirements outlined in Housing Authority v Sui Chong Construction & Engineering Co Ltd, including demonstrating a serious issue to be tried.[20]
FRANCE
In 2011, France revised its arbitration laws under the French Code of Civil Procedure, mandating confidentiality for domestic arbitration unless otherwise agreed by the parties[21]. However, international arbitration lacks explicit confidentiality provisions apart from the obligation to maintain tribunal deliberations confidential. French courts, similar to their English counterparts, historically acknowledge an implied duty of confidentiality in arbitration. For instance, in Aïta v. Ojjeh[22], the Paris Court of Appeal penalized a petitioner for attempting to disclose confidential arbitral information during annulment proceedings, highlighting arbitration’s role in privately resolving disputes as per parties’ agreements. In another case, Bleustein et al v. Société True North et Société FCB International[23], the Commercial Court of Paris ruled a breach of confidentiality when a defendant issued a press release disclosing arbitral proceedings without legal obligation. In a recent case, NAFIMCO v. Foster Wheeler Trading Company[24], the Paris Court of Appeal required the claimant alleging breach of arbitral confidentiality to substantiate the existence of such a duty, reflecting the nuanced approach of French courts towards arbitration confidentiality.
SINGAPORE
Singapore’s International Arbitration Act permits arbitration-related proceedings to be heard confidentially, barring directions for publication without consent or judicial determination that no confidential matter is revealed. The Singapore High Court affirmed in BBW v. BBX[25] its authority to seal court files to safeguard arbitration confidentiality. While Singaporean law lacks a codified duty of confidentiality, amendments in 2020 empower arbitral tribunals to uphold existing confidentiality obligations.[26] Courts follow English precedent, recognizing an implied duty of confidentiality as arbitration entails private proceedings. Exceptions exist if disclosure safeguards legitimate interests or serves justice, as seen in Myanma Yaung Chi Oo Co Ltd v. Win Win Nu[27]. In International Coal Pte Ltd v. Kristle Trading Ltd[28], the High Court clarified that confidentiality’s scope varies, noting arbitral awards lose privacy once registered as judgments.
CONCLUSION
In the realm of confidentiality, arbitrators’ duty to maintain confidentiality during their tasks is widely recognized in national legislation and arbitration rules governing International Commercial Arbitration (ICA). However, there is considerable variation regarding the duty of confidentiality among parties and other individuals involved in arbitration proceedings. Due to this diversity, arbitrators in ICA often advocate for explicit agreements on confidentiality among the parties when establishing the procedural framework, typically referred to as Terms of Reference. The extent and scope of confidentiality can differ significantly, even within frameworks that acknowledge such duties, highlighting the absence of a universal presumption of confidentiality in ICA. Therefore, parties seeking to protect their ICA disputes from public disclosure or to avoid potential negative publicity should carefully review the applicable legal framework concerning confidentiality. Depending on the specifics of each case and the agreements made by the parties, the relevant law could pertain to the arbitration agreement itself, the governing law of the contract, or the law of the arbitration’s seat. It is advisable in all cases to include explicit provisions in the arbitration agreement addressing confidentiality concerns.
Reference(s):
[1] See Survey question based on those designed by CHRISTIAN BUHRING-UHLE et al., “Arbitration and Mediation in International Business”, The Hague International, Kluwer, 1996 (his survey regarded confidentiality as the third most important advantage of arbitration, out of a list of eleven).
[2] Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings.
[3] Section 126 of the Indian Evidence Act 1872 provides that no barrister, attorney, pleader, or vakil shall be permitted to disclose communications made by his client or advice given by him in the course of his employment except if there is an illegal purpose or showing a crime or fraud after commencement of his employment.
[4] Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings.
[5] S 13, Report of the High Level Committee to Review the Institutionalization of Arbitration Mechanism in India, 30 July 2017, available at- http://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf
[6] S 42-A, ACA, inserted by Act 33 of 2019, S.9.
[7] D. FRASER, Confidentiality in Arbitration, available at http://www.bakerinfo.com/Publications/Documents/756_tx.htm
[8] https://www.trans-lex.org/301850/_/john-forster-emmott-v-michael-wilson-partners%C2%A0limited-%5B2008%5D-ewca-civ-184/ [2008] EWCA Civ 1847
[9] https://www.lcia.org/Dispute_Resolution_Services/lcia-arbitration-rules-2020.aspx#Article%2030 The parties agree to maintain confidentiality for all arbitration awards, materials created during the arbitration, and documents provided by another party, except when disclosure is legally mandated to protect rights or enforce awards in court.
[10] [1990] 1 W.L.R. 1205.
[11] [1993] 2 Lloyd’s Rep. 243
[12] [1999] 1 W.L.R. 314.
[13] [2004] EWCA Civ 314.
[14] [2021] EWCA Civ 1110.
[15] https://globalarbitrationreview.com/guide/the-guide-ip-arbitration/second-edition/article/confidentiality-in-international-ip-arbitration Last visited 24/06/2024 12.53 pm
[16] DIS Arbitration Rules, Article 44.
[17] ‘Arbitration Guide: Germany’, Arbitration Committee of the International Bar Association (updated February 2018).
[18] https://www.elegislation.gov.hk/hk/cap609
[19] “Unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to – (a) the arbitral proceedings under the arbitration agreement; or (b) an award made in those arbitral proceedings”.
[20] (2008) 1 HKLRD 84.
[21] French Code of Civil Procedure, Article 1464(4).
[22] Aïta v. Ojjeh, Paris Court of Appeal, 18 February 1986, Rev. Arb. 1986.583.
[23] Bleustein et autres v. Société True North et Société FCB International, Commercial Court of Paris, 22 February 1999, Rev. Arb. 2003.189.
[24] NAFIMCO v. Société Foster Wheeler Trading Company AG, Paris Court of Appeal, 22 January 2004, Rev. Arb. 2004.647.
[25] [2016] SGHC 190.
[26] Singaporean International Arbitration Act, Section 12(1)
[27] [2003] 2 SLR 547.
[28] [2008] SGHC 182.
