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Confidentiality in Arbitration

Varsha Rajora
Institute of Law, Nirma University

I. Introduction
Confidentiality has long been part of the mythology of Alternative dispute resolution
(ADR). It one of the apparent virtues of ADR is that its processes have been viewed as
confidential. This aspect of the mythology has come under more scrutiny in recent years,
particularly in the Arbitration Context1.

Arbitration has become a permanent fixture of the landscape of civil justice. Arbitration
is promoted as a private or confidential process, raising some moral and perhaps ethical
obligations on the part of the profession to be candid with consumers as to the meaning and
limitations of arbitration confidentiality. Such candor is important because courts have begun to
receive challenges to arbitration confidentiality, and more can be expected in the future as both
voluntary and mandatory arbitration continue to expand and become more institutionalized.

Arbitration and the Meaning of Arbitration Confidentiality

Arbitration under the Law of Arbitration is an adjudicatory process, meaning that it is a


process in which a neutral third party renders a final and binding decision upon a dispute that has
been submitted to the arbitrator by disputing parties. Its adjudicatory nature makes it similar to
public trial, but it is less formal in a number of important respects. For example, formal rules of
evidence and civil procedure generally do not apply in Law of arbitrations. Similarly, Law of
arbitration is generally considered a private process. What that means, however, is less clear.
At a minimum, it means that arbitration proceedings are not conducted in public, unlike public
trials. This understanding only scratches the surface. A crucial distinction, for example, must be

3rd Year Student, B.A. L.L.B (Hons) Institute of Law, Nirma University (ILNU), Ahmedabad
1
Robert J. Confidentiality in Arbitration: Beyond the Myth
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=925281

Electronic copy available at: http://ssrn.com/abstract=1572221


drawn between the privacy of the arbitral proceeding and the confidentiality of the
proceeding. The privacy of the proceeding refers to the ability of uninvited third parties such as
former spouses, business partners, and the media to access and observe the proceedings, and
perhaps disclose those observations, without the consent of the disputing parties, and possibly
the arbitrator.
The confidentiality of the proceeding, however, refers to the ability of the disputing
parties, the arbitrator, witnesses, and others who attended the arbitration to disclose publicly oral
statements made in arbitration, documents tendered in arbitration, or observations of conduct by
parties, witnesses, and arbitrators during the course of the arbitration. When considering
confidentiality of arbitration communications, yet another important distinction must be drawn
between disclosures to third persons in the general public and disclosures to institutions in the
context of formal legal proceedings. Disclosures to third persons in the general public include a
wide range of possibilities from disclosures to spouses, family members and friends to business
partners and competitors, and students in classrooms and training sessions. Since these
disclosures are in the private realm, the law historically has permitted parties to regulate them
through the law of contract, and that law is generally well developed.

Disclosures in the context of formal legal proceedings can also take many forms, such as
disclosure pursuant to a deposition or in response to a discovery request, testimony during a trial,
as well as the work of other public bodies, such as investigations and hearings by administrative
agencies, legislatures, and grand juries. Unlike disclosures to third persons generally, which
implicate private interests, disclosures in formal legal proceedings implicate public interests
specifically, the publics interest in accessing the information pursuant to governmental fact
finding, adjudication, or policy development and legal regulation.

II. Public Interest in Disclosure


A concurrent and sometimes overriding public interest sometimes has to be recognized. It is
appropriate to lift the cloak of confidentiality in a number of circumstances including the
following:
1. The subject matter or the existence of the dispute and/or its outcome must be publicly
reported because it may be material to the financial condition of a public company.

Electronic copy available at: http://ssrn.com/abstract=1572221


2. Disclosure of the dispute and the surrounding circumstances or outcome may be required by
shareholders, partners, creditors or others having a legitimate business interest in the affairs
of one of the parties to the dispute.
3. One of the parties may conclude that its commercial interests and the interests of
shareholders and potential shareholders would be enhanced by publicly disclosing
information about the dispute and any resulting award and that, accordingly, it has a duty to
make such disclosure.
4. One or both of the parties may be subject to obligations (e.g., as a fiduciary) to disclose
information in spite of any express or implied term to the contrary in the arbitration
agreement.
5. It may not be possible or proper to shield the companys auditors and outside advisors from
the fact and nature of the dispute and to arbitration without mentioning confidentiality and, if
so, precisely what is confidential and the surrounding circumstances and the ultimate award,
whether confidential or not.
6. The parties may have duties of disclosure to insurers.
7. The parties must be free to present the award and relevant surrounding circumstances in a
public court to either enforce or appeal the award or use it as evidence in another related
proceeding.
8. The parties may be obliged to disclose evidence from the arbitration in another proceeding.
9. Evidence of illegal or criminal conduct that should be reported to public authorities may be
uncovered during the course of the proceedings.

Concern of Parties
When parties seek access to Arbitration related information, court often engage in
balancing, weighing the public interest in the disclosure of the information with the parties
interest in maintaining the confidentiality of the information. The results of such balancing are
frequently uneven across jurisdictions, creating uncertainty for parties that seek to ensure
confidentiality in arbitration2.

2
Confidentiality in Arbitration: A valid assumption or proposed solution?
http://findarticles.com/p/articles/mi_qa3923/is_200705/ai_n19435153/
Maintaining the privacy of these proceedings is often very important to the parties and is
arguably integral to a properly functioning arbitration system. Arbitration, which can readily be
held in private settings, provides parties with an alternative to the openness of courtroom
proceedings. Parties may have varying concerns about the confidentiality of arbitration.
Disclosure of arbitral materials that reveals trade secrets, for example, can be of particular
concern. Parties may also wish to prevent the public disclosure of arbitral material that
implicates business strategies or even the partys position in prior arbitration proceedings if
inconsistent with the partys current stance on the issue. Indeed, in some instances, a party may
wish to shield from disclosure the very existence of a pending proceedings or prior arbitration
proceedings.

III. Confidentiality Clause

Given the competing values discussed above, it is doubtful that any legislated solution
would be effective to resolve the issue of confidentiality in all circumstances. A number of
arbitral institutions have enacted rules dealing with confidentiality. In general, the rules are
intended to ensure the privacy and confidentiality of the proceedings, subject to the consent of
the parties and the application of any overriding legal duty of disclosure. However, not all
arbitration rules refer to confidentiality.

The question of confidentiality is best left to the parties in their commercial agreement or
arbitration agreement. It is always preferable to negotiate a written arbitration agreement before a
dispute arises because it is often difficult to reach a consensual agreement once a dispute occurs.
The appropriate terms of a confidentiality agreement will be different depending on the
circumstances of each transaction or dispute. If the arbitration agreement does not address the
issue of confidentiality, the parties may address that issue during an administrative conference
with the tribunal at a preliminary stage of the proceeding. What follows is a form of
confidentiality clause that can serve as a basis for discussion and negotiation when
confidentiality is important to the parties. Bear in mind that any confidentiality clause must
comply with the applicable law in the relevant jurisdiction.
Subject to any applicable and overriding law and duty, the parties agree for themselves
and any persons or companies under their control and direction that any arbitration conducted
under the authority of this agreement will be private and confidential, and all documents,
evidence, orders and awards, whether electronic or otherwise, will be kept private and secret and
will not be disclosed to persons who are not participating in the arbitration proceeding. This
obligation continues during the course of the proceeding and thereafter unless all parties
otherwise agree. If a party concludes that its legal duty requires disclosure of such material, it
will give the opposing party notice of its intention to disclose before making any such disclosure.
If the opposing party will not consent to the disclosure, the parties agree that the question of
whether there is any applicable and overriding law and duty in relation to the material under
consideration will be presented for decision to the arbitrator who is appointed under this
agreement. The parties agree to be bound by the ruling of the arbitrator whose decision will be
final and binding. The arbitrator may determine the timing, nature and extent of disclosure. The
parties agree that any failure to abide by the decision of the arbitrator may give rise to a claim for
an injunction.

The Arbitrator
The parties agree that they will expect and require a person who is appointed as an arbitrator
under this agreement to agree with, and for the benefit of, all parties that all documents,
evidence, orders and awards, whether electronic or otherwise, in relation to this arbitration will
be kept secret, private and confidential by the arbitrator; will be not be disclosed by the arbitrator
to anyone who is not a participant in the proceeding; and will be destroyed by the arbitrator at the
conclusion of the proceeding.

Court Reporter and Clerks


The parties agree that they will expect and require the person who is appointed as a court
reporter or clerk under this agreement to agree with and for the benefit of all parties that all
documents, evidence, orders and awards, electronic or otherwise, in relation to the arbitration
will be kept secret, private and confidential by him or her and will not be disclosed to anyone
who is not a participant in the proceeding.
Counsel
The parties agree that they will expect and require all counsel and their staff who are retained or
appointed to act for a party in an arbitration under this agreement will be expected and required
to agree with, and for the benefit of, all parties that all documents, evidence, orders and awards,
whether electronic or otherwise, in relation to the arbitration will be kept secret, private and
confidential by them and will not be disclosed by them to anyone who is not a participant in the
proceeding unless the counsel is bound by an overriding law or duty.

Consultants/Expert Witnesses
The parties agree that they will expect and require a person who is retained as a consultant/
expert witness by a party to this arbitration to agree with, and for the benefit of, all parties that all
documents, evidence, orders and awards, electronic or otherwise in relation to the arbitration will
be kept secret, private, and confidential by the consultant/expert witness and will not be
disclosed by the consultant/expert witness to anyone who is not a participant in the proceeding
unless the consultant/expert witness is bound by an overriding law or duty.

Non-Expert Witnesses
The parties agree that they will expect and require a person whom they present as a witness at
any hearing held pursuant to this arbitration to agree with, and for the benefit of, all parties that
all documents, evidence, orders and awards, electronic or otherwise, in relation to the arbitration
will be kept secret, private and confidential by the witness and will not be disclosed by the
witness to anyone who is not a participant in the proceeding3.

Comments on the Draft Agreement

If confidentiality is extremely important to the parties, a stricter confidentiality regime


could be imposed on expert witnesses, for example, it might say: If a consultant/expert witness
concludes that its legal duty requires disclosure of such material, before making any such
disclosure, it will give the parties to the arbitration notice of its intention to disclose material
covered by this agreement. If the parties will not consent to the disclosure, the consultant/ expert
3
Confidentiality in Arbitration: A valid assumption or proposed solution?
http://findarticles.com/p/articles/mi_qa3923/is_200705/ai_n19435153/
witness and the parties will agree that the question of whether there is any applicable and
overriding law and duty in relation to the material under consideration will be presented for
decision to the arbitrator appointed under this agreement. The parties and the consultant/expert
witness agree to be bound by the ruling of the arbitrator whose decision will be final and binding.
However, many consultants and expert witnesses will refuse to enter into this kind of contractual
commitment. An appropriate confidentiality agreement must address the legal duty of disclosure.
The challenge is to draft a clause that will discourage a party who is subject to a confidentiality
agreement from unilaterally and arbitrarily determining that its understanding of its legal duty of
disclosure justifies the publication of confidential information. Thus, the existence and timing of
the alleged duty to disclose may be controversial and may require urgent action. A broadly
drafted arbitration agreement can purport to give a tribunal jurisdiction over confidentiality
issues. The clause suggested here empowers the arbitrator to resolve any dispute over this matter.
However, where the tribunals jurisdiction is unclear, the courts would have to adjudicate the
issue of jurisdiction. It is not clear that a court would feel bound by the decision of a tribunal on
the issue. Moreover, since the tribunal does not have the power to excuse non-compliance with a
legal duty, there is a risk that the arbitrators decision could be determined to be wrong by
another tribunal at another time. Nevertheless we believe that the proposed clause has some
practical value and if implemented would discourage, if not prevent, arbitrary and unjustified
publication of confidential material4.

IV. Confidentiality in Arbitration Proceedings


The parties and the Tribunal shall at all times treat all matters relating to the proceedings
(including the existence of the proceedings) and the award as confidential.
Rule 34.6 of the SIAC Rules

A relevant and perhaps crucial consideration for parties who opt for arbitration is the
private nature of the proceedings. Rather than be exposed to public scrutiny, which inevitably
arises in litigation, parties often prefer to arbitrate since it is reasonably expected that sensitive
information will be protected under a duty of confidence. However, the existence of a duty of

4
Robert J. Confidentiality in Arbitration: Beyond the Myth
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=925281
confidence in arbitration proceedings cannot be taken for granted as the Courts in various
jurisdictions have adopted different and opposite approaches to this issue. Before we look at the
decision of the Singapore High Court in Myanma Yaung Chi Oo Co Ltd v Win Win Nu5, it is
important to note the positions taken by the English and Australian Courts.

The English position

The English approach provides for a duty of confidence even if it is not expressly
provided for. In the case of Dolling-Baker v Merrett6, the English High Court held that there was
an implied obligation on parties not to use or disclose documents arising out of the arbitration
unless the parties so consent to such disclosure. Essentially, this means that in order not to impair
the efficacy of privacy in arbitration proceedings, a duty of confidence has to be implied. The
Court of Appeal in Hassneh Insurance Co of Israel & Ors v Steuart J Mew7 further
acknowledged that it is customary of arbitration proceedings to be considered private and
confidential; hence a duty of confidence was implied.

The later Court of Appeal case of Ali Shipping Corporation v Shipyard Trogir8 rooted the
implied duty even further by holding that it came into being, not simply on the basis of business
efficacy, but by operation of law. This means that even where contracts do not deal with trade or
business, an implied duty of confidence may still exist as a result of the contractual obligations.
The court held that such a duty is a term which the law will necessarily imply as a necessary
incident of a definable category of contractual relationship9.

This duty of confidence is certainly not a blanket one. There are exceptions where
disclosure does not amount to a breach of such a duty. In Dolling-Baker v Merrett10, the test
which was applied was whether such disclosure was essential for the fair disposal of the action.

5
Myanma Yaung Chi Oo Co Ltd v Win Win Nu [2003] SGHC 124
6
Dolling-Baker v Merrett [1991] 2 All ER 890
7
Hassneh Insurance Co of Israel & Ors v Steuart J Mew (1993) 2 Lloyds LR 243
8
Ali Shipping Corporation v Shipyard Trogir [1998] 2 All ER 136
9
1998] 2 All ER 136 at 146
10
Dolling-Baker v Merrett [1991] 2 All ER 890
In Ali Shipping Corporation case11, though the court effectively held that all documents in
arbitration were confidential as between parties, the exception was that such disclosure could be
made with the courts leave. Under this approach, there is no necessity to decide if a certain
document fell within the scope of the duty, since all documents are considered prima facie
confidential, unless the court gives leave allowing otherwise.

These cases show that English courts recognize an implied duty of confidence with
varying approaches. Even then, this implied duty of confidence does not have a uniform scope of
application with regards to what can be considered confidential and the tests to be applied in
deciding whether such disclosure constitutes a breach. Despite these uncertainties, parties to
whom confidentiality is of vital importance will be heartened to know that English courts will
imply such a duty even if it is not expressly provided for.

The Australian position

However, the Courts in Australia have taken a strict view on implying a duty of
confidentiality. In Esso Australia Resources Ltd. v Plowman12, the court held that
confidentiality is not an essential attribute of private arbitration, whether on the grounds of long-
standing arbitral custom and practice, or in order to give efficacy to the private nature of arbitral
proceedings13. The Esso Australia decision has had far-reaching implications for international
commercial arbitration, In particular, by stipulating that neither the privacy of the proceedings,
nor custom and practice, justify a duty of confidentiality in arbitration, the very basis of the
implied duty has been laid open to challenge.14 Therefore, it cannot be taken for granted that the
English position ought to be the final say with regards to the confidentiality issue in arbitration
proceedings.

Cases emanating from other jurisdictions including the United States and Sweden, shows
that this position taken in Esso Australia is certainly not unique to Australia. There is a clear

11
Ali Shipping Corporation v Shipyard Trogir [1998] 2 All ER 136
12
Esso Australia Resources Ltd. v Plowman (1995) 128 ALR 391
13
Leon E Trakman, Confidentiality in International Commercial Arbitration, Arbitration International Vol.18,
No. 1 at 9
14
Supra F N 9
divide in judicial opinion with regards to the imposition of a duty of confidence. In United States
v. Panhandle Eastern Gen.15, the court rejected the argument that the confidential nature of
arbitration would give rise to a duty of confidence to be imposed on parties.

In AI Trade Finance Inc. v Bulgarian Foreign Trade Bank Ltd, the Swedish Supreme
Court held that unless parties to the arbitration had a confidentiality agreement drawn up, there
was no duty of confidence deemed to be binding on the parties. Thus, it is prudent to provide
explicitly for confidentiality within arbitration agreements than to leave the decision to the
courts.

The position in Singapore

In the recent case of Myanma Yaung Chi Oo Co Ltd v Win Win Nu16, the Singapore High
Court chose to follow the English position and upheld the confidentiality of arbitration
documents. The Myanma Yaung case concerned the disclosure of documents arising from the
arbitration and the disclosure of the proceedings itself. It did not however concern the disclosure
of an arbitration award. Arguably, the disclosure of documents and the proceedings of arbitration
would be more sensitive than disclosing the award itself. Notwithstanding this, it can be gleaned
from local legislation that confidentiality in arbitration proceedings is an aspect that is valued
and protected in Singapore. Bearing in mind that Singapore is aggressively promoting herself as
an arbitration hub, it is unlikely that Singapore courts will ignore the practical reality that parties
often prefer arbitration over litigation for the sake of preserving confidentiality.

Sections 22 and 23 of the International Arbitration Act (Cap 143A) and sections 56 and
57 (particularly section 57 (2), (3) and (4)) of the Arbitration Act (Cap 10) provide that a party
may apply for the proceedings to be made otherwise than in open court and also that the court
may give directions as to what information pertaining to the proceedings may be published.
These sections, arguably recognize, albeit implicitly, the confidential nature of arbitration
proceedings and information arising therefrom. Additionally, the Singapore International

15
United States v. Panhandle Eastern Gen. 118 F.R.D. 346 (D.Del.1988)
16
Myanma Yaung Chi Oo Co Ltd v Win Win Nu [2003] SGHC 124
Arbitration Centre (SIAC) Rules (in particular Rule 34.6) provide for and lend support to
confidentiality of arbitration proceedings. Essentially, under this rule all matters relating to the
arbitration proceedings are treated as confidential by parties as well as the Tribunal. This rule is
in pari material with rule 41 of the SIAC Domestic Rules.

V. Conclusion
Confidentiality is often believed to be an important advantage of arbitration. However,
because of the legal inconsistencies across jurisdictions and different treatment by institutional
arbitration rules, parties to arbitration should not assume that the existence of arbitration, the
evidence and the award would be kept confidential. At most, to attempt to preserve
confidentiality, parties should incorporate express confidentiality provisions in their arbitration
agreement and address the issue by stipulating to confidentiality terms in an arbitrators
procedural directions or in an order from the arbitral tribunal.

Judicial opinion is divided as to the status of confidentiality in arbitration proceedings. It


is also unclear how far the duty of confidence extends, specifically, whether it extends to third
parties, as well as to specific documents (including the arbitral award). More often than not,
common sense ought to prevail in such situations where confidentiality is disputed and where
clear public policy interests are paramount, confidentiality cannot be absolute.

It is therefore recommended that parties explicitly provide confidentiality clauses or even


separate confidentiality agreements where confidentiality is an important consideration.
Accordingly, parties should take on an active role in providing for confidentiality, and tailoring a
duty of confidence to be imposed which is suitable for the circumstances of each case.

There is no hard and fast legal rule regarding the confidentiality of arbitration
proceedings and related materials (such as pleadings, briefs and transcripts of proceedings), and
the scope of confidentiality largely depends on where the proceedings are held, which arbitral
body's rules govern, and whether the parties have acted proactively to preserve confidentiality.