Need help?
Call now 0207 118 0808

GET PRICE NOW

Writer's Profile
Joanna Wright

Specialised Subjects

Consumer Law, Contract Law, Criminal Law, Equity Law, European Law, General Law, Human Rights, Intellectual Property Law, International Law, Land Law / Property Law, Law, Negligence Law, Public Law, Tort Law, Trusts Law

I am a law graduate from London aspiring to work within the legal profession. I have recently finished a Master’s degree in law with a dissertation on Human Rights in Globalisation. I am planning to carry on with my legal studies by doing a Legal Practice Course. Meanwhile, my objective with this current position is to continue being academically involved with legal writing. My main area of law is human rights law and I am working primarily within that subject field. I have also earlier studied European Human Rights Law separately.  I am interested in international studies and cultural overviews and have also studied psychology and social psychology in Scandinavia. Besides English, I speak also German, Swedish, Norwegian and Serbo-Croatian.

DUAL IN CONFIDENTIALITY – ADVANTAGES AND DISADVANTAGES IN ARBITRAL PROCEEDINGS

 

SECTION I: INTRODUCTION

Disputing international companies who seek a private method of dispute settlement often prefer the option of arbitration. An arbitration clause in a contract would be included as a pre-enforceable condition to solve a contractual issue when a dispute arises.[1] Alternatively, arbitration can be agreed upon as the dispute arises. The privacy of arbitration comes into question when the parties involved in the proceedings have their information leaked without consensus. There have been instances involving conspiracies with third parties in disclosing confidential information.[2]

Consequently, the issue refers to confidentiality. The principal of confidentiality can be equally an ambiguous as a distinct concept. In a study it was found that 56 out of 93 different national jurisdictions had deficient legal guidance on confidentiality, whilst only 32 have some form of fixed provisions.[3] The most efficient way of ensuring a duty of confidentiality in arbitration will persist is by including it contractually. Circumstantially, a contractual reference or agreement on confidentiality is often absent and thus left in the hands of the arbitration rules, which might not refer to confidentiality in a party’s advantage.

Accordingly, the purpose in this paper is to discuss the principal of confidentiality in arbitral proceedings and the advantages and disadvantages that might exist in practice. In order to provide a constructive view to the discussion, various jurisdictions will be considered as a way of arguing the existing approaches and contexts to the implications to the principal of confidentiality, though the main point of referencing will be based on English case law.

 

  1. What is arbitration?

Arbitration is a form of an alternative dispute settlement to court proceedings.[4] There are various forms of arbitration from domestic arbitration to international arbitration. It is considered an effective dispute settlement mechanism, as it is generally less costly and proceeds at a faster pace than court proceedings. It is also perceived as an appropriate and flexible means of resolution for international companies as it requires not being physically present for the hearing. The International arbitration of London has been for example the major institute for international arbitration.[5] The English law values the principal of confidentiality are reasons why international companies prefer English law as the seat of law.[6]

 

  1. Confidentiality under International Law

The definition of confidentiality can be assumed to carry a similar threshold for the majority, though the concept between international law and national jurisdictions can somewhat vary in application and interpretation. [7] The only international instrument that refers to confidentiality for international arbitration[8] is found under the UNICTRAL Arbitration Rules (1976).[9] Specifically, Rule 52(5) states duty of confidentiality applies for the arbitral award, meaning that a duty of confidentiality does not necessarily cover the arbitrary proceedings. Both parties must consent for the award to be public.[10] This suggests that parties are to determine the implication of confidentiality regarding the award. The UNICTRAL Model Law (1985)[11] on the other hand, is silent on the subject.

The LCIA Arbitration Rules exert their preference by presenting an existence of a ‘general duty of confidentiality’ unless parties have agreed otherwise. [12] The disapproval of confidentiality should be expressed in writing and should be referred to the award and the proceedings. Duty of confidentiality should not disable “a legal duty to protect or pursue a legal right” or when the award is challenged in “bona fide legal proceedings before a state court or other judicial authority.”[13] Any publishing of the award is to be done so with consent of the parties.[14]

The most ‘established’ international arbitration rules are the IIC Arbitration Rules.[15] Unlike the previously mentioned rules, where the primary duty of confidentiality is derived from the parties, the ICC rules convey instead that arbitration tribunals are to take upon methods to protect confidential material, such as trade secrets.[16] Any party to the proceeding “shall not be admitted.”[17] While ICC does not refer to a specific notion on confidentiality of an award, it does provide a general scope of confidentiality[18] on behalf of the court’s conduct to the proceeding.

The WIPO Arbitration Rules provides an explicit reference to the duty of confidentiality[19] regarding their arbitration process, where it defines it as a default.[20] It outlines three implications of confidentiality. Firstly, the duty of confidentiality comes about in existence of arbitration. Any disclosure is subject to confidentiality unless it generates legal relevance for the arbitration or a court claim, or disclosed with good faith.[21] Secondly, while disclosing information within the arbitration proceedings, there should be a witness present.[22] Thirdly, the award is also a subject unless it becomes a public matter by court proceedings or the award is relevant in protecting a third party’s rights.[23]

 

  • Confidentiality under Other (National) Laws

Courts in general have expressed different views concerning the implication of confidentiality.[24] Arguably, one reason why the application of confidentiality differs between courts on an international level is the fact that some states have a lack of domestic sources clarifying the application of confidentiality.[25] The Norwegian Arbitration Rules have though recently included provisions on confidentiality for guidance on the issue.[26] The relevant provision is mainly concerning the confidentiality of awards, rather than a general duty of confidentiality in relation to the information used in the arbitration proceedings. While the English Arbitration Act 1996[27] does not contain a provision on confidentiality,[28] it does have a richer case law, as seen by the leading cases Emmott v Michael Wilson (2008) and Dolling-Baker v Merrett (1990), thus providing a legal direction, [29] unlike in Norwegian law, where case law on the issue has not been sufficiently extensive for usage.

 

  1. Arbitral proceedings and arbitrary awards

There are differences in rules on when confidentiality in arbitration shall come into play. The UNICTRAL Arbitration Rules (1976) only refer to confidentiality over awards, though WIPO Arbitration Rules cover both the award and the proceedings. The IIC rules do not refer to confidentiality regarding the award but do express confidentiality in arbitration, while the rules by LCIA apply confidentiality on the award, where the parties must consent in order to make it public. Significantly, when challenging an award in a court, the question on confidentiality tends be viewed as public matter.[30] The award would therefore most likely be the element concerned with public interest[31] unlike the proceedings, therefore the confidentiality is influenced by public interest.

In the English case of Ali Shipping (1999) duty of confidentiality could apply over all input provided, i.e. information, award, witnesses and other submissions.[32] The entire arbitration processes was subject to confidentiality.[33] Whilst in the recent Norwegian Arbitration Act 2004,[34] where it stated that confidentiality could apply both to the proceedings and arbitrary award, the duty would only be affirmed by consensus between the parties as non-disclosure. The Norwegian Arbitration Committee also claimed public interest is higher regarding the award than proceedings, as to why awards should preferably be publically available.[35].

 

SECTION II: From Privacy to Confidentiality

“It was not always easy to distinguish confidentiality from privacy and that it was also important to bear in mind the context of the decisions because quite different considerations might apply in different contexts.”[36]

When referring to the principal of confidentiality, it sub-contextually implies a correlation to privacy since “confidentiality is impossible without privacy and privacy is meaningless without confidentiality[37] For that reason, arbitration is often referred to as a private proceeding as opposed to a public proceeding. Privacy in arbitration is ensured by confidentiality.[38] The absence of a clear definition of confidentiality has been an indirect limitation thus approaches to confidentiality have been diverse and complex.[39] The concept of confidentiality of arbitral proceedings has for example not been recognised under the common law in Australia, while privacy has.[40] The claimed privacy in common law automatically derives once parties agreed to undertake arbitration. Initially, “privacy is unquestionably a fundamental feature of arbitration. In contrast, confidentiality is an underlying issue.”[41] Consequently, in order to argue against confidentiality would mean to separate it from the idea of privacy in arbitration.

 

  1. The ‘ratio’ of confidentiality

A particular view of privacy in arbitration expressed by English courts is that duty does not require being limited to confidential material such as e.g. trade secrets, “but is implied as a matter of law.”[42] Generally, some national jurisdictions will provide a detailed meaning of confidentiality while others will take upon a general description.[43] This example can be found in the Latvian Civil Procedure Law 2006, where it states that ‘all information concerning arbitral proceedings’ is under the duty of confidentiality. [44] A similar notion does the Hong Kong Ordinance 2011 state, by referring to ‘any information relating to arbitral proceedings or award.’ [45] As a result, a loose definition of confidentiality becomes furthers the issue by the scope of ‘all/any information’.

In the Australian International Arbitration Act 1974, it is stated “in reliance on an arbitration agreement [parties] must not disclose confidential information in relation to the arbitral proceedings.“[46] Accordingly, the parties must realise that the duty of confidentiality arises as the proceedings commence, thereafter the entire proceedings are subject to confidentiality. [47] This is more specifically included in the Stockholm Chamber of Commerce Rules 2010,[48] which expressly states the starting point; “the arbitration shall be deemed to commence on the date on which the Request for Arbitration is received.”[49]

New Zealand and in particular Scotland law, maintain a more detailed version of confidentiality. Arbitration (Scotland) Act 2010 defines confidential information (within the arbitration) as any information relating to the dispute, the arbitral proceedings, award, any proceedings relating to arbitration (unless a court order under section 15, specifies otherwise) is not meant to be made public. [50] Clearly, the Scottish law is taking a further step on assessing confidentiality by not only indicating it as a form of information, but also presenting it within a relevant context in which information is subject to confidentiality.

Nevertheless, the English cases have displayed inconsistency. In Dolling-Baker v Merrett (1990),[51] where prepared information to the arbitration is disclosed wrongly, it is asserted that only information relevant to the arbitration is to be dealt as confidential. By the meaning of relevant documents, the court in the case affirms that pleadings, documents witness, and statements sought to be found as relevant. However, this was not the prevailing view in Ali Shipping (1999).[52] Additionally, in another English case, Hassneh Insurance v Steuart (1993),[53] the court held that the award was not subject to duty of confidentiality, claiming that an award is a public document under the Arbitration Act 1950.[54]

 

SECTION III: Assumption versus Compulsion

The duty of confidentiality can be an implied or expressed undertaking.[55] In the French case of NAFIMCO v Forster Wheele (2004), where damages for a disclosure was refused, the court argued that a ‘duty of confidentiality is not be taken for granted’ when following the French Law. [56] Questionably, one could consider why an assumption of implied confidentiality has at all emerged. Understandably, the purpose of taking a dispute to arbitration is partly to solve a dispute as a private matter without public knowledge[57] as opposed to court litigations.

One could further consider who the parties are in a dispute. On one hand, international and commercial arbitration involve often public figures and businesses, unlike domestic arbitration concerning private people. In this sense, the aspect of implied confidentiality should not be anticipated. On the other hand, the parties are often foreign companies, whereby the communication is limited or inexplicit, thus an implied gesture of confidentiality of a dispute is naturally assumed based on the communication between the parties.

Whether confidentiality should be an assumed undertaking for parties in arbitration or be evoked by compulsion of being expressly conveyed between the parties, or by law, is a constant dilemma for courts and arbitrators. The general idea of confidentiality in arbitration tends to be that it is automatically present when signing on to arbitration.[58] In reality, the assumption has yet never been internationally confirmed.[59] Prior to the entry of Norwegian Arbitration Act 2005, Norwegian law remained silent in regards to confidentiality as many other jurisdictions. [60] It is evident that confidentiality is an essential component to the nature of privacy in arbitration thus why several critics perceive it as an ‘inherent’ element.[61] The virtue of confidentiality has yet been difficult to institute. Conversely, the arbitrary proceedings are meant also to be flexible; therefore, the responsibility on duty of confidentiality should be initiated by the parties themselves.

In Dolling-Baker v Merret, it was assumed that an arbitration agreement includes an ‘implied’ confidentiality obligation. The assumption was declined in the Australian case of Esso Australia Resources Ltd v Plowman (1995),[62] and by a Swedish case.[63] The English courts have yet maintained mostly within the scope that an implied confidentiality exists since Dolling-Baker v Merret.

What is relied upon is, in effect, the essentially private nature of an arbitration, coupled with the implied obligation of a party who obtains documents on discovery not to use them for any purpose other than the dispute in which they were obtained.[64]

This point of reference was upheld later the other mentioned cases such as Hassneh Insurance v Mew, Ali Shipping Corp v Shipyard Trogir and Emmott v Michael Wilson & Partners Ltd. Accordingly, the concept of implied confidentiality is supported and enforced by the court. While the court might reject implied confidentiality in terms of its context, it does acknowledge it as an existing principal, unlike the majority of other law considers. “The case law over the last 20 years has established that there is an obligation, implied by law and arising out of the nature of arbitration.[65] Meaning, an implied duty of confidentiality under English law can be relied upon. As a result, most parties prefer to have their seat under English law, thereby suggesting that an implied or pre-existing duty of confidentiality is more favoured than rejected. Eventually, the projecting issue regarding an assumed duty is based on the perception of privacy and confidentiality being corresponding equals.[66]

[1] Yu, Hong-Lin. ‘Duty of confidentiality: myth and reality.’ (2012)Civil Justice Quarterly 31 (1), 68-88

[2] Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184

[3] (Yu 2012)

[4] Hassneh Insurance Co of Israel v Steuart J Mew [1993] 2 Lloyd’s Rep. 243,

[5] Dundas, Hew R. ‘Confidentiality in English Arbitration: The Final Word? Emmott v Michael Wilson & Partners Ltd.’ (2008) Law Publishers, Arbitration 74, 458-466

[6] Russell v Russell (1880) 14 Ch D. 471

[7] Advocate, Roi Bak. ‘Arbitration – Duty of Confidentiality?’ Available at <http://www.israelbar.org.il/uploadFiles/Confidentiality_of_Arbitration.pdf> accessed 28 April, 2013

[8] (Yu 2012)

[9] UNICTRAL Arbitration Rules 1976

[10] UNICTRAL Arbitration Rules 1976, Rule 52

[11] UNICTRAL Model Law on International Commercial Arbitration(1985)

[12] London Court of International Arbitration Rules (LCIA)

[13] London Court of International Arbitration Rules (LCIA), Rule 30.1

[14] LCIA, Rule 30.3

[15] International Chamber of Commerce (ICC)

[16] ICC, Rule 20.7

[17] ICC, Rule 21.3

[18] Statues of the International Court of Arbitration, rule 6

[19] World Intellectual Property Organization (WIPO) Arbitration Rules; (Advocate u.d.)

[20] WIPO Arbitration Rules, art 52

[21] WIPO Arbitration Rules, art 73

[22] WIPO Arbitration Rules, art 74

[23] WIPO Arbitration Rules, art 75

[24] (Yu 2012)

[25] Nisja, Ola O. ‘Legislative Comment Confidentiality and public access in arbitration – the Norwegian approach.’ (2008) International Arbitration Law Review 11(15), 187-192

[26] (Nisja 2008)

[27] English Arbitration Act 1996

[28] (Yu 2012); (Advocate u.d.)

[29] Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184M; Dolling-Baker v Merrett [1990] 1 W.L.R. 1205

[30] Stojcevski, M. and Bruno Zeller. ‘Confidentiality and privacy revisited.'(2012) Arbitration 78(4), 332-339

[31] (Nisja 2008)

[32] Ali Shipping [1999] 1 W.L.R. 314 at 326

[33] (Yu 2012)

[34] Norwegian Arbitration Act 2004

[35] (Nisja 2008)

[36] (Dundas 2008)

[37] Kyriaki Noussia, Confidentiality in International Commercial Arbitration: A Comparative Analysis of the Position under English, US, German and French Law, (Springer, 2010)

[38] (Stojcevski och Zeller 2012)

[39] (Yu 2012)

[40] (Stojcevski och Zeller 2012)

[41] (Stojcevski och Zeller 2012)

[42] Ali Shipping [1999] 1 W.L.R. 314 at 326

[43] (Yu 2012)

[44] Latvian Civil Procedure Law 2006, art 512 (2)

[45] Hong Kong Ordinance 2011, section 18; (Yu 2012)

[46] The Australian International Arbitration Act 1974, s.23C

[47] (Stojcevski och Zeller 2012)

[48] Stockholm Chamber of Commerce Rules 2010

[49] (Stojcevski och Zeller 2012)

[50] Arbitration (Scotland) Act 2010, Rule 26

[51] Dolling-Baker v Merrett [1990] 1 W.L.R. 1205

[52] Ali Shipping [1999] 1 W.L.R. 314 at 326

[53] Hassneh Insurance Co of Israel v Steuart J Mew [1993] 2 Lloyd’s Rep. 243

[54] Arbitration (English) Act 1950, section 26

[55] (Stojcevski och Zeller 2012)

[56] Nafimco v Foster Wheeler Trading. Company, 2004 REV. ARB. 647; (Yu 2012)

[57] (Yu 2012)

[58] (Yu 2012)

[59] (Yu 2012)

[60] (Nisja 2008)

[61] (Nisja 2008)

[62] Esso Australia Resources Ltd v Plowman (Minister for Energy and Minerals) (1995) 128 A.L.R. 391

[63] Bulbank (A.I. Trade Finance v Bulgarian Trade Bank ; unreported, October 27, 2000, Supreme Court case 1881-99)

[64] Dolling-Baker v Merrett [1990] 1 W.L.R. 1205

[65] Emmott v Michael Wilson & Partners Ltd [2008] EWCA Civ 184, per se Lawrence Collins L.J.

[66] (Stojcevski och Zeller 2012)