September 28, 2016

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Confidentiality in Arbitration

- Michael Hwang S.C, Senior Counsel [ Michael Hwang Chambers LLC ]
- Jia-Lin Hoe, Former Associate [ Michael Hwang Chambers LLC ]

Michael Hwang S.C, Jia-Lin Hoe

Given the limitations of legislating confidentiality through institutional arbitration rules, and the non-uniform treatment of confidentiality in national laws of even arbitrationfriendly jurisdictions; it is crucial that both counsel and parties settle all important issues of confidentiality at the outset of the arbitration

An oft-cited benefit of international arbitration is the confidentiality that parties assume automatically attaches to the arbitral proceedings and all the documents generated in the course of the arbitration. In reality, no universal consensus has been reached in the national laws of popular arbitration seats or current institutional rules as to (i) the existence or (ii) scope of a duty of confidentiality in arbitration. More significantly, even where a duty of confidentiality exists, there is no consistent formula or international arbitration standard for the exceptions to confidentiality.

Global Survey: A general obligation of confidentiality in arbitration?

A global survey of existence of duty of confidentiality shows that national laws are divided into jurisdictions (i) which adopt the UK common law position on an implied duty of confidentiality; (ii) whose legislation regulates confidentiality to varying degrees; and (iii) whose legislation is silent on the duty of confidentiality (and do not follow the Commonwealth position).

UK Common Law Position

The English position on the duty of confidentiality is succinctly encapsulated by Lawrence Collins LJ in Emmott v Michael Wilson & Partners Limited (“Emmott”) :

“[a]n implied obligation (arising out of the nature of arbitration itself) on both parties not to disclose or use for any other purpose any documents prepared for and used in the arbitration, or disclosed or produced in the course of the arbitration, or transcripts or notes of evidence in the arbitration or the award, and not to disclose in any other way what evidence has been given by any witness in the arbitration, save with consent of the other party, or pursuant to an order or leave of the court.”

English case law is thus settled on the juridical basis of the duty of confidentiality and the documents to which that duty extends. While it is uncontroversial that the obligation applies to persons entitled to know about the arbitration (parties, counsel, tribunal, administering institution), there is no definitive answer as to whether this duty encompasses actual and potential witnesses.

While the scope of the duty of confidentiality is contentious, it is clear that the obligation cannot be an absolute one. It is immediately obvious, for example, that winning parties must be allowed to bring the award and reasons into court for the purpose of invoking the supervisory jurisdiction of the court over arbitration awards and for the purpose of enforcement of the award (see Colman J in Hassneh Insurance Co of Israel v Steuart J Mew).

There is, in fact, a myriad of exceptions and, as the English Court of Appeal in Emmott recognised, the limits of the obligation are still in the process of development on a case-by-case basis. Indeed, formulating a comprehensive code of exceptions “runs the risk of failing to distinguish between different types of confidentiality which attach to different types of document or to documents which have been obtained in different ways and elides privacy and confidentiality”.

Nevertheless, as expressed by the Court in Emmott, the common law recognises several principal cases in which disclosure will be permissible, such as where:
  • The parties have given their consent. Such consent may be given expressly in the arbitration agreement, or in a post-dispute arbitration agreement. Consent may be implied for example where a party applies to court for the removal of an arbitrator.
  • It is made with leave of the court or pursuant to a court order. Thomas LJ in Emmott has clarified that “the leave of the court is a matter that arises in circumstances where the court is deciding the issue as between a party to the arbitration and a stranger (as where the court is ordering disclosure in litigation of arbitration documents in the possession of one party…) or in circumstances where the arbitration has come to an end”. This does not however confer on the court a general and unlimited jurisdiction to consider whether an exception to confidentiality applies.
  • It is reasonably necessary to protect the legitimate interests of an arbitrating party. The broad wording of this exception covers the practical necessity of disclosure to protect the legitimate interests of the winning party attempting to enforce its rights under an earlier arbitration award. A party may also have legitimate interests in the disclosure of an arbitration award to adduce evidence of a position that was taken by an arbitrating party in an earlier arbitration so as to raise issue estoppel (see AEGIS). However, an open question is whether reasonable necessity must be measured vis-à-vis a third party (as required by Potter LJ in Ali Shipping Corporation v Shipyard Trogir).
  • The interests of justice and also (perhaps) the public interest require disclosure.

    The nature of the arbitration may give the public a legitimate interest in certain aspects of the arbitration. One example where the interests of justice would call for an exception to the obligation of confidentiality is where a witness has been proven to have expressed himself in a materially different sense when acting for different sides, in which case the witness’ evidence from the previous arbitration will be required for the fair disposal of the present arbitral proceedings (see London & Leeds Estates Ltd v Paribas Ltd (No 2)).

Antipodean cases have similarly recognised an exception to confidentiality when there is a public interest in obtaining information about the affairs of public authorities (Esso Australia Resources Ltd v Plowman (Minister for Energy and Minerals) or in knowing how much a well-known TV personality was paid (Television New Zealand Ltd v Langley Productions Ltd). The public interest exception is particularly pertinent in investor-State arbitrations.

However, the English courts appear divided as to whether the interests of justice is an exception in itself or whether it is part of wider public interest.

Other commonly recognised exceptions to the duty of confidentiality include court hearings for the enforcement or setting aside of the arbitral award. In this regard, Mance LJ (as he then was) in Department of Economics, Policy and Development of the City of Moscow v Bankers Trust Co suggests that the principle of open justice may militate in favour of a public judgement, and against the extension of the implied obligation of confidentiality to court proceedings.

Disclosure may also be under compulsion by law (as famously articulated by Bankes LJ in Tournier v National Provincial and Union Bank of England), such as by anti-money laundering legislation which imposes a duty of disclosure on a person who suspects that a transaction may involve property representing the proceeds of crime. Other exceptions include where corporations owe a duty of disclosure to stakeholders with a legitimate interest in the outcome of the arbitration; and where disclosure is made to persons assisting in the conduct of the arbitration.

Express Provisions on Confidentiality

To date, the most comprehensive code of confidentiality is that provided under Sections 14A to I of the New Zealand Arbitration Act 1996; but even so, as conceded by the Robertson Report (which recommended the amendments to the Act), the statute cannot set out exhaustively all of the exceptions that may arise. The New Zealand Act thus grants the tribunal the residual discretion to allow disclosure of confidential information on an ad hoc basis when the situation does not fall within the authorised exceptions.

Jurisdictions which do not address confidentiality

The UNCITRAL Model Law is silent on confidentiality, and many Model Law jurisdictions do not subject parties to an obligation of confidentiality. Commonwealth countries which do not regulate confidentiality can be assumed to adopt the common law position, unless their national courts say otherwise. For example, the High Court of Australia in Esso Australia declared that there is no general rule of confidentiality, except a rule of privacy in the arbitration hearing, which was characterised as an incident of subject matter of the arbitration agreement rather than an implied term.

Non-commonwealth jurisdictions which do not regulate confidentiality may not recognise confidentiality as a general rule, such as the United States and Sweden.

Institutional Rules on Confidentiality

Arbitral institutions similarly do not provide a uniform code on confidentiality. Some institutional rules have no express provisions on confidentiality (e.g. ICC Rules; UNCITRAL Rules; ICSID Rules) and even those rules which do provide for general confidentiality fail to regulate all aspects of confidentiality (e.g. LCIA Rules; Swiss Rules; AAA Rules; SIAC Rules). To date, the most detailed institutional rule is Rule 35 of the 2013 SIAC Rules. In recognition of the danger of providing a closed list of exceptions, its revision from the 2010 Rules includes a new provision allowing the tribunal to make an order for disclosure in situations otherwise than as listed.

Confidentiality in India

India’s Arbitration and Conciliation Act, 1996 is silent on confidentiality in arbitration, although it contains an express provision governing confidentiality in conciliation proceedings. Neither has there been any case law finding an implied duty of confidentiality, although the Supreme Court of India seems to suggest an implied duty in mediation proceedings. It may be that Indian courts will follow the common law position, if the principles in Emmott can be seen to be a doctrine of arbitration law widely accepted by national arbitration legislation. However, as this article has sought to illustrate, there is no national consensus on the duty of confidentiality or its exceptions. The confidentiality of arbitrations seated in India shall thus have to be provided for by institutional rules (such as Article 30 of the LCIA India Arbitration Rules), the arbitration agreement, or a procedural order.

Conclusion: Protecting Confidentiality

Given (i) the limitations of legislating confidentiality through institutional arbitration rules, and (ii) the nonuniform treatment of confidentiality in the national laws of even arbitration-friendly jurisdictions; it is crucial that both counsel and parties settle all important issues of confidentiality at the outset of the arbitration.

Corporate lawyers, when drafting contracts and arbitration agreements should therefore not assume that all issues can be easily resolved through inserting a confidentiality clause in the arbitration agreement. This is because, among other things, it is difficult to cover all the possible exceptions to confidentiality which may arise in the course of the commercial relationship or disputes arising thereof.

In the writer’s view, the best solution would be for the parties to create a customised confidentiality regime after the dispute has arisen, through the issuance of a procedural order on confidentiality by the Tribunal, after discussion with the parties. A comprehensive template model procedural order would contain the commonly recognised exceptions to duty of confidentiality as well as allow for customisation for the particular dispute and national laws of the seat in each case. The procedural order should retain discretion for the tribunal to order disclosure when the justice of the case requires it or when otherwise appropriate.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature. This article was originally published in Volume 2, Issue 1 (2013) of the LCIA India newsletter.

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