Confidentiality in Arbitration - A Cloak with Holes
Introduction
Commercial arbitration is generally perceived as a private matter between the parties and the tribunal from which third parties are excluded. Parties often agree to arbitrate disputes because of the advantage of confidentiality of proceedings over national courts where hearings are usually held in public with the prospect of media reporting and the risk of unflattering findings becoming widely known.
However, the confidentiality of an arbitration is not an automatic right or inherent to the process, and the extent to which the arbitral process is (and will remain) confidential varies. This article will provide an overview on why confidentiality is so important, how parties can secure the confidentiality of the process, and when confidentiality may be circumvented and why.
Why is confidentiality important?
When parties negotiate and then perform a contract, they do so in private, keeping their internal communications and communication with each other confidential. And yet when a dispute arises and comes to a national court, the principle of open justice means that there is no confidentiality. Private information and correspondence which was never intended to be made public is suddenly vulnerable to disclosure, which may cause embarrassment, reputational harm, prejudice to a party’s competitive position, or interfere with unrelated commercial relationships. Sensitive information may include pricing and costing information, or information relating to marketing and strategic planning.
There is also the unedifying prospect of employees, including senior management, being publicly cross-examined and subject to judicial criticism, with proceedings in some courts televised or put on the internet indefinitely.
This can mean that even though a party has a good case, it may feel compelled to settle or pay out the claim to avoid the reputational and commercial harm caused by the court proceedings.
A confidential dispute resolution process protects the parties from this possibility and is therefore attractive to many businesses.
Where does confidentiality come from?
Every arbitration has a ‘seat’, being the legal place where the arbitration occurs and whose national arbitration law will apply. Some national laws contain provisions that the arbitration is to be confidential. For example, section 14 of the DIFC Arbitration Law 2008 states that unless the parties have agreed otherwise 'all information relating to the arbitral proceedings shall be kept confidential, except where disclosure is required by an order of the DIFC Court’.
The laws of many jurisdictions however do not contain an express provision on confidentiality. The English Arbitration Act 1996 is a notable example of this, as is the UNCITRAL Model Law on International Commercial Arbitration (which forms the basis of a number of national laws). In such jurisdictions confidentiality may still arise via other means, perhaps from common law rules regarding privacy or an implied term being read into the arbitral agreement, but this is far from ideal.
Parties can however ensure their arbitration is confidential by making sure their arbitration agreement contains a confidentiality clause or that they select an arbitral institution whose arbitral rules impose confidentiality on the process. There are a number of institutional rules available that expressly provide for confidentiality. For example, article 30.1 of the LCIA Rules 2020 requires the parties to undertake to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party.
Again, however there is some variation. The ICC Rules do not mandate that the arbitration will be confidential, but at article 22.3 of its 2021 Rules it permits the arbitral tribunal to, upon a request of a party, make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration, and may take measures to protect trade secrets and confidential information. Furthermore, the ICC may notify the parties that it will publish the final award, although the parties can request that it be anonymised.
Confidentiality in arbitration – where are the holes?
Even where the national law or arbitral agreement mandates that the arbitration is to be confidential, there may still be circumstances where details will enter the public domain or be disclosed to third parties.
The most common circumstances are where a party invokes a court’s supervisory powers in relation to the arbitration or seeks the court’s assistance with regards to the enforcement of an award. In such cases the principle of open justice may mean that the existence of the arbitration, the parties’ names and possibly the award itself will enter the public domain. Some courts however do anonymise parties to try and preserve confidentiality. A recent example of where the parties to an arbitration were revealed was Manchester City Football Club Ltd v Football Association Premier League Ltd [2021] 1 W.L.R. 5513, in which the English Court of Appeal allowed the unredacted publication of a first instance judgment rejecting challenges to the arbitral award. Despite the fact that both parties were opposed to publication, the court decided that publication would not disclose significant confidential information and would satisfy the public interest in how disputes between the Premier League and its member football clubs were resolved.
An example of where the English Court preserved confidentiality is CDE v NOP [2021] EWCA Civ 1908. The court proceedings overlapped with the subject matter of an ongoing LCIA arbitration, and one of the parties wanted to argue that the arbitral award was binding on the defendants despite the defendants not being a party to the arbitration. The first instance judge ordered that a case management conference should be held in private and made further orders to ensure that the award would not become public until the court had determined that it should. The Court of Appeal upheld this decision, commenting that arbitral confidentiality is recognised by English law as significant and worthy of protection. The critical question was whether it was necessary to sit in private to secure the proper administration of justice.
Another hole in the cloak of confidentiality can be where material disclosed or generated during the arbitration is subsequently required for other purposes. In The Chartered Institute of Arbitrators v B & ORS [2019] EWHC 460 (Comm), an English court granted CIArb’s request for an order to access documents relating to an arbitrator’s appointment, for the purposes of disciplinary proceedings against him. The court held that it was necessary in the interest of justice to grant access to the material notwithstanding the confidentiality of the proceedings. In Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 21] [2023] WASC 169, the Supreme Court of Western Australia held that documents disclosed in private arbitration proceedings could be used in court proceedings to allow the proper pleading of a defence as this was necessary to uphold the public interest in the proper administration of justice.
It should also be recognised that in practice several non-parties will have legitimate interests in being informed of the existence and content of a pending arbitration, such as a parent company, insurer, guarantor, beneficiary, creditors’ committee, and of course the arbitral institution itself.
Notwithstanding these possible exceptions, parties that wish to maintain confidentiality may seek injunctions to restrain the opposing party or a third party from taking steps that may violate confidentiality. Such an applications will need to be made swiftly. In a recent Singapore judgment (The Republic of India v Deutsche Telekom AG [2023] SGCA (I) 4) the court refused to make orders to keep court proceedings private to protect the confidentiality of the arbitration when the award was already publicly available and had been reported on in the media (including by the applicant's own lawyers on LinkedIn). The court held that it would not “go through an empty exercise to protect confidentiality when there is nothing left to protect”.
Conclusion
Whilst absolute and enduring confidentiality may not always be feasible due to, for example, the risk of national courts placing information into the public domain, it remains the case that arbitration has the ability to be far more confidential than litigation. Parties wishing to benefit from the cloak of confidentiality should ensure that their arbitral agreement mandates that the arbitration and the final award will be confidential.
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